By Deena Beasley
SAN FRANCISCO (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 (SIX:NOVN)’ 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 (NASDAQ:BIIB) CEO Chris Viehbacher.
The largest U.S. PBMs — UnitedHealth Group (NYSE:UNH)’s Optum, CVS Health (NYSE:CVS)’s CVS Caremark and Cigna (NYSE:CI)’s 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 (NYSE:NVO)’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.”