GILD - Inflation Reduction Act: A Bullish Catalyst For Viatris Inc.
2024-04-24 18:28:32 ET
Summary
- The Inflation Reduction Act has reduced the exclusivity period for small-molecule drugs, potentially leading to earlier market entry for generic drugs.
- The shortened exclusivity period may create a bullish catalyst for certain stocks in the generic pharmaceutical sector.
- Gilead will face a patent "mini-cliff" in the near future, providing opportunities for generic drug manufacturers.
- A unique opportunity presents itself for lesser known Viatris.
The Inflation Reduction Act ('IRA'), enacted in August 2022, focused on several key areas. The legislation is very extensive and complex. This article will focus specifically on healthcare and the ramifications for generic pharmaceutical companies in the healthcare sector:
To reduce prescription drug costs, there was a provision in the IRA enacted to reduce the cost of certain drugs. Specifically, the period of exclusivity on small-molecule drugs was reduced from 13 to 9 years, while the timeframe that biologics are exclusive was left unchanged. This period is very dependent on the specifics of the product. An excellent summary may be found at Akin. The article finds that:
- Reduction in Exclusivity Period for Small-Molecule Drugs: The IRA introduced charges to reduce the market exclusivity period for small molecule drugs, while leaving biologics relatively untouched.
- Impact on Patent Litigation: The reduction in patent life is highly dependent on litigation and difficult to predict a priori . However, small molecule drugs (SMDs) have been reduced in patent lifetime compared to biologics.
- Biologics: Biologics are large, complex molecules derived from living organisms, often proteins or antibodies.
- Small Molecule Drugs (SMDs): SMDs are chemically synthesized compounds of lower molecular weight, which are more often taken orally via pills.
- Market Entry for Generic Drugs: Overall, the IRA provisions are expected to facilitate earlier generic entry, particularly for SMDs.
- Generic Drugs: Generics are produced after the brand-name drug patent expires.
- Branded Drugs: Branded drugs are marketed by a specific company under a proprietary name.
- Branded Generic Drugs: On occasion, branded pharmaceuticals are licensed to generic pharmaceutical companies, leading to branded generics, which can sell before or after competition with generic drugs.