Medicare price negotiations may harm drug development

Eli Lilly Chief Executive David Ricks said Tuesday that Medicare price negotiations, which aim to lower costs for older Americans, could hurt drug development.

“I’m really worried about the damage this could do to new treatments and possibilities in medicine,” Ricks said in an interview on CNBC’s “The Exchange.”

Rex was referring to a livelihood In the Biden administration’s Inflation Reduction Act that would allow Medicare to negotiate more expensive drug prices each year.

He’s the latest pharma CEO to publicly blow up rulings and the law in general, which will likely reduce the company’s profits. Global drugmaker Merck last week sued the Biden administration over Medicare price negotiations in an effort to weaken the program.

Ricks said the “biggest issue” with that ruling stems from the difference in the price negotiation schedule for small-molecule drugs — that is, drugs made from low molecular weight chemicals — versus biological drugs, or those derived from living sources such as animals or humans.

Under the Inflation Control Act, Medicare can begin negotiating prices for small-molecule drugs as early as nine years after they receive FDA approval, compared to 13 years for biologics.

Rix said the distinction would “really cut off investment” in small-molecule medicines, which are “one of the most efficient parts of healthcare.”

“We’re going to get fewer (small-molecule drugs) because investors are already saying to me, ‘Why invest in more small molecules when biologics get 13 years ahead of negotiations? ”

Small-molecule drugs make up 90% of pharmaceutical drugs, according to a Stady at ScienceDirect.com.

Novartis CEO Vas Narasimhan in February expressed similar concerns about the shifting schedule, saying it was a top priority for the industry to correct the four-year gap between the two types of drugs, According to Fierce Pharma.

Another provision of the Inflation Control Act requires drug companies to recoup Medicare through rebates if drug prices rise faster than the rate of inflation.

The first set of eligible drugs were subject to Medicare inflation rebates beginning April 1, according to the US Department of Health and Human Services.