Drug Pricing in the U.S: A Careful Balance Between The White House, Patients & Big Pharma

As election campaigns in the US begin to ramp up, Big Pharma continues to battle Biden’s plans to introduce negotiations for drug pricing.

A significant component of the Inflation Reduction Act (IRA) is a new mandate that for the first time will allow Medicare to negotiate drug prices directly with pharmaceutical companies. The act’s aim is to make prescription drugs more affordable for millions of Americans and reduce overall Medicare expenses, with the financial burden on older adults anticipated to ease considerably.

Unsurprisingly, the changes have stirred apprehensions within the pharmaceutical sector.

Big Pharma faces a new reality where, given the newfound bargaining power of Medicare, there is looming potential for reduced profits on blockbuster drugs. But this depends on how drugs are categorized.

Small molecules drugs such as Eliquis and Imbruvica could become eligible for price negotiation after nine years, in comparison to biologic drugs which will get slightly longer - 13 years. This four-year difference could have significant ramifications of profitability for drug makers, and they are obviously concerned.

This is likely to result in strategic pivots towards biologics and innovative therapies, which remain outside the negotiation scope for a longer duration. Pfizer is already responding to these changes, and has already announced plans to focus more on biologics - aiming to reduce their small molecule drugs from 96% to 35% by 2030 - in a bid to boost long term profitability.

The industry is now navigating through legal challenges and uncertainties. Several pharmaceutical companies are contesting the IRA's provisions, arguing they undermine their revenue models and innovation incentives. These legal battles not only have financial implications but also raise questions about the future of drug pricing and accessibility.

Big Pharma’s saving grace could come with incentives offered through the Orphan Drug Act – a policy to encourage investment in treatments for patients who would otherwise go unserved. However, ongoing discussions could see these incentives scrapped, delivering a further blow for pharma and patients with rare diseases who would benefit from innovative medicines for treatment.

For more, please find the original story source here.