CNBC Says That IRA Negotiations Will Be 'Intense.' Here's Why They Won't

This has not been a great week for explanatory takes on the Inflation Reduction Act “negotiation” process. I did some whining yesterday about Reuters’ micron-deep assessment of the situation, and I’m rolling my eyes at the coverage this morning, too, mostly because of this quote: “I expect negotiations to be intense.”

It’s from Georgetown Law’s  Lawrence Gostin in this CNBC article, and I’m bemused. 

It’s not clear what there is to negotiate. That’s the reason that I try not to use the word “negotiate.” I don’t avoid “negotiate” because I’m working to disperse some sophisticated, semantics-driven, pro-industry message. It’s that it’s hard to see what there is to “negotiate.” 

Drugmakers can’t walk away from the table. And they can’t really argue over the CMS assessment, either, because the CMS standards are non-existent.

I mean, with an ICER review, if a company wants to argue that the health-state utilities are wrong or a study isn’t being considered, it can raise those issues, and ICER will consider changing its model. CMS doesn’t have a model. CMS is winging it. 

The term of the day is “black box.” PhRMA CEO used it in this Washington Post interview to describe the process. BMO analyst Evan Seigelman used the same phrase in his note this morning about the IRA. CMS’ process here is entirely inscrutable, which makes the idea of “negotiations” even more laughable. 

Heck, even ICER is looking at this process askance. ICER’s new president, Sarah Emond, was asked by Fierce if the group wanted to get in on the price-setting process. And the response was really fascinating: “I think we would need some direction from [the Centers for Medicare & Medicaid Services] that they wanted the drug price negotiation program to be about value, and not just about a lower price.”

In other words, ICER sees this as kind of a black box, too. And you can’t negotiate with a black box, no matter how intense you are. 

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While we’re talking about the IRA, this paper in Nature Biotechnology is worth the read (though -- sorry -- paywalled). It tries to model what would have happened to medicines if the IRA had been in place a decade ago, and it concludes that the impact would have been pretty modest. (“Our results do not support the view that Medicare negotiation will result in large-scale defunding of biopharmaceutical innovation,” is how the authors put it.)

But “modest” is in the eye of the beholder. The study suggests that the IRA will eliminate 5% to 11% of a drug’s lifetime value, which the authors consider a small price to pay on a blockbuster drug. But decisions will be made about development well before a medicine becomes a blockbuster (and, indeed, well before it even hits the market), so an 11% hit might not be so benign. 

The paper also assumes that companies will be able to maintain commercial pricing even if prices get slashed in Medicare, which seems like a big assumption.

As we speak, oral arguments are underway in a Delaware courthouse where lawyers are making their case to the judge in the AstraZeneca IRA case. There’s no audio available (that I know of), so this is one where we’re going to have to rely on media coverage to know what’s going on. 

I’ve long maintained that the AZ argument might be the most legally plausible way for the IRA to get knocked off course. It doesn’t require a constitutional challenge (where “off-target risks,” to mix my jargon, make judges uncomfortable), but instead leverages CMS’ own inconsistency to make the case. 

And, unlike most of the other cases, the AZ one is being heard by a Republican nominee. And while it’s definitely lazy legal analysis to suggest -- without evidence -- that that means that there might be a pro-business slant in the consideration of the case, it might not be bad legal analysis.

Anyway: Hon. Colm Connolly is a Trump appointee, and his background is a little non-traditional: he only donned the robes a few years ago, so there’s not a long judicial history to mine here. Still, it’s likely that he’ll be a key character in this drama over the next few weeks, so here is his Wikipedia page, which notes that he was once played in a made-for-TV movie by the actor who was also Rachel’s boss on Friends. 

Elsewhere: 

• Any other day and this CMS announcement of a pilot project to oversee outcomes-based contracts state Medicaid programs looking to cover sickle cell disease gene therapies would have been a slam-dunk Inflection Point as the story of the day. STAT has the best coverage, though the market access folks I follow on LinkedIn are jonesing for more details. (“I have questions!” -- Ellen Licking, “A bit light on details.” -- Jeff Berkowitz.)

• Vizient, a group purchasing organization, said that drug prices will rise about 3.8% over the next year. I don’t know how credible or useful its numbers are -- I’m happy to adopt your opinion, if you have feelings -- but it’s always good to have perspectives. The Vizient report also includes the top 10 medicines driving that projected increase, with Stelara (pre-biosimilar entry), Keytruda, and Skyrizi topping the list. 

• Not a single word of this will come as a surprise to you, but here is Bernie Sanders’ Fox news op-ed on pricing ahead of next week’s Senate hearing. 

• The lobbying trying to get the Biden administration to reject calls to weaken international patent protections on COVID-19 treatments is going to get real loud over the next couple of weeks. Here’s the latest missive -- from an odd-couple pairing of an Obama USPTO guy and a Trump PTO guy -- beseeching the administration not to weaken international IP. 

• Yesterday, I flagged this BMC Medicine piece as a must-read for anyone interested in the future of value assessment. I know, “Hey, read this thing about the future of value assessment,” is not a compelling pitch, but you all are that kind of audience. Anyway, health policy and reimbursement consultant Jennifer Snow called the piece “required reading,” in a blog post yesterday, so I thought I’d amplify that.