In this photo illustration, Eliquis is made available to customers at the New City Halsted Pharmacy on August 29, 2023 in Chicago, Illinois.
Scott Olson | Getty Images
Medicare is set to negotiate prices for 10 different drugs with manufacturers in a bid to make those costly treatments more affordable for older Americans – a process the pharmaceutical industry fiercely opposes.
But analysts say the drug price talks will likely have a muted financial impact on manufacturers, at least for this first round of prescription medicines. The drug price talks are expected to have a minimal financial impact on manufacturers, at least for this first round of prescription medicines. Many of the drugs on the list are already under intense competition from other brands or will soon see their patents expire, which will allow generic alternatives to enter the market. Some of the drugs listed aren’t major contributors to the company’s revenue. Analysts say that this could change during future rounds of negotiation. The Biden administration released the long-awaited drug list on Tuesday. This officially kicked off a lengthy negotiations process that will conclude in August 2024. Prices will not be reduced until January 2026. The list includes the drugs that will have the highest Medicare Part D spending from June 2022 until May 2023. That includes blood thinners from
Johnson & Johnson
, and diabetes drugs from
and AstraZeneca. However, it’s possible that the prices negotiated will not be implemented. A number of drugmakers, some of whom have medications on the list, filed lawsuits at different federal courts to stop the negotiations. This could lead to split decisions by appellate courts and speed up the dispute before the Supreme Court. Meanwhile the U.S. Chamber of Commerce is seeking an injunction before October 1 to stop the negotiations. On the same date, drugmakers will have to sign contracts to take part in negotiations. Uncertain whether this effort will succeed. Patent expirations, branded competitionNew negotiated prices in 2026 may have a minimal financial impact on drugs already expected to see revenue and profits decline due to upcoming patent expirations and branded competition. Januvia, Merck’s Type 2 Diabetes drug, could lose exclusivity by mid-2026. This is only a few short months after new negotiated prices are implemented. Goldstein expects that 90% of Januvia’s volume will be transferred to generic competitors in the first few months after the patent expires. The drugs on Medicare’s list this yearEliquis, made by Bristol-Myers Squibb, is used to prevent blood clotting, to reduce the risk of stroke.Jardiance, made by Boehringer Ingelheim, is used to lower blood sugar for people with Type 2 diabetes.
Xarelto, made by Johnson & Johnson, is used to prevent blood clotting, to reduce the risk of stroke.
Januvia, made by Merck, is used to lower blood sugar for people with Type 2 diabetes.
Farxiga, made by AstraZeneca, is used to treat Type 2 diabetes.
Entresto, made by Novartis, is used to treat certain types of heart failure.
Enbrel, made by Amgen, is used to treat rheumatoid arthritis. AbbVie’s Imbruvica is used to treat various types of blood cancers.
Stelara, made by Janssen, is used to treat Crohn’s disease.
- Fiasp and NovoLog, insulins made by Novo Nordisk
- “So, doing any negotiating for Januvia today seems like kind of a moot point since it will be losing exclusivity in 2026 and seeing this decline due to generic competition,” she told CNBC. According to an analyst from Leerink Partners, David Risinger’s note, AstraZeneca Type 2 diabetes drug Farxiga will lose exclusivity by 2026. Other drugs with later patent expirations are also affected.
- Johnson & John’s blood thinner Xarelto, and Novartis heart failure drug Entresto will both lose exclusivity by 2027. Risinger wrote that the companies could only be affected by negotiated prices on their drugs for a year, before generic competition reduces its impact.
- Eliquis, a blood thinner from Bristol-Myers Squibb and
- , is slightly more exposed to the impact of negotiated prices since its patent expires in 2028. But that risk will likely be manageable.
- “We think Bristol/Pfizer could take a low-mid single-digit hit to their respective 2026 revenue … due to Eliquis negotiation,” Bank of America analyst Geoff Meacham said in a research note Tuesday, adding that the effect of negotiated prices will be limited to 2026 and 2027.
- Branded competition is another factor that could mute the impact of negotiated prices, Meacham added.
- For example,
‘s blood cancer drug Imbruvica could see steep declines before its negotiated price goes into effect in 2026, largely due to “competitive erosion” from similar treatments like AstraZeneca’s Calquence and
‘s Brukinsa, according to Meacham.
Competition between similar branded medications has already resulted in rebates and discounts paid to Medicare Part D for some of the drugs on the list. Meacham said that the competition between similar branded medications has already resulted in rebates and discounts paid to Medicare Part D for some of the drugs on the list. Louise Chen, a Cantor Fitzgerald analyst, also noted that the majority of drugs on this list were not the main growth drivers for their respective companies. This means that a decline in sales or profits of a drug may not have a significant impact on the overall business or stock price of whichever company it belongs to. For instance, Merck’s Januvia contributes less to revenue and earnings than other drugs that are in the pipeline of the company, like its blockbuster cancer medication Keytruda, or HPV vaccine Gardasil. The next negotiations could be different. The next negotiations may be differentBut Chen stated that this could change by 2028 or beyond when negotiations begin to target drugs under Medicare Part B. That includes Keytruda and other biologic medications, which are created using living cells or organisms.
“When we get to more biologics, the impact is going to be a lot more significant because those products are much more expensive and impact the earnings and growth of these companies a lot more,” Chen said.
Mizuho Goldstein added that the impact of drug price negotiations on companies will be more long-term, even though it may “certainly feel muted at this time.” Negotiations could alter a company’s strategy for drug development over time. Negotiated prices prevent companies maintaining pricing power for a treatment. According to Goldstein, this means that continuing to invest in a drug and adding additional indications will have a lower return. Expanding indications is the use of a drug for a different condition.