President Joe Biden's administration's drug-price negotiation law is facing a resistance from Johnson & Johnson, with its Chief Executive Officer Joaquin Duato saying that the law poses a threat to new product development and to fewer medicines in the future.
"The number of medicines that will be there will be less," Duato said in an interview with Bloomberg Chief Future Officer, Bloomberg reported.
The Inflation Reduction Act (IRA), which was signed into law in August 2022, empowers the Centers for Medicare & Medicaid Services (CMS) to negotiate prices for some of the most expensive drugs bought by the US national health insurance providers.
The IRA's Medicare price negotiations are expected to substantially hit pharmaceutical companies, especially those that rely on Medicare sales.
Duato who heads one of the world's top drug manufacturers described the IRA of the Biden administration as "misguided" and one that will "chill" innovation.
Under the IRA, 10 of the biggest-selling drugs in the federal Medicare program, including three from J&J, will see price cuts in a range between 38% and 79% from 2026.
J&J's blood thinner Xarelto and autoimmune disorders drug Stelara will see about two-thirds price cut versus its list prices in 2023. A 38% reduction will be implemented on prices of J&J's leukemia drug Imbruvica, which it sells with AbbVie. Aside from these drugs, there are others that would be negotiated in their pricing in the coming years.
The price restrictions under the legislation are likely to push drugmakers and biotech companies to stop developing drugs that may not "pay off." Duato noted that drug development would not be that attractive anymore for investors.
Duato said since J&J is a diversified company, it can better deal with the challenges by the IRA. The company's Chief Financial Officer Joe Wolk also expressed a similar sentiment.
"We've got a stable of products that will offset any of the losses that we have," said Wolk in an interview with Bloomberg's David Gura.
Aside from the IRA, drugmakers already deal with payments made to pharmacy benefit managers (PBMs), or those middlemen who handle drug coverage plans for employers and insurers. They are paid so that their products would not have much of the restrictions.
Wolk said J&J pays these PBMs about 60% of its list price in discounts and rebates, compared to only 25% six years ago. He also lamented that most of the time patients don't usually benefit from such payments.
Wolk also pointed out that drugmakers are the ones making the investment on the development of new therapies and not the PBMs, BNN Bloomberg reported.
"They are not passing on the discounts and rebates to the patients that they're supposedly serving," he added.
In July 2023, J&J sued the Biden administration over Medicare's new powers to cut drug prices, after lawsuits from other drugmakers such as Merck and Bristol Myers Squibb.
Ratings agency Fitch noted that the first 10 selected drugs announced in August 2023 are unlikely to affect global pharmaceutical companies' performance materially in the near term. However, it expects the negative impact to increase as the list grows over the rest of the decade, which will also include many high-profile Part B medicines.
