Another late one. Some days, I feel like Inigo Montoya: “There is too much.”
Yesterday, Charles River Laboratories, which provides tools and services to help companies do R&D, warned analysts that it was about to go through a dark time. Companies were pulling back on research, especially early-stage work, in such a way that it was going to dent the growth of Charles River. The WSJ’s David Wainer did a good job of providing an overview.
I was a little skeptical. Pharma company restructurings are a natural part of the life science circle of life, and it hasn’t been obvious, watching pharma earnings over the past few weeks, that there is a reckoning on the horizon.
But that take might be a little sanguine.
I asked John Stanford, who runs the Incubate Coalition, which represents biopharma venture capitalists, for his take on what’s going on.
He didn’t mince words, suggesting that Charles River is the canary in the IRA/innovation coal mine: “This is exactly what we’ve expected, and I’m frankly wondering why so many are acting surprised. My common refrain is that with $100 billion to $300 billion sucked out of an industry, there are going to be consequences.”
The Inflation Reduction Act has always been kind of a hard thing to target politically. The high-profile part — the “negotiations” — has always been popular, even though the data are pretty clear that no one is quite clear on how it works or what the long-term ramifications are.
The other big element is the change in the benefit design in Medicare Part D, notably (but not solely) the $2,000 out-of-pocket cap for beneficiaries. This is wildly popular for an obvious reason: it takes costs away from patients and pushes them onto the system.
The word “system” is doing a lot of work in that last sentence.
Part D redesign shifts costs away from not only patients but from the government as well. But those costs still end up somewhere else in the system. Some of that “somewhere” is drug manufacturers, but the largest group on the hook is Part D plans, which are absorbing a lot more of the costs.
Under normal circumstances, this wouldn’t be a problem for plans. They’d just raise premiums to make up for those costs and go on their happy way, dollar bills flying out of the windows of the G-wagons of their executives.
But the IRA also capped premium increases at 6% (though that “cap” is a complex beast of its own and doesn’t refer to individual plans, so it’s possible that beneficiaries could see larger increases). That left plans in a financial vice: increasing costs without access to the most obvious way of recouping those costs, premium hikes.
So CMS, seeing the potential for a mess, has trotted out a handful of efforts at premium “stabilization,” most of which involve throwing government money at the problem. And that has created a political handhold for folks who hate the idea of the government throwing money at problems.
All of that is context for the furious assault on CMS’ effort to address the premium issue.
I pointed out the WSJ editorial yesterday. The Senate Finance Committee Republicans have asked the GAO to investigate. A chunk of Donald Trump’s HHS-in-waiting are livid, e.g. this Real Clear piece by Joe Grogan, who was a domestic policy advisor in Trump’s first term, and this Paragon Health Institute blog post.
I have no idea what the endgame here is. In theory, price controls — when they kick in — could offer some relief. Or maybe, as the critics fear, there’s going to be a long-term government effort to prop up Part D.
Regardless, there’s a new front in the war on the IRA.
Yesterday, I flagged some off-base arguments about the impact of IRA on innovation, along with a plea for better perspectives. And today, BIO came through with its assessment detailing why that skeptical research deserves some skepticism right back.
On any other day, I’d probably go more into depth on the thoughts of CVS leadership on the FTC PBM report and the general attitude of America’s lawmakers toward the industry. But I’m already late. The transcript is here, and you can ctrl-F for “FTC” and get the gist. I will say this, though: until the PBM industry can explain why they charge plans 10 (or more) times more for abiraterone than Mark Cuban does, even their legitimate defenses are going to ring hollow.
Bloomberg Law has a great wrap-up on the state of all of the lawsuits over state-level 340B regulations, which includes 23 suits, including some at the federal appeals court level and one request for the Supreme Court to take this up.
I don’t think there’s much new in this STAT article about Donald Trump’s health care agenda. There is a longstanding consensus that international reference pricing would be the signature pharma policy issue, and STAT lays that out well. But I had to laugh at some of the Project 2025 details, including Joe Grogan’s admission that he signed the document without reading it.
One of my fundamental beliefs about obesity medicines is the prices are falling and will continue to fall, and failure to account for that trend is warping the discussion. Anyway: Novo Nordisk held their quarterly earnings call yesterday and they made that point explicitly: “As volumes go up, prices will come down,” Doug Langa, the company’s EVP, told the analysts. (There’s some brief IRA commentary in the transcript, too.)
Speaking of Novo (and international reference pricing), KFF Health News has an intriguing piece about the price of Novo Nordisk’s Wegovy in its home country of Denmark. The medicine isn’t covered by state insurance, and consumers pay $365 a month. That’s a number worth thinking about, because net prices on obesity meds in the U.S. continue to fall, and it’s not hard to imagine a world in which $365 isn’t far off the U.S. price.
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