The landscape of drug pricing in the United States is undergoing a significant shift as Medicare gains new powers to negotiate prices. With the Inflation Reduction Act paving the way for negotiations on drug prices, the focus has now turned to how the Trump administration will handle this crucial issue.
As the first batch of 10 drugs negotiated under the Inflation Reduction Act’s provisions is set to take effect next year, and an additional 15 drugs have been released for negotiation in the 2027 plan year, the program has become the new normal. Phil Sclafani, a principal at PwC U.S., noted that the Trump administration is approaching the negotiation process with an attitude of continuity rather than seeking to dismantle it.
Despite pushback from special interests like the pharmaceutical lobby, who decry the negotiation program as government price-setting, efforts are being made to work within the framework of the law and shape it moving forward. The focus now lies on understanding the flexibility within the selection of drugs for negotiation and refining the process accordingly.
While the Trump administration is known for its efforts to reverse Biden’s policies, drug pricing may be an area where the approach is more about degree than direction. President Trump is keen on outperforming the previous administration in lowering drug prices and taking on Big Pharma. Both major U.S. political parties have a shared goal of reducing drug prices, and it is likely that the Trump administration will seek to tailor the Inflation Reduction Act to its priorities rather than completely repealing it.
The initial drugs selected for negotiation were mainly those with high Medicare spending, rather than focusing on factors like cost per patient or potential savings opportunities. The impact on the industry from these negotiations was somewhat muted, as many of the selected drugs were older treatments or already offered with substantial rebates. However, significant price drops were seen for certain drugs, indicating the potential for savings in the future.
The future of drug price negotiation under the Inflation Reduction Act remains uncertain, with the second list of drugs released for negotiation pointing towards more impactful negotiations. The public and political attention on these negotiations, especially for drugs like Novo Nordisk’s diabetes and weight loss medications, could lead to a higher profile for the law.
As the Trump administration navigates the complexities of drug price negotiation, the focus is on efficiency and readiness for the changes that lie ahead. The pharmaceutical industry is adapting to the new landscape, preparing for potential impacts on their products and market strategies. The future of drug pricing in the U.S. remains a dynamic and evolving landscape, with the negotiation process set to have a significant impact on the industry as a whole. The future of the Inflation Reduction Act (IRA) remains uncertain, with rumors of a complete repeal circulating alongside the possibility of less expansive reform. President’s proclivity to act quickly and forcefully leaves plenty of options on the table for the pharmaceutical industry.
If the IRA is here to stay, potential changes could include adjustments to how orphan drugs are exempted or addressing concerns about the discrepancy in exemptions between small and large molecule drugs. However, the most likely scenario is incremental change rather than a complete overhaul or repeal, according to industry experts.
“We’ve seen a shift from extreme proposals to a more rational approach,” said Sclafani. “It seems like the government has settled on a ‘good enough for now’ stance, which reflects the complexity of the issue at hand.”
Despite the pharmaceutical industry’s opposition to the IRA, there is a silver lining for some companies. While some drugmakers anticipate a negative impact on earnings, others may see a positive outcome.
“If patients can stay on their medications longer, it could lead to increased sales for certain companies,” Sclafani explained. “Additionally, the competitive landscape may shift, benefiting some companies over others. Pharma leaders need to take a long-term view and strategize accordingly to mitigate potential challenges.”
Preparation for the IRA’s implementation has led to unintended consequences, such as companies collaborating with Part D plans to reduce prices preemptively. While concerns about price negotiation impacting innovation are valid, companies have adjusted their R&D priorities to align with the program’s requirements. However, innovation remains crucial for the industry’s success in the long run.
“The impact of the IRA will ultimately depend on the drugs included in the list, and future selections could have significant implications,” Sclafani noted. “Negotiations for higher-cost drugs will be more nuanced, driving real savings for the healthcare system.”
As the pharmaceutical industry navigates the evolving landscape shaped by the IRA, companies must continue to adapt and innovate to thrive in a changing market environment. The upcoming decisions regarding drug pricing and access will shape the industry’s trajectory for years to come.
