By Top executives of drug companies suing to stop the Biden administration’s Medicare price negotiation law are telling shareholders and analysts the final price offers won’t materially impact their companies’ respective bottom lines.
The comments from executives of companies including Pfizer, Bristol Myers Squibb, Johnson & Johnson and AbbVie suggest the price cuts won’t be as steep as many in the industry initially feared.
But the executives were still adamant Medicare price negotiations under the Inflation Reduction Act (IRA), which end Thursday, will throttle innovation in the long run and expressed hope that a new administration — or industry lawsuits — will end the policy.
The IRA law “is a very big loss for innovation and for the crown jewel of American industry, which is the life science technology business,” said Pfizer CEO Albert Bourla on Tuesday. “But it is what it is. It is the law of the land. And we are doing our best to make sure that we minimize any impact, particularly in the future.”
The companies that manufacture the 10 drugs eligible for price negotiations have been exchanging offers with the federal government since February.
While the official end of the negotiation period is Aug. 1, the companies indicated they already have final offers in hand. The settled prices will be publicly announced by Sept. 1, and will take effect in 2026.
The first 10 drugs selected for negotiation accounted for $3.4 billion in out-of-pocket costs for an estimated 9 million Medicare enrollees in 2022, according to the Biden administration.
The law requires small-molecule drugs like pills to have been on sale for at least nine years. The figure is 13 years for biologic drugs, which are often injected or infused.
“Now that we have seen the final price, we’re increasingly confident in our ability to navigate the impact of IRA on Eliquis,” Chris Boerner, CEO of Bristol Myers Squibb, said during a July 26 earnings call with analysts.
Eliquis is the company’s blockbuster blood thinner, with a $594 a month list price. Medicare spent nearly $16.5 billion on it between 2022 and 2023, according to the Biden administration, more than any other prescription drug.
Still, Boerner maintained the industry position that price negotiation is unlawful government price setting.
“We continue to believe arbitrary price setting by the government on lifesaving medicines is not good public policy, so irrespective of short-term dynamics we remain very concerned about long term impacts of IRA on innovation,” Boerner said.
Many, but not all, of the drugs on the initial list are facing generic competition and looming expirations of exclusive patents, which would likely result in price cuts even without the law. Those would also make them ineligible for negotiation in the next round.
Chris Meekins, a health policy analyst at Raymond James, said drug companies either accurately anticipated what the negotiated prices were going to be, or think they can offset the cuts by price increases on other products.
But until the final price is announced, Meekins said the public won’t know which tactic the companies used.
“In most instances when there’s a policy change, companies are incredibly adept at finding ways to limit the pain from the change, and that’s what we see the pharmaceutical companies doing,” he said.
Larry Levitt, KFF executive vice president for health policy, said it makes sense that at least initially, the impact of the law could be muted.
“Drug price negotiation only applies in Medicare, and this first round only affects 10 drugs, so it wouldn’t be too surprising that it wouldn’t have a big effect on the bottom lines of giant drug companies as of now,” Levitt said.
But,“this wouldn’t be the first time companies express optimism to Wall Street while saying the sky is falling on Capitol Hill,” Levitt added.
Several drugmakers, as well as the leading industry group PhRMA and the U.S. Chamber of Commerce, sued the Biden administration to block enforcement of the price negotiation provision.
Most of the lawsuits have been unsuccessful, but PhRMA filed an appeal of its lawsuit in the 5th U.S. Circuit Court of Appeals, considered to be one of the most conservative in the country and that has a history of ruling against the Biden administration.
Without commenting on the actual prices, several executives said they factored the impact of the IRA into positive growth assessments.
AbbVie CEO Robert Michael said during a call last week the company has included in its forecasts an expected sales hit to Imbruvica, a leukemia drug developed with Johnson & Johnson (J&J).
“We’ve come out and said that even with modeling that impact in, that we still expect to deliver on our long-term outlook,” Michael said.
Michael added that the price negotiation will “certainly harm long-term innovation,” and he is “hopeful” a new administration will “reassess” those provisions of the law.
Richard Francis, president and CEO of Teva, had a similar message Wednesday regarding the drug Austedo, which could be part of the next round of negotiations to take effect in 2027.
The company has a $2.5 billion sales target for the drug in 2027, which he said includes any impact of the IRA negotiations.
J&J executive Jennifer Taubert said on July 17 the company is “not in alignment with IRA and the price setting process.” Still, the government’s final numbers “have been included in the guidance that still looks very good to us today.”
J&J has two drugs on the negotiation list: psoriasis drug Stelara and blood thinner Xarelto.
Meekins noted that executives have an incentive to try to downplay the potential impact, so they don’t anger shareholders and tank the stock price. But if a Democratic Congress and administration sees the reactions and thinks the law isn’t strong enough, that will also be a problem.
“Certain people want a pound of flesh from the pharmaceutical industry, and if they think they’ve not gotten it yet, there’s a perception they will continue working until they do,” Meekins said.