David Ricks, CEO of Eli Lilly, expresses concerns over potential harm to drug development caused by Medicare price negotiations aimed at reducing costs for older Americans.
Ricks, in an interview on CNBC’s “The Exchange,” stated, “I’m really worried about the harm this will do to new cures and possibilities in medicine.”
The provision in focus is part of the Biden administration’s Inflation Reduction Act, which allows Medicare to negotiate prices for the most expensive prescription drugs on an annual basis.
Ricks joins other pharmaceutical executives in publicly criticizing the provision and the law as a whole, as it is likely to reduce company profits. Merck, a global drugmaker, recently filed a lawsuit against the Biden administration in an attempt to weaken the program.
The main issue raised by Ricks is the discrepancy in negotiating timelines for small-molecule drugs and biologic medicines. Under the provision, Medicare can begin price negotiations for small-molecule drugs as early as nine years after FDA approval, while biologics have a 13-year negotiation timeline.
Ricks argues that this distinction will significantly impact investment in small-molecule drugs, which are considered one of the most efficient parts of healthcare. He shares that investors are already questioning why they should invest in more small molecules when biologics have a longer negotiation timeline.
According to a study published in ScienceDirect, small-molecule drugs make up 90% of pharmaceutical drugs.
Vas Narasimhan, CEO of Novartis, has also expressed concerns about the discrepancies in negotiation timelines, stating that it is 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 Reduction Act requires pharmaceutical companies to refund Medicare through rebates if the prices of their drugs rise faster than the rate of inflation. The US Department of Health and Human Services has already implemented Medicare inflation rebates for eligible prescription drugs starting April 1.
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