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THE ARC/ Part D Benefit Redesign Math
I remain fascinated with the dynamics of the Medicare Part D redesign under the IRA. It is — right now — a much bigger deal in terms of dollars signs as compared with price controls, but it gets a lot less attention.**
I went and charted out what the different pharma companies have said about the impact on their earnings this year. Here’s what that looked like. Doing the math and a little extrapolation would suggest that pharma will be at least $10 billion in the hole this year as compared with last year.
Despite the financial blow, no one really seems to be objecting to that. In return for a benefit design in which companies (and health plans) have to pay more, patients get an out-of-pocket cap, which everyone thinks is a good thing.
Still, managing billion-dollar revenue hits is not a trivial matter. How companies determine the financial impact of the policy is something I’ve been curious about for a while, and Pfizer on Friday unlocked a ton of insight into how the company thinks about these trends.
The company’s IR team hosted an event titled “Pfizer Pflash: A Spotlight on IRA Part D Redesign and its Impact in 2025,” which walked through how to think about money flows. The deck — which I’ll excerpt from — is here. The transcript is well worth a read, too.
Basically, Pfizer tried to simplify things by drawing two sets of distinctions: What would the impact be on “higher-priced” drugs vs “lower-priced drugs,” and when would the impact hit during the year (as compared with last year)?
Here’s how the impact looks for higher-priced drugs:
The upshot is that Pfizer is going to pay a lot more in discounts for those meds, evenly distributed over the course of the year. This is where the real hit comes: rebates that clock in at an average of 19% (compared with 3% last year).
In contrast, here’s what lower-priced meds look like:
The discounts here, in general, fall from 17% to 14%, which gives a lift to the company. The issue is that discounts are no longer backloaded, so there will be an impact earlier in the year than has traditionally been the case.
All of these variables get blended together (along with higher utilization driven by the OOP cap) to get to the broad numbers Pfizer disclosed late last year: $1.5 billion in additional rebates, almost entirely as a result of higher-priced drugs, less $500 million in increased use.
That’s a lot of math, and it probably won’t change anyone’s day-to-day view of what’s going on (unless you’re a Wall Street analyst). But it’s a pleasant and illuminating dose of sunlight into a hugely complicated rewiring of Medicare benefits.
** Price controls get more attention, rightly, because it’s a policy that is going to get more and more onerous as time goes on, and it’s also a policy solution built on a slippery slope. I don’t want to suggest that the level of concern directed at “negotiation” is at all misplaced.
INFLECTION POINT/ Noom Joins the Lilly Pharm-to-Table Ecosystem
At some point, I’ll let the “pharm to table” stuff drop, but today isn’t the day.
Noom has become the latest company to plug into the LillyDirect ecosystem. Noom can now route prescriptions for Zepbound through Gifthealth, which is one of LillyDirect’s pharmacy partners. That gets Noom customers access to Lilly’s cash pricing.
Lilly isn’t quoted in the release at all, so my assumption is that Noom won’t formally be one of the Lilly telehealth providers. (Ro’s arrangement, I believe, is similar: access to the pharmacy back-end but not integrated with the LillyDirect telehealth-referral front end.)
I used the word “ecosystem” above because it’s increasingly clear that LillyDirect isn’t a straight line from manufacturer to provider to pharmacy to patient. There are opportunities to bolt on different pathways through the different components.
That allows, I would think, for additional flexibility, all driven by the need to give consumers the best possible experience.
Loving the innovation here.
QUICK TURNS/ Amgen Loses on PDABs, Your Obligatory 340B Link, and Research on the Limits of Transparency
Amgen lost its lawsuit against Colorado over the state’s PDAB. Weirdly, the ruling held that Amgen didn’t have standing because the company isn’t directly regulated by the law. As you all know, I’m no legal expert, but that feels pretty bizarre. STAT’s Ed Silverman has the story.
This is a useful assessment, by Kirsten Axelsen and a team at DLA Piper, of the formulary status of all of the medicines targeted by CMS for price controls. The short version is that coverage is pretty good and out-of-pockets are pretty reasonable, leading to an obvious question: Exactly what are seniors getting out of these “negotiations”?
(I know, I know: The answer is complicated. The savings from price controls that flow to the government will be, in part, reinvested in patient-friendly things such as the OOP cap. But this is just another reminder that “negotiations” are not going to deliver for seniors in the way that the public expects.)
Here’s a nice piece of work by a team led by UCSD’s Inma Hernadez that found that hospital drug-pricing transparency data is pretty much garbage (when it’s even made available at all).
Per All Things Biosimilar, we now have a price war over Stelara biosimilars, with Sandoz dropping the price on Pyzchiva to 85% of the brand-name product, bringing its price in line with the other lowest-net-price offerings. The price drop came less than two months after the biosimilar was introduced, proving (somewhat) that price competition is real. At least, outside of the bubble of PBM-controlled white-labeled biosimilar versions.
I’m not sure that this pro-reform MedCity op-ed on 340B is crystal-clear, but it hits the right points: Anything that can be done to clarify that the benefits of 340B should accrue to underserved populations is a move in the right direction.
Two strong KFF deep dives this morning for your consideration: One on PBM reform, focusing on a Montana legislative effort that would protect pharmacies, and one looking at the impact of prior auth denials that is levened with a strong sense of skepticism about proposed changes in how prior auths are handled.
Cost Curve is produced by Reid Strategic, a consultancy that helps companies and organizations in life sciences communicate more clearly and more loudly about issues of value, access, and pricing. We offer a range of services, from strategic planning to tactical execution, designed to shatter the complexity that hampers constructive conversations.
To learn more about how Reid Strategic can help you, email Brian Reid at brian@reidstrategic.com.
