Programming note: No Curve tomorrow. Back Monday. Behave, y’all.
We’re in the thick of earnings season, and we had quarterly numbers drop today from Sanofi, AstraZeneca, AbbVie, and Roche. All four companies had strong earnings and raised their profit outlook for the year.
Of those four companies, two are on the hook for price controls in the next month or so: AstraZeneca (Farxiga) and AbbVie (Imbruvica).** Neither company talked much about the CMS price-setting process, though AZ said in its media briefing that the impact on Farxiga “will be very limited.” Make of that what you will.
Roche and Sanofi were both mum on policy issues, and no analysts asked any questions about the IRA. Neither company is in the thick of things yet, so that’s not hugely surprising.
The topic did come up in the AZ and AbbVie calls. As usual, it’s probably easiest to just give you the transcript.
Here’s AbbVie (which also flagged a handful of times that the Part D benefit redesign would be a “headwind”):
We’ve obviously contemplated the Inflation Reduction Act. We’ve come out and said that even with modeling that impact, in that we still expect to deliver on our long-term outlook. Now I will say our view on the IRA from a policy perspective is we’re certainly in favor of the Part D benefit redesign since it helps address patient out-of-pocket burden.
But the price-setting provisions in the IRA will certainly harm long-term innovation in our industry. So we are hopeful that if it’s a new administration or the current administration, that they’ll reassess those provisions that ultimately are harmful for long-term patient care in the U.S.
I mean, it clearly takes away the incentive to launch in later lines of smaller patient populations, which is really a very unfortunate negative outcome from the legislation. So, the way I view it is addressing out-of-pocket burden is good policy, but taking away the incentive for innovation is not and my hope is under either administration that will be reconsidered.
AbbVie 2Q24 Earnings Call
And here’s AstraZeneca on the long-term impact:
[The IRA] is suddenly a challenge for small molecules, there is no question. But as you can see from our pipeline and our investments, what we’ve communicated, as we move forward, we’re investing in bispecifics, cell therapy, ADCs, conjugates and all of those agents are, of course, stating the obvious, they’re not small molecules.
So in a way, we are shifting a little bit away from small molecules. It doesn’t mean we’re not going to be in small molecules. Now what IRA will mean for us is and that’s really unfortunate actually, but it will mean … if you think of a product that has small indications to start with, we will develop these smaller indications, We will launch them around the world, but in the U. S, we will have to wait before we file because we can’t start the clock for a small indication that where we would record low sales for a couple of years or 3 years, Lynparza would have been a good example of this. So that’s one issue.
The other issue is on the back end of it. If a product is, say for instance, an orphan medicine and a new indication will change that status, we may consider not launching it in the U.S. So those are some of the implications of the IRA and those are quite unfortunate. But this is what it is and we’re working now to try to advocate for change for a fix to the IRA that would address this issue of what we call orphan indications or orphan diseases.
And some thoughts on the Part D redesign:
A quick comment on this Part D piece actually, Matt, is that I think you’re going to hear different responses from different companies based on the type of product portfolio they have because it affects more some products than others. And we see this in our own company, different products are affected differently. So you’re going to have low impact to high impact to medium impact. So it really, really depends on the overall portfolio we have. In our case, we have a portfolio that, as you know, covers primary care all the way to more expensive specialty care products. So we are kind of a mix of things.
… I think it’s also worth noting on Part D that we are seeing the improvements in patient affordability or the reduction in patient medicines within what I would call kind of your normal distribution channel, so outside of free programs. We’re also seeing signs of improvements within abandonment. So I think that these are positive aspects that come out of IRA. And so while in aggregate, I think that IRA represents a couple of headwinds that we’ve spoken through, I think that they’re manageable and I think we’ve got a portfolio that allows us to grow through it.
Maybe a couple of additional points, if I may, is that next year we’ll see additional improvements to the changes that Dave was talking about in terms of access. One is the total annual copay will drop to $2,000 from $3,600, I believe. The second one, which is I think really meaningful is you’ll have the smoothing. So the $2,000 will be divided by 12. We have this year, people are still hit by the $3,500 upfront. So those really changes should further improve access to our medicines, I would hope. And that’s why we believe, as they’ve said, that it’s manageable.
** This is my semi-regular caveat that the first 10 medicines to be price-controlled are probably not going to be hammered particularly hard by price controls because most of the meds are already massively rebated. Just because this group of meds may escape without a lot of financial pain for their manufacturers shouldn’t be taken as a sign that the IRA will be benign over the long run.
STAT was first with the news that CVS Caremark is going to have to pay Illinois back $45 million for overcharges. What’s meaningful is not the number, which is modest on the scale of things we usually talk about here, but the reason for the overcharge in the first place. Turns out that CVS’ GPO, Zinc, held on to rebate dollars that should have been passed through. If this sounds vaguely familiar, it’s because Express Scripts did something similar to the Postal Service.
Bloomberg Law has a nice overview of state-level efforts to rein in PBMs via legislation.
I get the feeling that hospitals are where PBMs were three or four years ago. There is a vague sense that their business practices are not quite on the level, but it’s not yet a cause célèbre. But we’re nearing a tipping point, and op-eds such as this one — from KFF Health News’ Elisabeth Rosenthal in the Washington Post — only serve to draw attention to the issue. The WaPo piece didn’t include a 340B discussion, but it could have. And similar broadsides in the future will certainly include that element.
And if you want evidence that nonprofit hospitals are not (necessarily) hurting, here’s a giant hospital system in New York that is … [checks notes] … launching a TV and film production company. Is that system, Northwell Health, profiting from 340B dollars? You better believe it.
Kudos to the STAT team for an impressive deep dive on what, exactly, UnitedHealth Group is doing by hoovering up doctors.
Header image via Anastasiia Gudantova on Unsplash.
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