Commercial Uncertainty
And then there is the patent cliff issue….
Adding to this legislative uncertainty are commercial questions stemming from pharma’s suite of patent cliffs. The full impact of these is still to come: top-seller Humira loses protection in the US this year; Keytruda, Opdivo and Eliquis, which together sold over $42 billion in 2022, lose exclusivity in 2028. Post-expiry sales are influenced by competitive, legal and therapy area dynamics, and are hard to quantify; still, Evaluate analysis estimates that over 6% of the nearly $1.6 trillion overall market may be at risk 2028, taking into account monthly patent expiries and competitor launch mechanics.
Pharma firms have long anticipated and resisted big exclusivity losses: AbbVie squeezed an additional seven years out of Humira after the main patent expired in 2016. Yet such ‘evergreening’ is precisely what IRA – which arrived far more suddenly – tries to stamp out. It strongly encourages generic and biosimilar competition by excluding from Medicare price negotiations drugs with such competitors. Drugs facing imminent competition win an extra two years before negotiations and fall out of the running if such competition materialises, though the law also includes restrictions to prevent brand sponsors from colluding with generics firms to game the system.
IRA’s timing dovetails with several big drug exclusivity losses. Manufacturers will need to calculate which is least damaging: generic competition or negotiations with the Centers for Medicare and Medicaid Services (CMS)? The answer will be product- and market-specific: Mark Cuban’s disruptive CostPlus Drug Company, which sells generics at cost plus a fixed 15% margin, will this year offer Coherus’ biosimilar Humira for $579, less than 10% of AbbVie’s list price for a month’s supply.
It’s unclear how deep CMS’ price cuts will go. Yet whatever the precise steps in the generics-versus-IRA dance, lower prices are inevitable for those drugs that fall into the Medicare high spend net. These will indirectly affect products in the same therapeutic area, or treating similar populations, even if these aren’t themselves eligible for negotiation. Commercial payers, under increasing economic duress, are likely to try to take advantage of Medicare price cuts as well. (The IRA is silent on access or utilisation management – the hurdles patients and physicians must overcome to access a particular product – but provisions including a $2,000 annual cap on out-of-pocket patient costs significantly increase payer liabilities, which may lead to higher premiums and access hurdles.)
Viewing IRA through a wider geographic lens softens its edges somewhat. The law doesn’t touch new drugs’ prices until their official exclusivity periods are up, unlike in Europe and other nations, where governments may impose their “value-based” price from launch or shortly after. Countries like the UK limit the growth of branded medicine sales, demanding rebates for any excess growth. The upshot is wide US-European pricing disparities, an R&D investment gap – and claims that US payers and patients are funding global drug innovation.
IRA won’t fundamentally change that picture: German-headquartered Bayer is pledging to double its US business by the end of this decade, and hopes to generate at least half of its new drug sales there. Meanwhile, Europe continues to tighten, with proposals to curtail exclusivity periods unless drugs launch across all 27 member states within two years. Japan is also seeking greater healthcare savings as its population ages: in April 2023, in a one-off move coming on top of biennial price revisions, the government shaved an average 9% off the prices of over 6,500 products. IRA sceptics might look to these regions for some perspective.
