A tsunami of regulations will require biopharma to look to the high ground of knowledgeable partners

“Global manufacturers are under challenges on multiple fronts,” David Senior, Senior Vice President, Market Economics at Cencora (formerly AmerisourceBergen), said. “We are cognizant of the challenges and how the pressure could affect manufacturers in terms of net revenues and pricing strategies, so we are doing a lot of analysis and running our own models.”

Introduced in 2022, the U.S Inflation Reduction Act (IRA) will allow Medicare to negotiate prices and rebates for certain drugs from manufacturers. The first 10 drugs under Medicare’s Part D negotiation were named in 2023 and when a final price is reached, they are to become available Jan. 1, 2026.

The 10 drugs being negotiated represented $3.4 billion of out-of-pocket costs for Medicare enrollees in 2022, the government agency said.¹

The ‘ins and outs’ of the IRA

Going forward, the Centers for Medicare & Medicaid Services plan to select another 15 drugs covered under Part D for 2027, and as many as 15 more drugs in 2028—including drugs that fall under Part B and Part D. After that, the agency wants to add 20 drugs each year.

Large biologics falling under the IRA provisions can be selected for price negotiation 11 years after being approved with the negotiated price going into effect 13 years after approval. Small molecule drugs face a nine-year post-approval timeline before their negotiated price is implemented.

Additional pressure for biopharma manufacturers in the U.S. could also come in the form of proposed legislation in Congress. H.R. 4895: Lowering Drug Costs for American Families Act, was introduced in July 2023. It would impose government price setting for up to 50 selected Medicare drugs starting in 2029, while expanding those negotiated prices to the commercial market.

If that legislation is adopted, a study by Vital Transformation forecasts between 136,000 to 216,000 direct biopharma jobs would be lost and between 678,000 to 1.1 million indirect jobs would be lost, a significant impact  the U.S. economy. Furthermore, there would be r an estimated 134 fewer FDA approvals for new medicines over a 10-year period that would be focused on Medicare aged patients.²

The study also pointed out that since 2021 biopharma venture capital investments fell 50%, while biopharma IPOs also saw a decline of 70%.

Avoiding massive disruption

“The IRA was the most significant drug pricing legislation since (Medicare) Part D and was hard to get over the finish line,” Senior said. “The Democrats have confirmed they have no interest in opening the law for any amendments and changes, which makes sense for the ’24 elections. But once you get to 2026, we are optimistic that legislators will be more amenable to looking at IRA and making some tweaks that aren’t massively disruptive to the market.”

Senior added that Cencora’s perspective includes a link between drug price inflation that will likely converge with the Consumer Price Index (CPI). On a compounded basis, manufacturers have some room in holding the line at 4% to 5% for a period of time, however, if the CPI is down to 2% “manufacturers will cross a threshold where they will be truly penalized on Medicare.”

Concurrent with regulatory changes in the U.S., biopharmas must also now manage the impact of new rules in the European Union (EU).

In 2021, the EU adopted legislation for joint European Health Technology Assessment (EU HTA). The new EU HTA Regulation becomes effective in January 2025 and represents a significant shift in how manufacturers introduce new drugs and devices to European patients, including the development of a joint perspective on clinical aspects of drugs, in vitro diagnostics (IVDs) and high-risk medical devices.

A focus on EU regulations

The new EU regulations will also impact oncology therapies and advanced therapy medicinal products.

As part of its push to provide expanded services in Europe, which included the 2021 purchase of Alliance Healthcare, Cencora last year acquired PharmaLex, a global healthcare and life sciences consulting and outsourcing provider. The Germany-based company provides strategic guidance and regulatory support across the development and commercialization process.

“The need for regulatory consulting expertise and providing innovative solutions has never been clearer,” Tommy Bramley, Senior Vice President, Market Access and Healthcare Consulting for Cencora, said. “As our pharma and biotech partners navigate these new regulatory challenges, we are here to help them maximize success and get innovative therapies to patients.”

 

¹U.S. Department of Health and Human Services, “HHS Selects the First Drugs for Medicare Drug Price Negotiation”, (HHS press release, 2023), https://www.hhs.gov/about/news/2023/08/29/hhs-selects-the-first-drugs-for-medicare-drug-price-negotiation.html

²D. Gassull, G. O’Loughlin, D. Schulthess, “The Impact of The House Proposed IRA Expansion on the US Biopharma Ecosystem”, (Vital Transformation, 2024), https://vitaltransformation.com/2024/01/the-impact-of-the-house-proposed-ira-expansion-on-the-us-biopharma-ecosystem/

 

Cencora encourages readers to review the references provided with this article and all available information related to the topics mentioned herein and to rely on their own experience and expertise in making decisions related thereto as the article may contain certain marketing statements and does not constitute legal advice