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More Thinking on Earnings, Including JNJ's Take on the IRA
Plus more good news for obesity drugs, which is bad news for those who question the meds' value
Brian Reid
April 17, 2024
A couple of thoughts on yesterday’s earnings season kickoff:
First off, the whole Change Healthcare goat rodeo got a ton of coverage in the context of UnitedHealth Group’s earnings, and I worry that focus took away from a critical point that flew entirely below the radar: United’s Optum Rx PBM saw revenue rise 12%.
I got sucked in by the Change stuff, too, so let me take this moment to reiterate: the PBM business is still growing outrageously quickly, despite all of the attention from policymakers and others. Contrast that with Johnson & Johnson’s pharmaceutical business -- a business dedicated to coming up with new cures and changing human health for the better -- which was essentially flat in the first quarter.
Second, and speaking of JNJ earnings, the topic of the IRA came up on the company’s investor call. Here’s what Jennifer Taubert, who runs the company’s medicines unit, said:
We've been really clear that we do think the IRA drug setting provisions are damaging to the healthcare innovative system. It is not something that is going to help reinforce the tremendous investments that we're making in R&D to develop the next types of treatments and cures …
And so we're working appropriately with the government and in line with the process to start going back and forth around what the ultimate price will be. So there has been a round or two of going back and forth. And so we're still in the middle of that process.
I can't really provide any more details on that. What I will say is that the products that we have that are going through the process, they are not our growth drivers for the future. They are our products that are more at end of life.
There’s nothing there that should be a surprise. I suspect that other companies will use a similar structure: a message about innovation and a reminder to investors that they shouldn’t be concerned (this go-round, anyway). Still, I’ll be curious if there are companies who begin using earnings calls and other exec visibility opportunities to highlight some of the strange incentives in the IRA, especially around pricing and access.
The chance of this whole apparatus being hijacked by PBMs who try to steer patients away from lower-cost, price-controlled medicines feels fairly high, and I’ll be watching to see if anyone sounds the alarm.
The insulin marketplace has been turned so upside-down that the business case for certain products no longer exists. Manufacturing issues, heavy competition, and an inability to get on formulary prompted Novo to take its Levemir insulin off the market, and no biosimilar company looked at that as an opportunity. In other words, we live in a world where there’s no incentive for that product to be on the market. Yet now Novo is facing questions from three U.S. Senators about that decision. I kind of hope Novo is honest in its answer.
This Wall Street Journal story, from last fall, was a damning indictment of the way that payers played ridiculous games with generic drug prices, to the detriment of health plans and the employers they served. So it’s nice to see that there’s now an HHS OIG effort to get to the bottom of things.
The obesity med Zepbound works in sleep apnea. Lilly will file for FDA approval this year, and the agency has already fast-tracked the new use of the medicine (which, I assume, would be covered by Medicare). That’s great news for patients, great news for the value delivered by the medicine, and terrible news for anyone who thinks there is an easy fix for the budget impact of these meds.
I’m low-key fascinated by media effort to summarize the whole PBM thing for an audience that has literally never thought about PBMs before (lucky ducks!). Here’s Reuters’ stab.