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Moody's: US Senate drug pricing bill ups social, financial risk for Big Pharma

Moody's believes the U.S. Senate Finance Committee's drug pricing legislation proposal creates social and financial risk for pharmaceutical companies like Amgen Inc., Gilead Sciences Inc. and AbbVie Inc. due to their high exposure to U.S. markets.

The rating agency said in an Aug. 7 report that the draft Senate bill, introduced July 23, would also target drugs with high price increases in both Medicare Part D and Part B, representing pharmacy- and provider-administered drugs respectively.

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Drugs covered in Part D would have a greater risk, and as far as individual products, Moody's cited Sanofi's diabetes drug Lantus, Celgene Corp.'s cancer drug Revlimid and Bristol-Myers Squibb Co. and Pfizer Inc.'s heart drug Eliquis as those with the highest use under that section.

The Congressional Budget Office predicted that from Part D rebates alone, annual savings to the federal government would be more than $10 billion if the bill is enacted.

It would also reduce out-of-pocket costs for Medicare beneficiaries, which would come at the industry's expense in general, Moody's reported. Pharmaceutical executives from some of the biggest pharmaceutical companies have said the proposal punishes innovators.

"Regulators' and legislators' recent proposals to bring down the cost of drugs signal that drug price scrutiny remains a social risk for the U.S. pharmaceutical industry," Moody's Senior Vice President Michael Levesque said. "If enacted, proposals such as those allowing imports of certain drugs, or the bipartisan draft bill known as the Prescription Drug Pricing Reduction Act, would pressure prices and raise financial risks for the branded drug industry."

Companies with less dependence on U.S. markets — like Johnson & Johnson and Sanofi — would be less exposed to financial risk from the changes in the U.S., even if certain drugs in their portfolios are affected by Medicare coverage.

Moody's said the Senate's proposal would be more detrimental to pharmaceutical finances than the U.S. Health and Human Services' action plan to implement drug importation from Canada and other countries, as that would likely be a slower process and lead to more modest decreases.