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The head of pharma group Novartis has warned that the US government’s reform of drug pricing risks damaging public health as drugmakers have already begun to cut investment in pills for the elderly.
Vas Narasimhan, who is the president of industry lobby group Phrma, said the Swiss drugmaker and its rivals were deprioritising pills, which under President Joe Biden’s Inflation Reduction Act will have a shorter exclusivity period of nine years, compared with 13 years for drugs delivered as infusions.
Extending the period for pills to 13 years was the “top top top priority” for the industry, he added. Prior to the new legislation the average exclusivity period for pills stretched to 13 years, according to an influential study.
The reforms in the IRA allow Medicare — the government-backed insurance for older people — to negotiate drug prices for the first time, starting with a select group of bestselling medicines due to be announced by September.
“Every day we’re making pipeline decisions based on the current legislative language and what that’s doing is leading to companies . . . deprioritising pills for the elderly, which is not going to be the right thing in the long run for public health,” Narasimhan told the Financial Times.
Without knowing exactly how the act would be implemented, “we have to assume the worst and in year one they can take a 95 per cent cut unilaterally if they want to”, he added.
The reforms have prompted a furious backlash from the pharma industry, which has warned that these would cripple innovation and hinder development of life-saving medicines.
The US is the largest pharmaceutical market, mainly because it pays the most in the world for drugs. While drugmakers are also grappling with pressure on pricing in Europe and the UK, even smaller reforms in America could have a big impact on where they invest.
The Biden administration has rejected fears about the damage to drug development. It has pointed to research by the Congressional Budget Office, a non-partisan federal agency, which estimates that just 15 fewer drugs would be introduced over the next 30 years due to the IRA.
Novartis is considering cutting programmes to develop drugs for cancers that particularly affect the elderly. Cancer drugs are usually trialled in stages, with several studies targeting different cancers, and Novartis did not think it could run these trials with a return on investment within nine years.
Earlier this month, Johnson & Johnson and Japanese drugmaker Astellas Pharma filed lawsuits against the Biden administration’s reforms, following on from legal challenges filed by Merck, Bristol Myers Squibb, the US Chamber of Commerce and Phrma.
Narasimhan said companies had tried to “educate” the administration on the problems they had with the bill before it was passed, but now some are taking legal action to try to amend the Medicare guidance to make it more “appropriate”.
Novartis was evaluating its legal options but had not yet filed a lawsuit, he said. Entresto, a drug the company developed to treat heart failure, may be one of the first to face price negotiation, Narasimhan said.
Eli Lilly’s chief executive David Ricks told investors in June that the company had axed three drugs in nine months due to the IRA. Bristol Myers Squibb told the FT last year it expected to cancel some drug programmes, with cancer medicines most vulnerable.
A spokesperson for the US Department of Health and Human Services told the FT the administration would “vigorously defend” the president’s drug price negotiation law, which, she said, was already helping to lower healthcare costs for seniors and people with disabilities.
“The law is on our side,” she added.
Additional reporting by Donato Paolo Mancini
