Changing Political Winds and the IRA: Q&A with Monica Martin de Bustamante

Monica Martin de Bustamante
Senior partner
Head of advisory
Trinity Life Sciences

During the previous administration, President Biden signed the Inflation Reduction Act into law. This act contained certain provisions that impacted the pharmaceutical industry, including multiple rounds of Medicare drug price negotiations. Since then, however, President Trump won the 2024 election, bringing a new administration into power that brought a shift in political priorities. As such, the future of the IRA and the upcoming price negotiations is uncertain.

Monica Martin de Bustamante, senior partner and head of advisory at Trinity Life Sciences, spoke with Pharmaceutical Executive about the situation and how companies are attempting to strategize around the uncertainty.

Pharmaceutical Executive: How can Pharma companies strategize to deal with an administration whose behavior in the Pharma space will likely be hard to predict?
Monica Martin de Bustamante: This administration has been tough to predict on various policies that will have an impact on the pharmaceutical industry. Our latest perspective is that the Trump administration is likely to retain the price negotiations established by the IRA, but that the door has been opened for some potential changes in the policy. Most comments from the administration speak to greater transparency in the process, which certainly would be welcomed and may mirror more of what we see in ex-US markets where rationale is clearly published and allows manufacturers to learn from each other and prepare for their negotiations – with that said, most of what is published is usually as part of clinical assessments and not price negotiations, which often remain confidential. CMS has shared the explanations behind the first set of MFP negotiations and within that, it is clear that the process is very qualitative, giving room for flexibility in negotiation. Trump’s past policies have pushed for lowered drug pricing through commentary on importation, international reference pricing, etc. thus retaining the policy would seem to fit with past narrative – the question is how greater transparency will be accomplished and if that will result in incorporation of any past proposals into the negotiation framework.

Beyond the MFP negotiation itself, the pharmaceutical industry has been focused on lobbying for changes to the small molecule vs. biologic provision within the IRA – with arguments focused on the misaligned incentives to develop small molecules, despite the impact they may have on patient care. Similarly, we’ve seen a focus on the orphan drug provision and how the narrow language has caused organizations to deprioritize these small populations, as once you launch your MFP clock starts ticking. It is possible that while negotiations may become tougher, Trump’s administration may open the door to some of these changes, which could be wins for industry.

I think the next several months will remain a bit of a rollercoaster for industry, as we better understand the administration and its appointees’ positions on each of these topics. In the meantime, pharma will need to navigate uncertainty with preparation – we know these negotiations have been influenced by evidence and the evidence has been graded by its robustness. Investment in continued evidence generation throughout a product’s lifecycle is likely to be helpful regardless of where we head in the final version of the IRA policy.

PE: Does the industry have an accurate view of the magnitude of the discounts?
de Bustamante: Yes, I think the industry has a pretty accurate view on the magnitude of the discounts that have been required to date. What remains uncertain is evolution on the level of impact that may exist as more protected areas (i.e., oncology) or spaces with limited gross to net discounting (i.e., medical benefit products) are negotiated, as we expect a disproportionate impact by the established ceiling price.

PE: Will these discounts have any impact on research and development?
de Bustamante: Yes, but not only will the discounts impact R&D, but the broader provisions in the IRA will have an impact on R&D. The string of pearls approach to indications or leading with the quick to market rare indication is likely a thing of the past – now that the clock start ticking when you get to market, programs are prioritizing larger indications early in a product’s lifecycle and foregoing some of the smaller/rarer conditions. When evaluating candidates in the pipeline, there is now a significant tradeoff between a small molecule and a biologic, as one may give you more time on the market before negotiations. The discounts will certainly impact long term revenues and in turn what industry can invest in R&D, but the IRA policy impact is broader than just the discounts.

PE: What drugs are the focus of these negotiations?
de Bustamante: The one thing I will note that is different about the list for this next round of negotiations is the number of oncology products included. We only had Imbruvica in the past negotiation, but we now have 4 oncology products included and while some of the spaces selected have payer contracts (i.e., prostate, breast), the magnitude of these contracts are much lower than those in the other TAs (i.e., diabetes, asthma, etc.).