Medicare price negotiations not likely to delay new cancer drugs

October 24, 2023

Source: Vogel, et al NEJM October 11, 2023 LINK  
Red shaded indicates foregone revenue from delayed launch, and green shaded indicates extra revenue from higher Medicare prices obtained through delayed launch.

The pharmaceutical industry has vigorously opposed Medicare price negotiation, and one of the talking points has been that this would encourage them to delay launches of new cancer drugs. Such a delay could prevent some patients from receiving lifesaving treatment. The CEO of Genentech suggested that his company might “slow walk” a promising drug that has already shown benefit for ovarian cancer until a later study demonstrated benefit for prostate cancer, which is a larger market.

Research published this week in The New England Journal of Medicine shows that such a delay would not increase profitability, and would likely decrease drug company sales and profits. The authors point out that such a delay entails the risk that the trials for the larger indication might not demonstrate effectiveness, and that a competitor’s drug could gain market share during any delay. Pharmaceutical companies get under half of revenue from Medicare, and delaying a drug launch would lead to loss of revenue from private payers. They also point out that the initial drug patent is filed before testing in humans, so delaying launch would squander some years of available patent protection, leaving the drug company to rely on more tenuous secondary patents to maintain exclusivity.

Pharmaceutical companies have been reported to strategically time drug releases to increase profitability. For instance, the New York Times  reported on the delay of the introduction of Descovy, an HIV treatment and prevention drug, until the patents on a related drug Truvada had almost run out. This happened long before Medicare price negotiations, and in that instance the pharmaceutical company was potentially seeking to avoid competing against itself.

The manufacturers of all ten drugs targeted for Medicare price negotiation have agreed to initiate these discussions, although there are federal lawsuits in multiple jurisdictions challenging the Inflation Reduction Act.

Implications for employers:

• This analysis should decrease fears that Medicare price negotiation will delay access to new lifesaving drugs.

• We don’t know how Medicare price negotiations will impact commercial drug prices. There are some indications that the Medicare negotiations will lead to lower commercial prices.

• The drugs for which Medicare is negotiating prices represent 15.5% of pre-rebate employer outpatient pharmacy spending.

• Employers should expect no immediate change in drug prices, as the new negotiated Medicare prices won’t go into effect until 2026 assuming the courts do not intervene.

Tomorrow: Discovery offers a new ray of hope for Long COVID treatment

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