Late-Arriving Thoughts on a SOTU That Was Way More Heat Than Light on Drug Pricing

I’m back -- 100% back -- from last week, where I was super-sick on Wednesday, rallied for a 6 a.m. flight the next day, and closed on my new home on Friday (I’ll be a Mainer come May!). So there will be some digging out over the next couple of days. There is a lot to go through.

By now, you know that Biden proposed an expansion of the IRA -- as promised earlier last year -- bumping the number of medicines price controlled from 20 to 50 a year. (Biden’s phrasing on Thursday night was “500 drugs over the next decade.”)

It’s a bad idea, and there are going to be some thoughtful innovation-centered explanations of why (NPC’s John O’Brien and PhRMA’s Steve Ubl have LinkedIn posts that are good places to start). 

But I have a couple of other bones to pick with Biden’s decision to lean into “making the IRA more punitive” as a core campaign plank. 

First, the proposal he floated yesterday won’t change the trajectory of the program all that much. At 20 drugs a year (the current pace), it won’t take long for the program to price-control pretty much every eligible drug. Bumping that to 50 might mean that some lower-revenue products get their turn in the CMS spotlight sooner than they would otherwise, but I suspect that won’t be meaningfully worse than what we have now. 

(Quick aside: there is some suggestion that this effort would include earlier price controls, which would, in contrast, be a disaster for innovation. I don’t want to suggest that any expansion of the IRA would be benign. I’m more focused on how Biden framed it last night. It was all about the 500 medicines to be negotiated.)

So maybe this is just spin. This probably polls great. But, as policy, it’s not even bad. It’s just meaningless. I mean, there aren’t 500 medicines on that market that even meet the IRA’s negotiation criteria.

That gets at my second frustration. Biden -- if he was serious about patient affordability -- would use this moment to take a swing at the PBMs. It’s a bipartisan issue, Americans already hate insurance companies, and it’s not a stretch to pitch PBM reform as a natural extension of the IRA. PBMs provide Biden a huge softball, and yet …

… he didn’t take a swing. 

There may be good reasons for this. Regulating PBMs is a harder story to tell to Joe Sixpack than just shouting “MEDICARE NEGOTIATIONS WITH BIG PHARMA.” But PBMs have been able to weaponize this complexity to duck serious conversations about reform, and it’s a shame that Biden either doesn’t have a meaningful policy position on PBMs or the confidence to sell one to his fellow Americans. 

Anyway: I suspect we’ll get more detail on the specifics when Biden’s budget hits today. As a reminder, that document carries no formal weight, but it’s generally an interesting accounting of a president’s hopes and dreams.

As a matter of public relations, I like Boehringer Ingelheim’s announcement that it would cap the cost of its inhalers at $35. As a practical matter, I’m really curious what that looks like. The BI release is not super-detailed on how it will work. There’s no fine print (other than that government plans will be excluded). 

The Spiriva webpage says, “Starting June 1, 2024, all Boehringer Ingelheim inhalers will be available for $35 a month for people with commercial insurance and for those who do not have insurance. Please visit www.Spiriva.com on June 1 for more information.” It’s kind of weird that we have to wait three months for “more information.” But I’m patient. 

My assumption is that between patient assistance for the uninsured and copay cards for the insured, there’s already a good safety net, so I’m guessing the new program will just be an amped-up version of what exists, maybe with a more generous copay card and some provisions for those whose inhalers are not covered. 

The mechanics here will be worth watching. Industry works really hard to build these kinds of safety nets, and they’re worth examining, strengthening, and promoting.

I wrote a little on this on LinkedIn, but I’m still digging into Sanofi’s Pricing Principles Report, which includes this fascinating nugget: “In 2023, we had a 15% increase in fees – or service charges – paid on top of negotiated rebates to PBMs and health plans.”

I haven’t ever seen a company break out any data on fees, and while I would have loved to have seen the actual, aggregate number, I’m thrilled that Sanofi is bringing more illumination to that corner of the supply chain. 

Fees are the new rebates: a way for PBMs to extract value from pharmaceutical companies, only with the added bonus that fees don’t really have to be passed along to customers. 

This also gives me an excuse to link to this fantastic Nephron research from last year on how quickly fees are growing. It’s one of those reports that is foundational in understanding the industry, and I hope that it continues to get eyeballs. This is an idea that really needs more attention. 

Elsewhere:  

• I suspect we’ll be talking more about obesity meds this week, but I wanted to flag the not-unexpected but still significant approval of Novo’s obesity med, Wegovy, for reducing cardiac events in those with obesity. Every new piece of research on outcomes, every new approval is only going to make the value arguments for these meds stronger … and the budget implications more acute. I’m still hoping we get a smart conversation, one of these days. 

• Taking Friday off meant that I wasn’t able to capture a lot of the real-time reaction to the mega-oral-argument in four of the IRA cases. From the reporting, it sounded like the judge was sufficiently skeptical of everyone that there’s no need to change your default assumptions about the outcome here. (It’s still a longshot.) And if you’ve 100% been living under a rock and want to know all about the lawsuits, the Washington Post has a comprehensive story that doesn’t break much (any?) new ground but is clearly a story designed to bring a general-interest reader into the story. 

• This is a really fantastic summary in Health Affairs of what’s going on as hospital markups collide with 340B, amping up hospital profits by extracting value from pharmaceutical companies. The piece is largely based on this great NEJM study from earlier this year, if you want to go deeper. 

• The Boston Globe ran an op-ed from the CEO of the Asthma and Allergy Foundation of America. It takes aim at PBMs in a way that I found accessible. That’s going to be hugely important as the PBM conversation moves forward … so much of what the PBMs are up to is hugely confusing, and -- absent strong communication -- that complexity will keep the issue from getting the hearing it deserves. 

• The agenda for the PCMA Business Forum looks fun. I’m especially curious about the session on “Preparing for 2025 Changes to Part D Plan Formularies and Benefits.” I’m not in attendance, but I’ll be happy to relay any nuggets from people who are. 

• bluebird bio announced that it has signed an outcomes-based agreement with Michigan Medicaid for its sickle cell disease gene therapy. Doesn’t look like there are a lot of details, which is to be expected. I’m never 100% sure what to make of these, so -- as is tradition with gene therapies -- I plan to adopt whatever opinion Courtney Rice has. (Her initial thoughts are here.)