David Ricks, the CEO of Eli Lilly, has expressed concerns over the potential harm that Medicare price negotiations could cause to drug development in the US. The negotiations are aimed at cutting costs for older Americans, but Ricks believes that they could have an unintended consequence of limiting investment in small-molecule drugs, which are considered to be one of the most efficient parts of health care.
Ricks is the latest pharmaceutical executive to voice dissatisfaction with the Biden administration’s Inflation Reduction Act, which will allow the Medicare program to negotiate prices on the costliest prescription drugs each year. The law is expected to reduce company profits, and global drugmaker Merck has already sued the Biden administration over Medicare price negotiations in a bid to weaken the program.
The “biggest problem” with the Inflation Reduction Act, according to Ricks, is the difference in timeline for negotiating prices on small-molecule drugs versus biologic medicines. Small-molecule drugs are made of chemicals that have low molecular weight and make up 90% of pharmaceutical drugs. Biologics, on the other hand, are derived from living sources such as animals or humans.
Under the new provision, Medicare can start negotiating prices on small-molecule drugs as early as nine years after they receive FDA approval, compared with 13 years for biologics. Ricks believes that this distinction will “really truncate investment” in small-molecule drugs, as investors will be less willing to invest in them when biologics get 13 years before negotiations.
Novartis CEO Vas Narasimhan has expressed similar concerns about the varying timeline, calling it a top priority for the industry to correct the four-year gap between the two types of drugs.
Another provision of the Inflation Reduction Act requires pharmaceutical companies to refund Medicare through rebates if the prices of their drugs rise faster than the rate of inflation. The first set of eligible prescription drugs was subject to Medicare inflation rebates starting April 1, according to the US Department of Health and Human Services.
Eli Lilly CEO David Ricks has expressed his concerns about the potential harm that Medicare price negotiations could cause to drug development in the US. Ricks believes that the new provision in the Biden administration’s Inflation Reduction Act could limit investment in small-molecule drugs, which are considered to be one of the most efficient parts of health care. The difference in timeline for negotiating prices on small-molecule drugs versus biologic medicines is the “biggest problem” with the new provision, according to Ricks, and Novartis CEO Vas Narasimhan has expressed similar concerns. Another provision of the Inflation Reduction Act requires pharmaceutical companies to refund Medicare through rebates if the prices of their drugs rise faster than the rate of inflation.
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