Drugmakers bypass US Medicare price negotiations by going under the skin.
Drugmakers bypass US Medicare price negotiations by going under the skin.
Injectable Cancer Drugs Excluded from U.S. Government Price Negotiations: Protecting Billions in Revenue
In a controversial move that has left Wall Street and drugmakers anxiously watching, injectable versions of widely-used cancer drugs are likely to be excluded from new U.S. government price negotiations for years. Some major pharmaceutical companies, including Johnson & Johnson, Merck & Co, and Halozyme Therapeutics, believe that adding an ingredient enabling infused drugs to be given by injection qualifies them as new medicines and significantly delays their eligibility for price negotiations[^1^].
The impact of this decision will potentially protect billions of dollars in revenue for drug manufacturers. It remains to be seen whether the government will agree with this viewpoint or if it will consider injectable versions with the added ingredient as new drugs. This is known to be an active ingredient that allows the body to absorb more of the drug when injected[^1^].
President Biden’s Inflation Reduction Act (IRA) has created ripples in the pharmaceutical industry by allowing the government Medicare health program, for the first time, to negotiate prices for some of the most costly drugs. This initiative aims to create $25 billion in annual savings by 2031, as the United States currently spends more on prescription medicines than any other country[^1^].
The Scope of Negotiations
Medicare, which serves Americans aged 65 and older, will begin negotiating prices for 10 drugs as part of the first wave, starting in 2026. These medicines will be selected from those that have been on the market for at least nine years and 13 years for more complex biotech drugs, without ample direct competition. Medicare plans to increase the number of drugs negotiated each year, expanding the scope of the program in 2028 to include drugs typically administered in a hospital setting[^1^].
The U.S. Centers for Medicare & Medicaid Services, responsible for running the Medicare program, declined to comment on whether older medicines with the additional ingredient of hyaluronidase would be considered new drugs[^1^]. Nevertheless, industry experts, such as Evercore ISI biotech analyst Michael DiFiore, expect that hyaluronidase will qualify these medicines as new drugs since it is a specialized technology that enhances the body’s absorption of the medication[^1^].
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Injectable cancer treatments that include hyaluronidase are seen as distinct from other types of reformulations. Medicare guidelines were updated to close loopholes that could have allowed drugmakers to manipulate the system by making minor changes to their drugs. However, injectable cancer drugs utilizing hyaluronidase do not fall into this category of potential manipulation[^1^].
Billions at Stake for Pharmaceutical Companies
For Johnson & Johnson, the subcutaneous version of their blockbuster multiple myeloma treatment, Darzalex, called Darzalex Faspro, is not expected to be eligible for negotiation until 2033 or 2034. This could be five or more years beyond the negotiation eligibility of the original Darzalex, as Faspro already accounts for more than 80% of its revenue, which is projected to reach $9.5 billion this year[^1^].
Merck & Co plans to launch an injectable version of its top-selling immunotherapy, Keytruda, within a few years. The approval of this version will start the 13-year clock until it becomes eligible for negotiation. Keytruda’s infused version could potentially fall under the program as early as 2028. Analysts estimate that Keytruda revenue will exceed $24 billion this year and could surpass $30 billion by 2026[^1^].
Halozyme Therapeutics, a San Diego-based company licensing the critical new ingredient, hyaluronidase, for subcutaneous drugs, foresees the revenue from hyaluronidase-containing drugs driving its growth in the future. Halozyme had $660 million in revenue in 2022 and sees these injectables as separate drugs that will receive the new drug treatment from Medicare[^1^].
The stance taken by Medicare on whether injectable cancer drugs containing hyaluronidase will be considered new drugs has significant financial implications for the pharmaceutical companies involved. The decision to exclude these drugs from price negotiations for years will protect their billions in revenue[^1^].
In conclusion, the exclusion of injectable versions of cancer drugs from U.S. government price negotiations has sparked controversy in the industry. Drug manufacturers argue that the addition of hyaluronidase qualifies these medicines as new drugs, thus delaying their eligibility for negotiation. The impact of this decision will protect billions of dollars in revenue for companies such as Johnson & Johnson, Merck & Co, and Halozyme Therapeutics. The Medicare program aims to create significant cost savings by negotiating drug prices, though the inclusion of these injectable drugs remains uncertain[^1^].
References: [^1^]: Original Article – Reuters