This month, we’ve seen a flurry of activity that confirms Washington will be focused on drug pricing this summer, and it’s coming from all directions: Congress, the Biden Administration, and Courts. We believe the rest of 2021 will be full of high-stakes negotiations, the outcome of which will deeply impact the life sciences industry.
Here is what has happened and why it matters:
The Biden Executive Order
On Friday, July 9, President Biden signed an expansive and wide-ranging Executive Order (EO) that touches every aspect of the American economy, including healthcare, and advances several policies that take aim at pricing and access issues. At the signing ceremony, the President said, “Take prescription drugs: just a handful of companies control the market for many vital medicines, giving them leverage over everyone else to charge whatever they want.”
These policies are some of Biden’s first tangible steps on prescription drug pricing, an issue he has largely avoided so far, or which has been mired in court delays. The order directs federal agencies to develop a “comprehensive plan” to lower drug prices in the next 45 days.
- On drug importation: The order directs the FDA to work with states on their plans to import prescription drugs from Canada. The agency first outlined two narrow pathways to importation under former President Trump, but has not yet approved a plan from the only state — Florida — to formally request permission. In essence, the Biden administration is building on the previous administration’s policy. The implementation, however, remains a challenge; the industry has already sued, and Canada has signaled opposition to mass exportations.
- On generics and biosimilars: The order directs the Dept. of Health & Human Services (HHS) to bolster support for generic and biosimilar drugs and develop a comprehensive plan to combat “price gouging” in the prescription drug market. It also instructs the Federal Trade Commission (FTC) to examine anticompetitive practices, such as “pay for delay,” in which brand name manufacturers strike deals with generic competitors to delay the entry of new products. The idea has broad bipartisan support in Congress.
Here’s the bottom line: Although light on actual details, this order sets in motion a very busy late summer of regulatory activity. With newly empowered federal agencies under pressure to perform, the Biden administration is using executive authority to put its own stamp on the drug pricing issue, while Congress gears up for its own reform effort.
House Oversight Committee Releases Critical Report on Pharma R&D as Congress Eyes Direct Medicare Negotiations
A report from the House Oversight and Reform Committee released on Thursday, July 8, found that the 14 leading drug companies paid out more in stock buybacks and dividends from 2016 to 2020 than they spent on R&D. Pharmaceutical leaders, including J&J, Novartis, Gilead and AbbVie, pent $577 billion on stock buybacks and dividends in that four-year timeframe, which is $56 billion more than the $521 billion they spent on R&D.
This report is intended to counter the industry argument that any move to allow Medicare to directly negotiate prices will hurt innovation. The report states that companies need to cut back on payouts to shareholders, rather than cut R&D.
As previously discussed, direct Medicare negotiations remain a potent idea and can secure a place in the coming legislative package, along with elements of Biden’s American Jobs Plan and American Families Plan (colloquially known as the “infrastructure bill”). Although Democrats have some disagreements, leadership (including Speaker Pelosi) is determined, and we expect Democrats to compromise and take advantage of the Senate reconciliation rules (e.g., pass legislation that has a budgetary impact with just the 50 Democratic votes) to tackle drug pricing.
The Biogen and Aduhelm Scrutiny Intensifies
The FDA Aduhelm approval and the consequent scrutiny continues to intensify, further strengthening the focus on drug pricing. The focus of this approval has quickly turned to a discussion on whether value justifies pricing and the appropriateness of how the FDA handled the approval process.
Last week, the FDA at Biogen’s urging announced that it was severely narrowing the label and instead recommending amyloid beta–targeting antibody for people with mild cognitive impairment or mild dementia and not anyone living with Alzheimer’s disease. The very next day, in a move that could severely alter how the FDA interacts with companies during the approval process, acting FDA Commissioner Janet Woodcock requested an independent Office of Inspector General (OIG) investigation into how agency staff interacted with Biogen executives leading up to the approval.
We expect this issue to remain in the limelight and be used as a proof-point to push for legislative and regulatory changes that feed into drug pricing. This is particularly important for companies operating in the rare and ultra-rare disease space, as stakeholders will continue to closely scrutinize the factors that influence pricing. This also puts the FDA on notice, as the agency takes a more prominent role in this issue.
What this means for life sciences companies
Whether you are a biotech, medical-device or traditional pharmaceutical company, you should operate under the assumption that every move you make will be heavily scrutinized. Pricing, value and approval processes, including accelerated approval pathways, are all under the microscope.
This is coming at a critical moment. For the first time in a decade, the life sciences industry has enjoyed renewed reputation—but the honeymoon is ending. Perceptions of inappropriate pricing and industry-friendly regulatory frameworks are driving desire for action.
Here are several steps that manufacturers and developers should consider:
- Prepare reactive messaging on drug pricing. The new House report on R&D, the Aduhelm approval, and the Biden EO mean there will be nonstop scrutiny, with particular focus on high-priced drugs and those approved through accelerated pathways. Reactive FAQs should be prepared.
- Communicate your product’s value proposition. For any therapies being approved in the next six months, developers will need to justify their value to a host of stakeholders. This will also require updating messaging on R&D. Companies need to explain in detail what the R&D spend looks like and the consequences of enacting policies that harm innovation.
- Take a stance. Executives should develop a POV on hot-button topics, such as Aduhelm’s pricing and approval process, Medicare direct negotiations, and their relationship with the FDA. They should also be prepared with commentary in any investor or executive visibility events.
For further interest or questions, don’t hesitate to reach out to the Syneos Reputation & Risk Management (RRM) team.