From The Editor | November 14, 2024

CEO Panel Talks IRA Impact At Galien Forum

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By Ben Comer, Chief Editor, Life Science Leader

Galien Forum-2024

After a year of monitoring implementation of the Inflation Reduction Act (IRA), including the first cohort of companies going through drug price negotiations at the end of last summer, a panel of CEOs and industry leaders convened at the Galien Forum on November 7 in New York City to talk about the law’s impacts.

Chris Viehbacher, president and CEO at Biogen, began by grousing about the “20% tax on Medicare sales” coming into effect in 2025, noting that “for those of us looking at our annual operating plans for next year, that is coming into play.” Viehbacher also suggested that the next group of drugs selected for price negotiation — CMS’s picks are expected by February 1, 2025 — are likely to face bigger price cuts.

“The first cohort of products coming in [for negotiation] had been on the market for quite a long time … so the actual ability for CMS to negotiate [downward] was pretty limited,” said Viehbacher, noting the IRA’s maximum and minimum pricing provisions, and the fact that net prices only dropped by “quote unquote” 10% for the first cohort of negotiated drugs. “The next cohort is almost certainly going to have much bigger decreases,” which is “creating an awful lot of uncertainty.”

Viehbacher also singled out the discrepancy between price negotiation eligibility for small molecule drugs versus large molecule drugs — nine years vs 13 years, respectively — and the impact that IRA provision is having on drug developers. “It’s certainly causing a number of companies to think about, ‘Do I even bother with second and third indications?’” which could impact oncology drug developers disproportionately, he said. “If you’ve taken a long time to develop that first indication, and you’re a small molecule and you only have nine years, you may find that you won’t get that second indication approved until you only have two or three years left in the market, and that’s not going to be enough to justify that decision.”

Good And Bad, And A New Opportunity For Tweaks

John Crowley, president and CEO at BIO, and former founder and CEO of Amicus Therapeutics, described the IRA as having a few silver linings, even if other aspects of the law need to change. “The $2,000 out-of-pocket copay limits that are coming to seniors in Medicare is a good thing,” said Crowley. “And while we’ve had to come together to find a way to pay for that, including the 20% tax on our industry, that [copay limit] shouldn’t be taken away from seniors as it begins to be implemented.” But in addition to the “good elements” of the IRA, there are other “unintended consequences” in the law, and “some just pure mistakes.” 

On the unintended consequences and mistakes included in the IRA, such as the small and large molecule discrepancy, and the problem of rare disease drugs losing exemption from price negotiations if more than one indication is pursued, Crowley is hopeful about the potential for working with the incoming 119th Congress and Trump administration to make legislative corrections. “The current [118th] Congress and [Biden] administration were not willing to look at improvements to the IRA,” said Crowley. With the incoming Congress and administration, however, “I think we will have an opportunity to selectively do that.” Crowley described the Epic Act, which would make both small and large molecules eligible for price negotiation after 13 years, as a “heavier lift” politically, but said that lawmakers are sympathetic to the issue of rare disease drugs and multiple indications.

Noubar Afeyan, founder and CEO of Flagship Pioneering, said the rare disease multiple indication issue — the IRA exempts orphan drugs from price negotiation only if they have a single indication, as mentioned above — renders an established drug development strategy verboten. “In the past, you might as an innovator have figured out the lowest risk, shortest time, lowest cost path to proof-of-concept, only to then go after all the other indications,” said Afeyan. “That is not a viable approach anymore.”    

Afeyan raised two additional challenges created by the IRA. “First of all, the chilling impact this has had on the investment community cannot be understated. It has increased the cost of capital undeniably, and the fact that you have to go all the way to the finish line without knowing the size of the prize is not conducive to big advances,” he said. “Ironically, it might work for smallish advances, but if you are going to put billions of dollars into developing a whole new modality, you want a little more certainty that you can get paid for it.”

The second issue, per Afeyan, is the law’s impact on partnerships. “It has a complicating effect on pharma partners who are themselves reeling to try to figure out what to do with [the IRA] in their own R&D programs.” If Big Pharma knows what it wants, that makes it much easier for biotechs to meet the need. “But if they don’t know what their finance people are going to want them to work on, that adds another degree of trickle-down uncertainty, and we certainly feel that,” said Afeyan. “I think that if the IRA was intended to pave the way for more innovative drugs, and maybe make it harder for less innovative drugs, it might be trying to do the latter, but it’s also not doing the former, in my view.”

The bottom line, said Viehbacher, is that the “amount of money it takes to get a drug to market only goes up every year, but the total reward we get over the years keeps shrinking. We’re going to have to figure out how to make ourselves a lot more efficient.”

In addition to IRA impacts, the Galien Forum’s CEO panel discussed the implications of emerging technology such as generative AI, and current enthusiasm for metabolic and neurologic therapeutic areas for drug development. The full panel is available for viewing on YouTube.