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Pharma seeks changes to Medicare drug price negotiation

law

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Industry targets PBM rebate practices for reform

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Pharma says IRA penalizes development of pills vs

biologics

By Deena Beasley

SAN FRANCISCO, Jan 16 (Reuters) - The pharmaceutical

industry, grappling with new government limits on drug prices,

is focusing its requests for president-elect Donald Trump and

Congress on "fixing" a Biden-era law allowing the Medicare

health plan to negotiate prices for its costliest medicines

along with insurance changes.

The industry, which argues that pharmacy benefit managers

contribute to the high price of prescription drugs, is also

pushing for curbs on the rebates they pay to PBMs in exchange

for favorable placement on insurer coverage lists.

Such changes would likely require Congressional action,

either in stand-alone legislation or as part of a wider bill.

CEOs of some of the largest drugmakers said this week they

were encouraged after Trump said at a meeting with pharma

executives late last year that these middlemen need to be

eliminated.

"PBM reform is top of mind with legislators," Victor Bulto,

president of Novartis' U.S. operations said in an

interview this week during the JP Morgan Healthcare Conference

in San Francisco.

A prohibition on PBMs getting rebates based on a drug's

Medicare list price was at one point included in a late-2024

stopgap measure aimed at averting a partial government shutdown,

but was later stripped out.

The legislative efforts have been fueled by consumer

backlash against co-pays linked to the often artificially high

list prices drug manufacturers set for their medicines, rather

than the net prices they receive after discounts and rebates to

entities like PBMs.

"The PBM situation has become quite frustrating," and is

putting upward pressure on prescription list prices, said Biogen

CEO Chris Viehbacher.

The largest U.S. PBMs -- UnitedHealth Group's ( UNH ) Optum,

CVS Health's ( CVS ) CVS Caremark and Cigna's ( CI ) Express

Scripts -- say that by negotiating prices with drugmakers, they

lower the cost of medications and help patients save money.

Steve Ubl, head of industry lobbying group PhRMA, said it's

pushing for three PBM-related policies that it thinks would make

a big difference for patients: de-linking PBM payments from list

prices, passing rebates on to patients at the point of sale, and

requiring PBMs to be more transparent about rebates and fees.

Chris Pope, senior fellow at the Manhattan Institute, said

U.S. drug spending is highly concentrated toward Medicare, which

is primarily for people over the age of 65, since prescription

drug usage increases as people age.

"The drug industry is inevitably very highly politicized,"

he said.

IRA FIX

Biopharma companies would also like to see changes to the

Inflation Reduction Act of 2022, including parity in its

treatment of drugs that are primarily pills and capsules

compared with complex biologic medicines.

Under the IRA, oral drugs are eligible for Medicare price

negotiation after 9 years, compared with 13 years for biotech

medications. The industry is lobbying for 13 years for all

drugs.

"We're going to be very focused on the 'pill penalty'," Ubl

said. "It incentivizes more expensive medicines."

That change would require legislative action, but Ubl said

PhRMA is also pushing for IRA changes that could be carried out

administratively.

The lobbying group does not believe all drugs with the same

active ingredient should be up for price negotiation even when

they are approved for different indications.

For instance, Novo Nordisk's diabetes treatment

Ozempic, widely expected to be on the next list of drugs up for

negotiation, contains the same key ingredient as newer weight

loss drug Wegovy. Under the current rules, Wegovy is also

expected to be up for a negotiated price.

"A lot of the drug payment policy formula are not very well

designed," Pope said, noting that narrow majorities for

Republicans in both the House and Senate means their legislative

agenda may require support from Democrats - some of whom were

involved in drafting the IRA.

"I think there is bipartisan interest in fixing some of the

flaws," Ubl said. "It's too early to say in terms of the puts

and takes of any legislation."