The Legal Battle Over the IRA Begins

Some late-breaking news: Merck is first up to bat in the legal battle against the Inflation Reduction Act. The company filed suit today to stop the implementation of the legislation, making two constitutional arguments. CNBC’s coverage is solid, and they embed the actual lawsuit.

First, Merck alleges that the IRA allows unconstitutional “taking” without just compensation, a violation of the Fifth Amendment, noting that “singular purpose of this scheme is for Medicare to obtain prescription drugs without paying fair market value.”

Second, the company lodges a First Amendment objection, claiming that framing the process as a negotiation rather than an imposition of price controls hides “government extortion” in the service of “parroted orthodoxy.” (The suit itself is a fun read.)

There isn’t a lot of commentary yet … I’ll gather some expert takes for tomorrow’s Curve.

As the annual ASCO confab wraps up, I want to turn my attention to oncology, building on a thought from yesterday, when I wrote about research that looked at how many drugs will be lost because of the IRA.

But it’s possible asking about “lost drugs” is the wrong question, or -- at least -- that there is another way that the IRA will impact innovation in a far more immediate and measurable way. And that’s by fundamentally altering oncology development.

For many (perhaps most) oncology therapies, the development strategy is simple: companies try out new approaches in small patient populations. Perhaps it’s a rare and serious cancer. Perhaps it’s a population that has been failed by other therapies.

Trying new medicines in those groups has been a win-win: companies get their therapy on the market quickly, and the neediest patients get access to medicines first. From there, developers can extend -- over years -- into broader patient populations.

But the IRA blows up that whole process. With brief, finite period of market exclusivity that begins when a medicine is first approved, the IRA encourages companies to hold back on bringing a medicine to the FDA until there’s evidence in a large patient population.

That’s not a theoretical concern. It’s happening now. For more data on the phenomenon, it’s worth checking out the PhRMA/Partnership for Health Analytic Research work I linked to yesterday.

But actual examples just hit harder.

On Friday’s Novartis CEO Vas Narasimham said his company is working on a new cancer treatment and that normally Novartis would “go as fast as we can in mesothelioma” -- the lead indication, according to STAT. But with the IRA hanging over the company, it makes more sense to wait and try the medicine first in bigger lung cancer indications.

Genentech’s Alexander Hardy, too, said the same dynamics were at work with a promising cancer med in his company’s pipeline. The IRA’s incentives are pushing his company to instead go to market first for a larger indication in prostate cancer, even though that might take longer than quickly getting backing for ovarian cancer.

In both cases, the companies plan to push ahead with development. If the data holds up, these will not be lost drugs, not technically. But patients — who will be stuck waiting — will nonetheless lose.

It’s a wonktastic day -- Health Affairs dropped yesterday, and two other studies caught my eye -- so I’m going to try to do a lightning round on new research:

• Nonprofit hospitals are not plowing profits back into charity care, according to a Health Affairs study. That’s not a good look for providers already facing questions about where their 340B revenues go. (The research wasn’t 340B-specific. That’s just me editorializing.)

• The American Journal of Managed Care does have 340B-specific research: a new study that found that contract pharmacies are mostly located in wealthy areas, which suggests that the program’s growth isn’t benefitting low-income Americans. The piece suggests that the trend applies to both hospitals and federal grantees.

• One last one on 340B from Health Affairs: rural hospitals generally amp up their oncology care after joining the 340B program.

• Everything You Wanted to Know About the Market for Biosimilar Herceptin* (*but were afraid to ask) (not the actual headline … also from Health Affairs)

• Inflationary rebates on generic drugs in Medicaid lowered spending on generics by between 2% and 12% between 2017 and 2020.

• About 14% of the time, when insurance plans have a specialty drug covered under both the pharmacy benefit and the medical benefit, the coverage policies don’t align. Welcome to the American health care system, folks.

Outside of the ivory tower:

• It’s a good morning to Google “Christina Ritter,” the Centers for Medicare & Medicaid Services staffer apparently running the CMS unit imposing price controls, per STAT.

• The Institute for Clinical and Economic Review dropped the first draft of their revised value-assessment approach. There are no radical changes proposed, though there are plenty of hints that the group is going to continue to do its darndest to maintain a narrow definition of value. You all have about three weeks to get your comments in.

• The next great battle over drug pricing is going to be around patent reform, so it’s noteworthy that the left-leaning American Prospect is staking out its position with a print-edition story that concludes that “patent reform is the obvious next step” in the battle against high drug prices.

• Yesterday, I posited that prescription drug affordability boards were “low-key one of the most intriguing trends of 2023.” Today, Axios is out with more evidence in support of that point. Interestingly, the Axios piece cites two different Arnold Ventures-backed voices. Hmmm.

• Global Blood Therapeutics’ Ted Love is BIO’s new chairman, and he received the STAT profile treatment. From that interview, here is Love’s take on the IRA: “I’m very concerned about the IRA really undermining essentially every step in that process, undermining the resources that the bigger company might have to acquire a GBT, and on the front end, limiting perhaps the excitement of venture people in putting money … at the front end.”