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Unintended Consequences of Drug Pricing Reform: Insights from the Indegene Digital Summit

02 Oct 2023
The life sciences industry is experiencing significant market and policy changes, including the Inflation Reduction Act (IRA) 2021 and other transformative factors. These changes have had profound implications for gross-to-net planning, requiring organizations to adapt and optimize their strategies accordingly. The Indegene Digital Summit brought together industry luminaries David Shulkin (Ninth Secretary, U.S. Department of Veterans Affairs) and Nicholas Simmons Stern (Biogen) to delve into the intricate realm of healthcare pricing.
The expert panel provided an in-depth analysis of the regulatory landscape, evolving pricing dynamics, the impact of the Inflation Reduction Act (IRA) on pharma, reimbursement implications, and market access challenges that arise from these changes, equipping the audience with practical strategies to adapt and thrive in this dynamic environment.
The key takeaways from their comprehensive conversations are summarized below.

Escalating Healthcare Pricing Pressures

Over the years, healthcare pricing pressures have steadily intensified. This mounting pressure stems from various sources, including rising public concern about the affordability of healthcare, bipartisan support for addressing the issue, and the pharmaceutical industry's unyielding pricing models. These factors have collectively spurred the demand for comprehensive pharma and drug pricing reform in the United States.
Taking a global perspective reveals that the United States is now experiencing pricing pressures that have long affected other regions. The stark contrast between drug prices in the US and those in other countries has become a contentious issue. Many wonder why the same medications are considerably more affordable elsewhere, leading to intense scrutiny of pricing practices within the pharmaceutical industry.
IRA is likely to dramatically change the way doctors practice and the way that they prescribe medications as well
– David Shulkin

Deciphering the Inflation Reduction Act 2022 (IRA)

The Inflation Reduction Act 2022 (IRA) encompasses a range of critical provisions designed to tackle the growing issue of healthcare costs and enhance patient accessibility to essential medications. These provisions include inflation penalty , limitations on out-of-pocket expenditures, alterations to benefit designs, negotiation of drug prices. It's worth noting that exemptions may come into play when multiple-source competitors enter the market. This introduces an element of dynamism to the list, potentially altering its composition over time.

Implications on the drug pipeline

The IRA has faced legal challenges, with some stakeholders questioning its legal standing and constitutionality. These legal disputes raise legitimate concerns and may lead to process adjustments or modifications in response to legal rulings.
78% of companies have actually already made decisions about their pipeline based upon the projected impact of the IRA
– David Shulkin
The discussion on the unintended consequences of the IRA highlighted several key areas of concern:
Biologics vs. Small Molecules: The IRA's incentives may lead to a disproportionate emphasis on investing in biologics, which are more expensive to develop and produce, and therefore typically more expensive in the marketplace. This skewed incentive could deter investment in small molecules, potentially distorting the reality of scientific innovation.
Impact on Orphan Drugs: The IRA's provisions could impact orphan drugs significantly. The pressure to launch larger indications first may lead to the de-prioritization of smaller indications. Furthermore, there's a disincentive to launch additional indications after the first orphan indication, potentially jeopardizing follow-on indications.
Existing vs. New Indications: The changes might discourage post-approval clinical trials and studies to find new drug indications, potentially limiting innovation in certain therapeutic areas. There could be a shift in focus toward existing indications that mostly impact the Medicare-plus population. Studies reveal that more than 60% of oncology products are actually now due to post-initial FDA approval clinical studies and not new indications.
Impact on Launch Prices: Manufacturers may raise initial launch prices due to the uncertainty of future negotiations, potentially making access to new drugs more challenging.
There is nothing in the current model to prevent manufacturers from recouping that lost revenue on the tail end with higher prices at launch.
– Nicholas Simmons-Stern

Global Pricing Pressures

The discussion extended beyond the United States, touching on pricing pressures in Europe. Different countries are implementing their approaches to address pricing issues. In France, some products are deemed non-reimbursable, leading to no price negotiations. Germany's AMNOG negotiation process has led to drug withdrawals, while the UK uses net pricing strategies to exert pressure. The global macroeconomic environment, particularly post-COVID, is adding budgetary pressures across the board.
It's increasingly difficult to find a commercially viable business case for launching a drug.
– Nicholas Simmons-Stern

In Conclusion:

The summit shed light on the complex and multifaceted nature of drug pricing reform. The unintended consequences of such reforms, particularly in the context of the IRA, could have far-reaching effects on innovation, patient access, and the pharmaceutical industry as a whole. It is crucial to continue monitoring these changes and consider alternative pricing strategies that prioritize value, effectiveness, and innovation while avoiding the potential pitfalls of price setting.
The future of the drug pricing reform remains uncertain, and stakeholders must work collaboratively to strike a balance between affordability and maintaining incentives for scientific innovation in drug development. Only time will reveal the true impact of these reforms on patients, manufacturers, and the broader healthcare ecosystem.

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