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Big pharma slams US Senate drug pricing bill, outlines exposure during Q2 calls

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Big pharma slams US Senate drug pricing bill, outlines exposure during Q2 calls

Pharma executives have little love for the Senate Finance Committee's drug pricing legislation, with Pfizer Inc. and Bristol-Myers Squibb Co. saying it punishes innovators in the industry.

The bill, introduced July 23, was featured prominently during pharma companies' second-quarter earnings calls as analysts grilled executives about potential exposure to the proposed reforms.

The Grassley-Wyden Prescription Drug Pricing Reduction Act of 2019, which has advanced to the Senate floor, would lower Medicare beneficiaries' out-of-pocket expenses and cap price increases for Medicare drug benefits at the rate of inflation. If a drugmaker increases prices above the rate of inflation, it would be required to issue a rebate. The bill would also increase Medicaid's rebate caps. If passed, the bill would begin implementation in 2021.

"We cannot support this bill as written," Pfizer CEO Albert Bourla said during his company's July 29 earnings call.

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AbbVie Inc. CEO Richard Gonzalez called some aspects of the legislation punitive for "innovation-driven companies" — or as Leerink analyst Geoffrey Porges put it, companies selling high-priced medicines.

Sanofi CEO Olivier Brandicourt and Eli Lilly and Co. CEO David Ricks — who have faced criticism over their companies' high insulin prices — as well as Bristol-Myers CEO Giovanni Caforio, argued that the bill does not actually improve affordability for patients.

"The Senate finance package ... generates a huge amount of savings to the government, most of which does not go back to the patients," Ricks said July 30.

Caforio, who pointed to insurers rather than drugmakers as major contributors to affordability issues, said the bill would benefit only 2% of Medicare patients.

"As a company and as an industry ... we oppose the Senate Finance Committee legislation," Brandicourt said on July 29.

Finding relief

According to Porges, the bill would "substantially change" Medicare Part B and Part D, which account for drugs administered during outpatient services and self-administered prescription drugs, respectively.

"Although we expect biopharma to fight this proposal fiercely, behind closed doors executives are probably quite relieved," Porges said July 24.

Porges attributed some of this relief to the exclusion of reference pricing — "the two most frightening words in the political lexicon" — which would require U.S. drugs to be priced at the same rate as in certain foreign nations.

"This legislation does close a number of the pricing rorts enjoyed and abused by the industry," Porges said.

Eli Lilly's exposure to the legislation is among the highest in the industry due to its insulin business flowing through Medicaid, according to Wolfe analyst Tim Anderson.

AbbVie, which has less exposure relative to its peers with 14% of global sales in Part D and less than 1% in Part B, offered support for the bill's Part D reform. The bill proposes decreased costs for participants, an increase in plan contribution, an increase in manufacturer burden and a decrease in consumer burden.

Bristol-Myers, which has 24% of its business in Part B and 26% in Part D, and U.K.-based AstraZeneca PLC noted their diverse portfolios as an important element of assessing impact. Gilead Sciences Inc. CEO Daniel O'Day emphasized growth from volume rather than pricing increases.

"We no longer see the benefit of those price increases in the U.S. because of obviously the changing dynamics," Merck & Co. Inc. CFO Robert Davis said July 30, in response to the policy changes to come.

Merck has about 25% of its business in Part D, while the company's blockbuster cancer immunotherapy Keytruda is reimbursed through Part B. Gilead has a low double-digit percentage in total exposure to Medicare, most of which is attributed to its HIV medications.

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Alexion Pharmaceuticals Inc., facing minimal exposure with 20% of its total business in Medicare, enforces a global sustainable pricing strategy, meaning it already prices drugs within a certain narrow range internationally.

AstraZeneca, Pfizer and Amgen Inc. said biosimilars, copies of complex large-molecule therapeutics, should alleviate some of the patients' financial burden. The U.S. Food and Drug Administration has approved 20 biosimilars since 2015 — but only six are marketed as of January 2019. Europe has at least twice as many biosimilars on the market.

Pharma companies pointed out that the bill is not yet set in stone, and GlaxoSmithKline PLC CEO Emma Walmsley added that the bill may be further amended during discussions.

Five Republicans who voted to advance the bill stipulated that they would need to see alterations to the proposal before voting in the Senate.

"I want to assure investors that the industry has and will continue to focus on shaping this debate," Eli Lilly's Ricks said.