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AZ and Novartis ‘most exposed’ to Senate pricing proposals

Most expensive therapies will be penalised

Senate

AstraZeneca and Novartis top the list of European drugmakers who will be affected the most if medicine price reforms working their way through Congress are adopted, say analysts.

In a research note, Jefferies say that among all the elements in the Prescription Drug Pricing Reduction Act (PDPRA) that cleared the Senate Finance Committee last week it is the restructuring of the Medicare Part D benefit – which provides insurance for low-income people – that will have the biggest impact on pharma companies.

The thrust of the Part D reforms is to close the so-called ‘donut hole’ or patient coverage gap, which starts when costs rose above the plan’s initial coverage limit ($3,820 at present) and ends when a patient pays $5,100 out of pocket.

When costs rise above this level – equivalent to drug costs of around $8,140 – it is referred to as ‘catastrophic’ coverage, and the cost of providing that has been increasing fast with the launch of new high-priced medicines.

“Currently, pharma subsidises the coverage gap by providing a 70% discount on drug costs until catastrophic coverage levels are reached,” notes Jefferies. Thereafter the company no longer has to provide a discount, so the cost is capped at just over $3,000 on drugs costing more than around $8,000.

Under the new plan, the gap would be eliminated and the 70% discount on drug costs between $4,000 and $8,000 would be replaced with an unlimited 20% contribution on drug costs above $11,000.

In crunching the number, the analysts suggest that “the drug spend (pre any rebates) at which the new proposal becomes detrimental overall to Pharma is [around $25,000], with drugs priced below this potentially standing to benefit.” They note however pharma may try to negotiate the 20% level down.

Put simply, that means low-cost drugs stand to benefit, while more expensive therapies will be penalised. AZ, Novartis and also Roche will lose out most because they have more high priced oral oncology drugs within their portfolios.

Among the European large-cap pharmas, the impact on GlaxoSmithKline and Sanofi will likely be neutral, while Novo Nordisk will be a beneficiary because – while many of its products are exposed to Medicare Part D – they are mostly lower-priced diabetes products.

An attempt to include a provision in the bill to tie Medicare Part B pricing to a benchmark of the lowest price among a group of markets outside the US was voted down in committee last week, but is said to be still very much on the White House agenda. Part B covers the reimbursement of drugs that have to be administered in the doctor’s office or hospital.

The reference pricing concept drew swift condemnation from industry, but Jefferies suggests that while it is generally considered prices outside the US are cheaper, once government reimbursement programmes are taken into account “net prices overall [are] not that dissimilar between the US government and governments in other major western markets.”

Article by
Phil Taylor

30th July 2019

From: Regulatory

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