Cancer will replace diabetes/heart disease as the dominant disease category in the upcoming list of Part D drugs selected for the Medicare price negotiation process, researchers Sean Sullivan and Emma Cousin from the University of Washington and Inmaculada Hernandez of the University of California San Diego predict in a new analysis.
Key Takeaways
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As many as six oral cancer drugs could be selected for Medicare price negotiation in the next round, which begins in 2025 for prices going into effect in 2027, according to a new analysis by researchers at the University of Washington and the University of California San Diego.
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A number of diabetes drugs may also be targeted, including Novo Nordisk's Ozempic. The price negotiated for Ozempic will also be applied to Novo's other semaglutide products, Rybelsus, an oral form for diabetes, and Wegovy, an obesity drug.
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The researchers list 13 out of a possible 15 drugs that could be eligible for negotiation and identified five more that might be, but for which there is less certainty because of possible changes in Medicare spending trends.
Using the selection criteria laid out in the Inflation Reduction Act, the researchers produced a list of 13 drugs they feel are likely to be chosen by the Centers for Medicare and Medicaid Services. The findings were presented at an ISPOR webinar on 11 July, and a paper on the analysis is under review for publication.
By comparison, just one cancer drug is now undergoing the first round of negotiations – AbbVie Inc./Janssen’s Imbruvica.
A total of 10 Part D rugs were chosen for the first round. (Also see "Big Rebates Already A Big Factor For Drugs On Medicare Negotiation List" - Pink Sheet, 29 August, 2023.) But the IRA directs CMS to select up to 15 drugs for the next cycle.
As many as six cancer drugs may be selected by the CMS, according to the analysis. (See chart below.) Prices negotiated in the next cycle will go into effect in 2027, while prices from the current cycle will be announced by CMS on 1 September and implemented in 2026. (Also see "Janssen’s Stelara May Be Medicare Price Negotiation Savings Star" - Pink Sheet, 9 May, 2024.)
All the oncologics on the list of potential 2027 drugs are small molecule oral treatments, which no doubt will fuel arguments that the negotiation program undercuts innovation because it will discourage companies from developing drugs that could face price controls nine years after approval. (Also see "Medicare Price ‘Negotiation’ Would Have Stymied Verzenio Advance In Early Cancer – Lilly’s Ricks" - Pink Sheet, 27 July, 2022.)
CMS is not scheduled to announce the next list of drugs chosen for negotiation until 1 February 2025 but speculation is already well underway about which products will be targeted.
Hernandez co-authored a widely consulted 2023 paper along with Sean Dickson, now at AHIP, on the likely candidates for negotiation in the first round. (Also see "Keytruda, Opdivo May Be Only Part B Drugs Chosen For Medicare Negotiation In First Applicable Year" - Pink Sheet, 31 March, 2023.) The new analysis may also be a reference point for stakeholders.
In addition to the 13 likely candidates, the researchers identified another five drugs that might fit the negotiation criteria depending on future spending trends but cautioned those trends are hard to predict. The lack of current and publicly available Medicare spending data complicates forecasts. (Also see "Medicare Negotiation List Surprises Highlight The Importance Of Current Spending Data" - Pink Sheet, 30 August, 2023.)
The most recent data currently available on the agency’s Medicare spending dashboard is from 2022 and CMS will base its selection on internal spending data from November 2023 to October 2024. The researchers used estimated 2023 gross spending levels to supplement the 2022 data.
Cancer Drug Candidates
The cancer drugs on the list developed by the researchers include Astellas’ Xtandi, Bristol Myers Squibb’s Pomalyst, Pfizer’s Ibrance and AstraZeneca’s Calquence and Tagrisso. AbbVie’s Venclexta is also included, but it is one of the drugs about which the researchers are less certain.
Tagrisso’s eligibility for negotiation is complicated by the fact that it has an orphan drug designation for treating EGFR mutation positive non-small cell lung cancer and the IRA offers a narrow exemption from negotiation to orphan drugs. The exemption applies to drugs for their first orphan designation but is not available once a drug receives additional orphan designations. Tagrisso has approvals for several indications related to EGFR lung cancer.
Among the cancer drugs flagged by the researchers for 2027, Xtandi and Pomalyst are the oldest, approved in 2012 and 2013, respectively. Drugs approved more than 16 years once their negotiated price goes into effect are subject to a 60% minimum discount under the law. But it seems that none of the drugs on the researchers’ list will be in that position in 2027. Younger drugs face a minimum 25% discount.
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Diabetes Drugs On the List
Although they may make up a smaller overall share of the drugs chosen for 2027 versus 2026, diabetes drugs will continue to be well represented on the upcoming list, according to the researchers. They expect four will be chosen, led by Novo Nordisk’s mega-blockbuster Ozempic (semaglutide). The drug’s negotiated price would also apply to Novo’s other two semaglutide treatments, Rybelsus for diabetes and Wegovy for weight loss, based on CMS’ interpretation of the law.
The other diabetes drugs that are likely to be selected include Boehringer Ingelheim’s Tradjenta and Merck & Co.’s Janumet, Cousin said. Eli Lilly’s Humalog insulin is on the “maybe” list.
Only single-source products are eligible for negotiation, but Humalog (insulin lispro) remains a potential candidate even though it has marketed competition from two follow-ons, Hernandez said. That is because one of them is an authorized generic from Lilly and the other, Sanofi’s Admelog, was not approved through the biosimilar pathway, she explained.
Predicting Humalog’s candidacy is also complicated by the fact that Lilly cut the list price of the drug by 70% in the fourth quarter of 2023, which will probably reduce Medicare’s spending for it, Hernandez noted. (Also see "Lilly’s Insulin Cost Cutting Plan: Replacing Rebates With Cost Sharing Help At Point Of Sale" - Pink Sheet, 2 March, 2023.)
The other drugs that are expected to be selected for negotiation treat a range of conditions and include GSK’s Trelegy Ellipta for COPD, Boehringer Ingelheim’s Cofev for lung disease and AbbVie’s Linzess for gastrointestinal disorders.
The 13 products identified each have projected Part D gross spending of $1bn to more than $7bn (for Novo’s semaglutide franchise), based on the analysis. Hernandez suggested actual spending for the three semaglutide products could even be higher, and could represent 35% to 40% of gross spending for all the drugs selected.
Boehringer Ingelheim and AstraZeneca each have two drugs on the projected list and AbbVie could have as many as three drugs undergoing negotiation in the next round (see chart). BI, AstraZeneca and AbbVie are already participating in the first round of negotiation for Jardiance, Farxiga and Imbruvica, respectively.
Small Biotech Exemption
Three drugs that meet the criteria for eligibility will probably seek and obtain the law’s small biotech exception, researchers believe. They include Incyte’s Jakafi, Neurocrine’s Ingrezza, and Exelixis’ Cabometyx.
CMS granted the exception to four drugs in the first negotiation cycle but did not announce which products were involved. (Also see "‘Small Biotech Exception’ From Medicare Price Negotiation Granted To Four Drugs For 2026" - Pink Sheet, 5 September, 2023.)
Under the IRA, a drug could be exempt from negotiation for prices implemented in 2026, 2027 and 2028 if spending on the product comprises a small percentage (less than 1%) of Medicare program spending, and is a significant proportional share (80% or greater) of a company’s Medicare business. The law excludes new formulations “such as an extended-release formulation” from the small biotech drug exception.
The provision is meant to protect small biotech manufacturers with a single product that represents the significant majority of their Medicare revenue.
