A Roundup of How Pharma Companies Responded to the Medicare Drug 'Negotiation' Announcement Last Week

It’s inauguration day today, and I have no great insights on what is to come from a health policy POV. So I will repeat my standard mantra/gif about what’s next: “Nobody knows.” That will cease to be true at some point soon -- governing requires decisions -- but for now, I’m sticking with a shrug. 

That said: I’m blocking off a lot of my spare time to bone up on the intersection between pharma issues and Medicaid. I’m just not as conversant there, and understanding what a fundamental change in Medicaid could mean for the industry is an educational priority, given Medicaid seems to be the piggybank lined up to be smashed to fund other priorities.

I mentioned on Thursday UnitedHealth Group’s earnings, which showed -- unsurprisingly -- that the company remains absurdly profitable. It was not, however, as absurdly profitable as Wall Street expected, and its shares fell. 

But the bigger second-day story, for me, anyway, was the decision by the company’s CEO, Andrew Witty, to try to take the issue of PBM rebates off the table. 

“We are committed to fully phasing out those remaining arrangements so that 100% of rebates will go to customers by 2028 at the latest … This will help make more transparent who is really responsible for drug pricing in this country: the drug companies themselves,” Witty told investors, a quip that ended up driving headlines and shift-the-blame narratives.

You can probably view Witty’s pledge in one of three ways. 

1. The most rosy is to give the company credit for recognizing that the rebates that PBMs negotiate ought to flow, in their entirety, to the clients for whom the rebates were negotiated. That’s the system we all want. Huzzah to United. 

2. A slightly more cynical view would frame it all as smart PR: PBMs have been moving toward 100% rebate passthrough for most of the past decade, so they’re just codifying current practice and getting a bonus swing at the pharmaceutical industry. Nothing to see here. 

3. The most cynical perspective, though, is to acknowledge that insurers have been working overtime to come up with alternatives to rebates that allow the company to continue to siphon off revenues from the rebate-negotiation process. This has been accomplished by sending the rebate process through oversees GPO and finding new ways to saddle drugmakers with fees.
   
   Here is a link to a Nephron Research effort that really spells out how PBMs have shifted their business models to work around rebates. It’s really quite something.
   
   And this is a good time to note that the shift away from rebates hasn’t seemed to dent Optum Rx profits at all. 

Sure, rebates -- narrowly defined -- may be getting passed along to plans, but it’s fair to ask if plans are seeing any of the fees and other novel revenue streams that are being directed into PBM coffers. Indeed, if you’re looking for some amusement, check out the comments on the LinkedIn post from Optum Rx CEO Patrick Conway noting the 100% rebate pledge. 

As a comms guy, it’s hard not to respect the hustle here. Still: simple messages tend to carry, but the messier truth has ways of catching up. 

I’m still thinking about the 15 medicines selected for Medicare “negotiations” last week. There are a lot of threads to pull on here, but I wanted to start with a simple observation: there wasn’t a lot in the way of reaction from the companies themselves. 

I didn’t see any companies post any releases or statements -- it’s possible I’m missing them -- but there were a handful of reactive comments that found their way to reporters.   

Here is Novo, pieced together from media clips: 

CNBC also received comments from a handful of companies, though the outlet didn’t provide much in the way of detali: 

I found the BMS quote in a BMS release from when the price of Eliquis was released last summer, so I don’t know if the language was repeated or if CNBC was operating off of the old statement. I didn’t see any other reporter quote any of the four statements that CNBC referenced. 

The AZ comment is interesting, though: In its original IRA lawsuit from August 2023, AZ raised the Calquence concerns that CNBC hints at. 

The suit was filed before CMS named the 10 drugs for the first round of negotiation, which — in the end — didn’t include Calquence. As a result, AZ’s objections ended up falling out of later legal arguments. 

But the CNBC comment suggested that AZ is going to go after CMS on Calquence again. So it’s worth taking a look at the language from that August 2023 filing: 

We’re going to hear a lot about the definition of “Qualifying Single Source Drug,” which is going to be at issue in the coming legal battle over whether the government can price-control both Ozempic and Wegovy. 

• Joe Grogan, an official in the Trump 1.0 White House, has a STAT op-ed on GLP-1s making two controversial points. First, he thinks it’s a no-brainer that Medicare should cover the meds, citing a USC Schaeffer white paper that suggests that the meds could bring $100 billion a year in social benefits. But Grogan is adamant that IRA negotiation not be the tool used to drive down prices, instead advocating for negotiations to be scrapped and arguing that competition will lower costs. 

• Ninety-two percent of Americans think that it is important that the Medicare drug-price “negotiation” should be expanded, according to this KFF poll. The same poll found a majority of Americans think it’s important to repeal the negotiation law altogether. I’m beginning to suspect that Americans aren’t really paying attention. 

• I’m a fan of the way that Mark Cuban has worked to simplify how we think about (and, to an extent) pay for medicines. But his new essay on how the fix all of health care oversimplifies things a bit too much. Still, no brickbats here, because the discussion that he’s likely to prompt is exactly the discussion we ought to be having.

Header image via Flickr user Pictures of Money.

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 [email protected].