Drugmakers give surprising response to Medicare drug price offers

March 20, 2024

Pharmaceutical executives have given surprisingly optimistic reactions to initial offers from Medicare in drug price negotiations, signaling a break from industry lawsuits that warn of dire consequences from the program.

With the offers remaining secret, some have speculated the price reductions may be relatively modest, but patient groups suspect CEOs may be paying lip service to investors worried about a hit to profits.

Either way, officials remain confident the program, part of President Biden’s Inflation Reduction Act (IRA), will ultimately deliver significant savings to Medicare.

The Centers for Medicare and Medicaid Services (CMS) sent out initial offers Feb. 1, and all involved drugmakers sent back counteroffers a month later.

Neither side has disclosed figures, but executives from Pfizer and AstraZeneca gave some hints about how they felt.

AstraZeneca CEO Pascal Soriot told reporters last month, “What we’ve seen is [a] relatively encouraging comeback from CMS.”

And David Denton, Pfizer’s chief financial officer, told investors last week, “We have products that are nearing the end of their life cycle, and therefore, the impact of the IRA over time would be modest.”

The Hill reached out to the other companies whose products are being negotiated for comment.

Zachary Baron, director of the Health Policy and the Law Initiative at the O’Neill Institute, said these statements reflect the multifront position drugmakers have placed themselves in by suing to stop negotiations while actively remaining engaged.

“They do have a duty to be honest, you know, with their investors, and they can certainly face legal risk on that front. And of course, there’s always sort of a balance in terms of trying to encourage innovation and maximize the stock price for current shareholders,” Baron said.

“Their counsel have to follow certain ethical guidelines to talk about the harm while also making sure to comfort investors on the other side to say, ‘Hey, don’t run away from this business and these opportunities. It’s not going to be as bad as you think.’”

Drug affordability advocates weren’t surprised by what pharmaceutical executives are saying.

“We were expecting that they would come out and say something like this,” Merith Basey, executive director of the advocacy group Patients for Affordable Drugs, told The Hill.

She added, “We know that the impact of the IRA is not going to affect their bottom line in the way that they like to cry poor every time anyone tries to touch anything that gets in the way of their monopoly power.”

In the slew of lawsuits filed by drugmakers and trade groups, lawyers alleged tremendous harm was already being done to companies as a result of the Medicare negotiation program, despite the fact that prices are still years away from going into effect.

When a federal judge ruled against AstraZeneca’s lawsuit to block negotiations, he noted the company’s lawyers “barely mentioned” the alleged harms during oral arguments.

U.S. District Judge Colm Connolly wrote the company had not “identified any harm traditionally recognized as providing a basis for a lawsuit that is analogous to or has a close relationship with a loss or diminishment of an incentive.”

Other judges have ruled similarly, finding that plaintiffs have yet to demonstrate actual harm to themselves due to the IRA provision.

Basey emphasized that while a few hundred dollars off per prescription might not represent a lot to these companies, that same amount would be transformative for many Medicare beneficiaries.

Last year, the Congressional Budget Office projected negotiations would result in average prices falling by 8 percent for drugs covered by Medicare Part D and by 9 percent for those covered by Part B by 2031.

The office estimated this would reduce the federal deficit by $25 billion in that same time.

Other advocates said these companies may be attempting to preserve a sense of credibility in the national health care debate as policymakers look for ways to cut costs.

“There also is just the reality that they have been saying that the sky has been falling. And if CMS comes out with a completely reasonable price, that does a lot to their credibility,” said Leigh Purvis, prescription drug policy principal at AARP’s Public Policy Institute.

“I think this is a situation where they could lose even more power in terms of their ability to influence the public and policymakers,” Purvis added. “So, there is a chance — again I don’t know what’s going on behind the scenes — but there is a chance that that’s influencing their willingness to come out there with these very dramatic statements, recognizing that the reality is likely very different.”

Regardless of what pharmaceutical heads are saying, advocates say there’s no reason so far to believe the savings that come from negotiations won’t be significant for Medicare beneficiaries.

“I think the projections that researchers have done have still showed an expectation of substantial savings for the federal government and downward pressure for premiums and out-of-pocket costs for patients,” Baron said.