The Inflation Reduction Act’s drug price controls have been a hot topic during the BIO CEO and Investor Conference—and one that has hampered an otherwise positive outlook about the incredible innovation in the industry.
How will the legislation affect R&D in the short and long term—and has it already? And what will the impact be on patients? BIO’s Chief Policy Officer, John Murphy, convened CEOs and policy experts to discuss the “profound impacts” of the legislation.
It’s not price negotiation – it’s price fixing
While panelists disagreed slightly on whether the consequences were “unintended” or not, all agreed that there will be consequences.
“Bad public policy can destroy industries and can absolutely shunt resources,” said Richard Pops, Chairman & CEO of Alkermes, Inc., which develops drugs in neuroscience and oncology. In fact, capital allocation decisions began to change in the summer—before the price controls were even implemented, he noted.
The law essentially amounts to “enforced genericization with government price fixing,” said Peter Thompson, Private Equity Partner at OrbiMed Advisors LLC. What he considers “one of the most profound changes” for the industry in 40 years in oncology, the law is “directly hampering science.”
It’s “much more of a rate-setting approach and not a negotiation,” echoed Chris Mancill, SVP & Head of Worldwide Value Access & Payment and Health Economics and Outcomes Research at Bristol Myers Squibb Company.
“This legislation is not in the interests of the very population it’s designed to serve,” said Thompson succinctly.
What is the value of a drug?
As the law is being implemented—and opportunities to make small but meaningful fixes arise—it will be important for companies to explain the value proposition of drugs, said Murphy.
Mancill expects the Centers for Medicare and Medicaid Services (CMS) will have a framework to get information from the industry and “arrive at an estimation of what they see as an appropriate price point.” BMS, for its part, “will submit a robust data set to justify the price of products and articulate what we think the process should like,” which he hopes will be “transparent.”
The industry also needs to talk to patient/provider communities to explain the provisions that are good and the provisions that are not so patient-friendly, he said, so the patient community understands the opportunity to influence which information CMS will look at.
However, the legislation includes an “arbitrary ceiling,” with companies working to justify the best possible price, not necessarily a price that reflects value, said Mancill.
Middlemen and messaging
“340B might be a flashpoint because it’s so egregiously being exploited,” said Pops. It’s a clear example of all the “hands out along the supply chain.”
We’re in the middle of two pending 340B cases, added Meenakshi Datta, Partner at Sidley Austin LLP. As Bio News reported, one was already decided in favor of manufacturers. She’s “cautiously hopeful” at least one will resolve in favor of manufacturers.
But in the meantime, “developers and investors make decisions about where to invest based on these burdens on development,” added Datta. This is an “extreme example of how the manufacturing industry has been disadvantaged.