In a recent move by the US government, the approach to negotiating Medicare drug prices could potentially discourage the production of cheaper alternatives, known as biosimilars, for some of the more complex and pricer pharmaceuticals. This issue has raised concern among drug policy analysts who monitor sectors with high Medicare spending.
The White House has recently released the names of the first 10 drugs that the Medicare agency has chosen for price negotiations. This move is seen as a pivotal step towards directly negotiating lower drug costs with pharmaceutical companies.
The list includes Johnson & Johnson’s Stelara, an expensive biologic used to treat Crohn’s disease and other autoimmune disorders. The inclusion of Stelara has surprised some analysts. This comes in the wake of a prediction that a cheaper version, or a biosimilar, is expected to become available before the newly negotiated prices take effect.
Considering the high cost of biologics, a government watchdog report last year found biologics cost the Medicare Part D program $12 billion annually. Therefore, cutting the price of a biologic would inadvertently lead to lower initial pricing for new biosimilars used as alternatives, as noted by analysts.
The Inflation Reduction Act exempts any brand-name drug or biologic that has a generic or biosimilar competitor from negotiations. Provided a biosimilar for Stelara becomes market-ready before negotiated prices go live in 2026, it could alter the market dynamics considerably. With this policy, the Centers for Medicare & Medicaid Services might unintentionally inhibit the entrance of biosimilars for the biologics that make up most of Medicare’s total costs, according to Alice Chen, an associate professor of public policy at the University of Southern California.
These developments open up questions concerning the future of biosimilar entry and biologic manufacturers, with the legal field keen to monitor these changes closely. For the full details of these changes, you can read the original article on Bloomberg Law here.