CMS wants feedback on how Medicare drug negotiations should evolve. Researchers, advocates, drugmakers all have notes

Industry and patient stakeholders who aren’t totally on board with the Biden administration’s Medicare Drug Price Negotiation Program are hoping that to-be-determined updates for the coming years tackle their concerns over access, innovation and pricing head-on.

The program outlined by last year’s Inflation Reduction Act (IRA) allows Medicare to negotiate the prices of 10 Medicare Part D drugs for 2026, with more Part B and Part D products becoming eligible in later years.

Expansions outlined in the law, as well as opportunities for drugmakers to renegotiate, mean that the Centers for Medicare & Medicaid Services (CMS) is already working on new guidances and processes for the years to come, said Meena Seshamani, M.D., deputy administrator and director for the Center for Medicare.

“It’s so important for us to all collectively learn along the way,” Seshamani said Tuesday during the Milken Institute's Future of Health Summit event in Washington, D.C. “Markets are dynamic … and so it’s important that we are constantly evaluating those market dynamics, working in concert with everybody involved in this space, so that we can make sure that our ultimate goal of accessibility and affordability for the kinds of innovations and cures that people need is consistently front and center.

CMS’ learnings are coming from a few key sources, she explained. The negotiation process that recently began with drugmakers has “quite a bit of back and forth” and data collection. While those discussions are held behind closed doors, CMS will be publishing a summary alongside its eventual “maximum fair price” of how it reached a number that will be available to the public and help inform its thinking for future updates, Seshamani said.

Other key influences on future guidance are information collection requests and 10 patient-focused listening sessions, seven of which have so far been held, the deputy administrator said. Seshamani emphasized the latter as vital to the program’s ultimate goals.

“We’re doing all of this for the people who rely on the Medicare program, and so it’s very important for us to be able to hear those voices,” she said.

Who could be harmed by the Medicare Drug Price Negotiation Program?

Appreciation for Seshamani’s promises of future program adjustments were among the few areas of agreement during a subsequent panel of diverse industry interests.

Lisa Lacasse, president of the American Cancer Society Cancer Action Network, warned that policy interventions “create not just complexity, but unintended consequences.” Stakeholders will need to “come together as a community” to push for changes should it become clear that certain patients aren’t paying less on negotiated drugs or that new incentives stunt the development of needed treatments.

Rena Conti, associate professor at the Questrom School of Business at Boston University, said that many seniors are set to benefit from the law—particularly those with anticipated catastrophic spending whose out-of-pocket costs will be capped at $2,000 annually. However, there are other “folks in the middle … who might have to pay a little bit more out of pocket because of the restructuring for these drugs.”

CMS will also need to be mindful of the downstream impacts benefits caps and negotiated prices will have on the commercial side of the industry.

Frederick Isasi, executive director of Families USA, said there are now “a lot of employers who are worried that the drug companies are just going to go ahead and drag up the price on the commercial [payers] and make up for the loss on Medicare.”  

Similarly, CMS’ choice of drugs stands to affect the formulary decisions of commercial insurers, which could harm access, added Lisa Joldersma, strategic adviser at Avalere Health.

“We really need CMS to be taking a careful look, particularly in classes where you maybe have a negotiated drug that competes with the drug not being negotiated by the secretary,” she said. “We want to make sure beneficiaries have affordable access to all of those drugs, and greater CMS oversight is fundamental."

Adam Gluck, senior vice president at Sanofi and the panel’s de facto pharmaceutical industry representative, similarly urged CMS to keep an eye on the subset of cost-exposed patients and formulary design, particularly as pharmacy benefit managers “negotiate for the highest rebate, not the lowest price.”

He also put a spotlight on the law and the program’s costs to the industry and how that might affect incentives for ongoing and future pharmaceutical research.

Though nonpartisan analyses like those from the Congressional Budget Office anticipate the IRA won’t impact new market entries within the next 10 years, the pace of science and development extends well beyond a decade, Gluck said.

“This will likely result in fewer new medicines coming to the market in 10 years and beyond,” he said.

The program also disincentivizes companies from pursuing additional indications for existing drugs that either are or could potentially be added to the list of Medicare-negotiated products, he said while pointing to recently announced data supporting Sanofi’s Dupixent for treating chronic obstructive pulmonary disease.

“Dupixent is well into its life cycle by this point,” he said. “Had the IRA been in effect … I don’t know that we could have afforded to take this high-risk bet to pursue this additional indication.”

“I want to make sure that as we move forward through implementation and corrections in the future that we can make sure that we are focused on making sure patients can get access to the new science that we all hope is coming," Gluck said.

Gluck’s comments faced some pushback from others on the panel. Conti, citing a recently published study she authored with colleagues, said that fully implemented negotiation will decrease pharma company revenues by an estimated average of 15% and that dividends and shareholder buybacks tend to comprise 16% of their total annual revenue.

“So is [it] a big thing or not? Well, our estimate suggests it matters, but it’s not the end of the world,” she said of pharma’s profitability and finances. These companies’ strategic decisions around drug development and “the culling of certain types of products altogether, or more importantly, indications— that’s what’s keeping me up,” she said.

Isasi sparred with Gluck over whether pharmaceutical companies can afford to take the program’s revenue hits, or if the administration should realign the source of patients’ cost savings. The former noted that “less than a quarter” of drugmakers’ revenue was spent on R&D as of 2017, while Gluck highlighted the dollars already being pulled from pharmaceutical companies and the healthcare system at large by pharmacy benefits managers.

In terms of therapeutic breakthroughs, Isasi suggested that the drug price negotiation program’s current structure is an effective deterrent from drugmakers’ low-impact profit chasing.

“In the 21st century, most drug companies have replaced moonshots with chip shots: strategies aimed at minimizing risk rather than chasing elusive game-changing drugs. Today, pharma giants focus on monetizing easy wins, and part of what this law is supposed to do is change incentives so that when drugmakers are thinking about profits, they're thinking about the next big win and not just simply a small change to existing drug, patent thickets and making more money.”

Conti added that the IRA’s impact on development incentives isn’t happening in a vacuum, as the Cures Act and recent National Institutes of Health budget increases should be bolstering the innovation ecosystem. Meanwhile, the country has already seen innovation successes from prior policy interventions like the Orphan Drug Act or the Hatch-Waxman Act that similarly disrupted development pipelines.

“I like to think that IRA is in some sense doing that here as well, where [it’s] kind of pushing companies off the teat, if you will, of older drugs and into the newer, more exciting therapies that are going to come to market.”

Lacasse capped the back-and-forth by reiterating her calls for CMS and opposing industry interests to monitor and act on any policy’s potential unintended consequences, whether that be in the context of costs or continued access to novel treatments.

“I'm a broken record: What's most important is that we actually see what the experiences of the patient [are], and if that experience is not what we are all saying it should be, CMS needs to be paying attention to that,” She said. “There’s going to be these unintended consequences, so how do we look at them from a patient lens and address whatever the actual experience is—not what everyone perceives?"