The Circumstantial Evidence that the IRA Is Affecting Development Is Piling Up

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The IRA is going to prompt companies to move from development of small molecules to biologics, which get 40% more time free from price controls under the law. This is a statement of incontrovertible economic fact. That’s the way the IRA was written. 

Companies have strong incentives not acknowledge this reality too publicly because it’s clear that there are some who want to spin that kind of disclosure in a way that paints pharma in the worst possible light.

And I don’t blame companies for wanting to avoid dealing with that headache. 

That shouldn’t blind us to the evidence that the law is already shifting priorities. Biospace pointed out today that Pfizer plans to close a research facility in Colorado Springs that had been concentrating on small molecules, and Roche’s earnings included a disclosure that they’re walking away from four early-stage programs, the two highest-profile of which were oral oncology medicines. That’s the kind of work which is, on paper, exactly the kind of development most discouraged by the IRA. 

This is all circumstantial evidence -- and, to be clear, I’m not deep on the underlying clinical or commercial realities of any of these programs -- and neither company has connected those moves to the IRA. But I hope that this gives pause to anyone bold enough to claim that the IRA won’t bend the course of drug development. 

Because the coincidences are piling up.

The two biggest drug-cost issues of this decade are going to be obesity medicines and Alzheimer’s therapies, and today brought a lot of thinking about where those two markets are going. 

First off, KFF has a solid analysis of how much the market for obesity medicines might expand now that Wegovy has a heart disease indication and can be reimbursed by Medicare. The math in the piece is well done (mostly), defining the overlapping heart disease/obesity population and calculating that about 3.6 million Medicare beneficiaries fall into that group. 

Now, about half of those folks also have diabetes and have always been eligible for GLP-1 medicines, but, even so, that’s a large expanded population. KFF does some quick math, and -- assuming 10% of that newly expanded population gets the drugs, and they get them at a 50 rebate -- determines that we could be looking at an increase in spending of almost $3 billion. 

KFF goes out of its way to call that a “conservative” estimate, but I’m not sure that’s the case. I don’t want to argue that we’re not going to have to have a serious budget conversation, but I think there are ways to quibble with the numbers. 

First off, a 50% discount feels high. Zepbound’s coupon program seeks to drive prices to no more than $550 a month, which I used as kind of a proxy for the upper bound of post-rebate prices for obesity meds (if you have a better estimate, I’m here for it). That’s 15% lower than the KFF estimate.

And the KFF analysis also noted an important point that you’re going to hear a lot more about: Ozempic/Zepbound is almost certainly going to get price-controlled in the next round of IRA “negotiations.” So the reality on the ground now, or next year, might not be the reality in the future. 

Second, it’s real hard to predict long-term uptake. I’m sure that 10% of the eligible population seems conservative, but I’m not super-confident there, either. 

And this is where Alzheimer’s enters the chat. Biogen dropped the first-quarter numbers for Leqembi today, and they are, um, modest. There was about $19 million in sales this quarter, which is a vast improvement over the $7 million in 4Q23 but still, objectively, it’s a small number. 

And it’s really small when you consider that the government is projecting sales of more than $500 million this year. As they say, it’s hard to make predictions, especially about the future. 

So soak up the estimates about obesity drug spending. Just don’t take them as gospel. 

(BTW: the STAT coverage of the KFF analysis also included a mention that American Society of Health-System Pharmacists research found that the bill for Ozempic and Wegovy hit $38 billion last year. The STAT piece didn’t link to the work, and I can’t find it, but that seems like a weird finding, given that Novo claimed worldwide sales of those drugs at about $20 billion.)

• I mentioned yesterday that I didn’t have a great response to the ICER/NEWDIGS white paper on gene therapy financing/reimbursement/access/etc., though I spouted some vague concerns about an overemphasis on pricing. Fortunately, NPC came to my rescue: they have a thoughtful take on the white paper that defines, far better than I could have, both where the analysis is helpful and where the effort falls short. 

• Speaking on smart responses to things we talked about yesterday: here’s a great opinion piece in STAT from Peter Pitts and Timothy Franson that leverages the J&J paper on accelerated approval to argue that the case against accelerated approval has been massively overstated. 

• This is sound reporting, from STAT, on what’s going on with Novo’s plans to discontinue Levemir. It has some nice clinical details on the patients most affected, and it dips into the interesting question of why -- if there’s a demand for the drug -- no one is moving to make a biosimilar. I have a tendency to nitpick these stories (I’d love more detail on the economics, and the patient assistance programs around alternatives deserve more attention), but the piece gives a good overview of the state of play. 

• The approval of Day One’s Ojemda for pediatric brain cancer is a huge step forward for a patient population with a huge need. On pricing: looks like it’ll come in at $33,000 a month. 

• The FTC’s big report on PBMs (or, at least, a piece of it) will be dropping in the next three months, according to a STAT newsletter mention based on something FTC head Lina Khan said at an “event.” Feels like a way of the FTC keeping up the pressure, given that -- as of February -- it hadn’t been able to get the PBMs to participate in the investigation. 

• Speaking of stuff on the verge, Sen. John Thune, part of the “gang of six” working on 340B legislation, said complete 340B legislative text could be available as soon as May. There is some ambition that the bill could be wrapped into end-of-year lawmaking, but given the complexity here, I would take the “over” on any estimates of when the bill may pass. 

• No one is thinking harder about the intersection between pharma commercial decision-making, reimbursement, public affairs, and reputation than Peter Kolchinsky. Though brevity is not his love language, his latest piece -- arguing for an effort to emphasize out-of-pocket costs, build awareness of industry’s “quests,” and advocate for the idea that talking about value more loudly can help pharma -- is one worth spending some time with.

Header image via Flickr user r. nial bradshaw.