RHHBF - Medicare publishes initial guidance on drug price negotiations

2023-03-16 14:15:32 ET

Big pharma held steady on Thursday after the Centers for Medicare & Medicaid Services (CMS) issued initial guidance on the Medicare drug price negotiation program, which will go into effect in 2026.

The program comes under President Biden's Inflation Reduction Act which became law last year, allowing CMS to negotiate drug prices for Medicare Part D beneficiaries for the first time in history.

"Through the Medicare Drug Price Negotiation Program, we will make sure seniors get a fair price on Medicare's costliest prescription drugs, promote competition in the market, and ensure Medicare is strong for beneficiaries today and into the future," Health Secretary Xavier Becerra said.

According to the 91- page guidance, CMS will first identify the top 50 costliest drugs to Medicare before publishing a list of the top 10 candidates for negotiations on Sep. 01 ahead of a public comment period.

The negotiations are expected to start in February and last until August, following which CMS expects to publish the negotiated "maximum fair price" for drugs in Sep 2024 for revised prices to take effect in 2026.

The net prices of therapeutic alternatives and the selected drugs' clinical benefit compared to alternatives would be among the key starting points that Medicare plans to consider for the negotiations.

Under IRA, small-molecule drugs, such as pills, are exempt from pricing negotiations for nine years, while "large molecule" biologics, such as injections, were exempt for 13 years.

However, in the draft guidance, the agency indicated it would consider all formulations or dosage forms in selecting drugs for negotiations, even if companies received separate FDA approvals for different uses.

That could mean even if Merck ( NYSE: MRK ) launches a subcutaneous formulation of its cancer immunotherapy Keytruda, it will not restart the timeline for negotiations.

Highlighting concerns for biologics, Evercore ISI pointed to Novo Nordisk's ( NVO ) Ozempic and Wegovy, generic semaglutide branded for diabetes and weight loss, respectively.

Halozyme Therapeutics ( NASDAQ: HALO ), which has licensed its ENHANZE technology to facilitate subcutaneous drug delivery, extended losses following the Medicare guidance.

According to the company's 10-K filing, partners for its ENHANZE technology include Roche ( OTCQX:RHHBY ), AbbVie ( ABBV ), Takeda ( TAK ), Pfizer ( PFE ), Johnson & Johnson ( JNJ ), Lilly ( LLY ), Bristol-Myers ( BMY ), AstraZeneca ( AZN ), argenx ( ARGX ) and Horizon Therapeutics ( HZNP ).

Merck ( MRK ) is advancing two subcutaneous versions of Keytruda ahead of a patent cliff for the blockbuster therapy in 2028.

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