A Rocky Road for Regulation

Based on the results of the US presidential election, the coming year should be an interesting time for people following regulation of the biopharmaceutical industry. One of the key pieces of legislation expected to impact developments in 2025 is the Inflation Reduction Act (IRA), advanced into law by the Biden administration in 2022. With Donald Trump’s victory in November, however, the fate of the IRA hangs in the balance. It’s possible that the Trump administration may seek to repeal or make adjustments to the law, but, for the moment, it remains a major piece of legislation with key provisions the pharma industry will have to continue to prepare for accordingly.

Alice Valder Curran, partner at Hogan Lovells, spoke with Pharmaceutical Executive about what she expects to see in the coming year in regards to the ongoing roll-out of the IRA’s Medicare Drug Price Negotiation Program. Please note, this conversation took place before the election, so a Trump win was still only a possibility. Valder Curran did speculate, however, on how the Biden camp may respond to a Trump victory on the legislative front.

Alice Valder Curran

“If former President Trump wins the election, there is a real possibility that the Biden administration will publish their maximum fair prices (MFP) explanations ahead of Jan, 20, and, therefore, the statutory March 1, 2025 deadline, to ensure the Democrats can control that narrative and its positive spin,” she says. “In terms of substance, it will be interesting to see how granular CMS (Centers for Medicare and Medicaid Services) gets in discussing therapeutic alternatives and their value relative to the selected drugs [on the negotiation list]. It will also be interesting to see what documentation CMS provides in support of each explanation. What is certain is that industry will pore over every word CMS does provide in order to gather whatever lessons can be learned to prepare for future negotiation rounds.”

According to Valder Curran, the MFPs established for the brands subject to negotiation are not likely to have a positive impact on the generics and biosimilars market in 2025. Such products that launch in the coming year will have to compete with brand drug MFPs come Jan. 1, 2026.

“Under the IRA, the MFP must be in effect for at least calendar year 2026 when the generic/biosimilar competitor launches after the MFP negotiation process closed this past Aug. 1,” says Valder Curran. “And the MFP can stay in effect even longer unless CMS finds that the generic/biosimilar has engaged in bona fide marketing by March 31, 2026."

Nevertheless, looming competition with an innovator product's MFP represents a sea change for generic and biosimilar makers, which build their business model on competing against brand wholesale acquisition costs (WACs) and their authorized generic equivalents, "the latter of which typically are priced on par with the first-to-file generic," notes Valder Curran.

"The MFPs and their significant discounts off of WAC have the potential to be much lower than either of those typical benchmarks, narrowing generic/biosimilar margins," she says. "Add to the mix the potential for Part D plans to favor non-MFP drugs that can still provide large rebates and lack generic/biosimilar competition, and the generic/biosimilar market share may be further squeezed. We will all be watching how these dynamics play out in real time, but those are the market forces we should be keeping an eye on.”

Valder Curran also believes that the IRA will have a negative impact on drug innovation, which she says is already happening.

“We’ve all read the press reports of manufacturers that have shelved R&D efforts due to the IRA," Valder Curran tells Pharm Exec. "But there are a couple of resources that I find helpful in summarizing these concerns and making them concrete. Incubate, which is a coalition of venture capital firms, publishes an investment tracker that identifies public statements that discuss these impacts. It’s worth a read. And No Patient Left Behind, a network of industry stakeholders focused on biomedical affordability and innovation, sent a letter to the Congressional Budget Office (CBO) signed by investors and innovators representing $332 billion of assets under management and 665 drug candidates under development, detailing the innovation impact of the so-called 'pill penalty.'"

This penalty, under the IRA, caps patent protection at nine years until MFP application for small-molecule drugs, compared to the 13 years for new biologics, "prompting the CBO to acknowledge the need for improvements in its modeling of how the IRA negatively impacts biotech investment and innovation,” says Valder Curran.

Trump’s win leaves the IRA on uncertain ground. It’s unclear what parts of it will be enforced and what may be rewritten or even overturned. The only thing that’s certain is that thenew administration will set the regulatory tone for 2025. This will force the industry to have to prepare for a variety of outcomes in the coming months.