June 17, 2024

Novartis boss warns US drug pricing reform threatens public health

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The head of pharmaceutical group Novartis has warned that the US government’s reform of drug pricing risks harming public health as drugmakers have already started cutting back on investment in pills for the elderly.

Vas Narasimhan, who is president of the industry lobby group Phrma, said the Swiss drugmaker and its competitors were prioritizing pills, which will have a shorter exclusivity period of nine years under President Joe Biden’s Inflation Reduction Act, compared to 13 years for drugs delivered as infusions.

Extending the period for pills to 13 years was the “highest maximum” for the industry, he said. Before the new legislation the average period of exclusivity for pills stretched to 13 years, according to an influential study.

The IRA reforms allow Medicare – the government-backed insurance for the elderly – to negotiate drug prices for the first time, starting with a select group of wholesale medicines to be announced by September.

“Every day we are making pipeline decisions based on the current legislative language and companies are leading the way in what they are doing. . . prioritizing pills for the elderly, which will not be the right thing in the long run for public health,” Narasimhan told the Financial Times.

Without knowing exactly how the Act would be implemented, “we have to assume the worst and in the first year they can unilaterally take a 95 percent cut if they want”, he said.

The reforms sparked a furious backlash from the pharmaceutical industry, which warned that these would stifle innovation and hinder the development of lifesaving medicines.

The USA is the largest pharmaceutical market, mainly because it pays the most in the world for drugs. While drugmakers are grappling with pressure on pricing in Europe and the UK, smaller reforms in America could have a big impact on where they invest.

The Biden administration dismissed concerns about the damage to drug development. He has pointed to research by the Congressional Budget Office, a non-partisan federal agency, which estimates that only 15 fewer drugs will be introduced over the next 30 years because of the IRA.

Novartis is considering cutting programs to develop drugs for cancers that particularly affect the elderly. Cancer drugs are usually tested in stages, with several studies targeting different cancers, and Novartis didn’t think it could run these trials with a return on investment within nine years.

Earlier this month, Johnson & Johnson and Japanese drugmaker Astellas Pharma filed lawsuits against the Biden administration’s reforms, following on from legal challenges filed by Merck, Bristol Myers Squibb, the US Chamber of Commerce and Phrma.

Narasimhan said companies tried to “educate” the administration on their problems with the bill before it passed, but now some are taking legal action to try to amend the Medicare directive to make it more “proper.”

Novartis was evaluating its legal options but had not yet filed a lawsuit, he said. Entresto, a drug developed by the company to treat heart failure, could be one of the first to undergo price negotiations, Narasimhan said.

Eli Lilly’s chief executive, David Ricks, told investors in June that the company had recovered three drugs in nine months because of the IRA. Bristol Myers Squibb told the FT last year that it hopes to cancel some drug programs, with the most vulnerable cancer medicines.

A spokeswoman for the US Department of Health and Human Services told the FT that the administration would “vigorously defend” the president’s negotiated drug price law, which she said was already helping lower health care costs for seniors and people with disabilities.

“The law is on our side,” she said.

Additional reporting by Donato Paolo Mancini

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