Drug companies favor biotech meds over pills, citing new U.S. law

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The Inflation Reduction Act (IRA), which Democrats passed last August, for the first time allows the government’s Medicare health plan for people 65 and older to negotiate the prices he is willing to pay for certain medicines.

The pharmaceutical industry, whose members gathered in the thousands this week in San Francisco for the annual conference of JP Morgan Healthcare, opposed the legislation and began to implement strategies to mitigate its impact.

Such a shift in focus could result in the availability of far fewer cheap generic pills in the long run.

All other developed nations negotiate drug prices, making the United States the most profitable market for the industry. The Congressional Budget Office estimates that the IRA’s drug pricing provisions will reduce the federal deficit by $237 billion over the next decade.

Medicare will select the first 10 drugs for the program this year. The number of drugs subject to price negotiation will increase over time, but newer drugs are not included.

The law establishes a nine-year exemption period for “small molecule” drugs, which are mainly pills, while “large molecule” biologics, usually injections or infusions, are protected from trading for 13- the year

“The difference between a nine- and 13-year-old product line is about 50 or 60% of value,” Eli Lilly CEO Dave Ricks said in an interview. “In 10 years, we’ll have far fewer small molecules being developed than we have today.”

He questioned the benefit of “rules that really disincentivize investment in what ends up being convenient drugs, drugs for tough conditions like cancer and drugs that become really cheap when they go generic”.

Lilly has already dropped a small-molecule blood cancer drug from its pipeline because “we can’t make the math work,” Ricks said.

The Indianapolis-based company is considering cutting more early-stage pill programs and is directing its small-molecule development group to pursue only opportunities “that are clearly good enough within nine years to be victorious.”

US Congresswoman Katie Porter, a Democrat who has pushed for drug price caps, described the companies’ strategy to deal with the law as “treating potential new drugs as bargaining chips instead of life-saving cures. “

Most drugs on the market today are small molecules, which can be taken orally, are absorbed into the bloodstream and easily penetrate cell membranes. Common examples include aspirin, statins for high cholesterol and blood pressure medications.

In recent decades, pharmaceutical development has moved into more complex, difficult-to-manufacture, large molecules derived from living cells that can target a specific location or mechanism in the body. These biologics, such as AbbVie’s rheumatoid arthritis drug Humira, need to be injected or infused and may require special handling or monitoring of patients.

But the industry has also come up with innovative pills, which patients often prefer. Lilly and other drugmakers, for example, are developing oral drugs for a diabetes- and obesity-related target that is currently only reached with injectable drugs.


When pills lose patent protection, generic copies usually enter the market at a price discount of up to 90%, while competing “biosimilar” versions of large molecule drugs are much less robust and much lower discounts.

Steven Pearson, president of the influential drug pricing research group Institute for Clinical and Economic Review, said the IRA should generally help lower prices for Medicare patients but acknowledged new laws as they may have “unintended consequences.”

He noted that it is not unusual for pharmaceutical companies to choose not to pursue a drug they once thought was promising.

“We just made it more complicated now,” he said.

Stephen Ubl, president of the Pharmaceutical Research and Manufacturers of America (PhRMA), said the industry trade group believes the IRA should not establish different exemption periods based on the type of drug. . “We would like that provision to be fixed,” he said.

Executives of the US biotech Amgen Inc. said that the IRA will have a wide impact on the industry, but that Amgen is well positioned for growth because of its strong position in biologicals.

“Large molecules are relatively favored under the IRA as opposed to small molecules,” David Reese, head of research and development Amgen, said in an interview. “Given our history and our focus in protein therapeutics, that’s one advantage.”

PhRMA said that when asked in a recent survey whether they expect to shift investment in research and development away from small molecule drugs, 63% of member companies that responded to the question said yes.

(Reporting by Deena Beasley in Los Angeles; Editing by Caroline Humer and Bill Berkrot)

By Deena Beasley

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