Analysts Predict IPI and Senate Bill Unlikely to Impact Drug Industry Like Pelosi Bill

A Senate bill to bring down the cost of some prescription drugs in the US and the Trump administration’s proposal to align US drug prices with international prices both pale in comparison to the major impact House Speaker Nancy Pelosi’s (D-CA) drug pricing bill would have on the biopharma industry, according to a new report from Bernstein analysts.

The predictions come as Sen. Chuck Grassley (R-IA) said he’s updating his bill, which will be re-released in December with improvements to the out-of-pocket cap “by giving seniors and Americans with disabilities more flexibility when it comes to upfront costs.”

But Bernstein analysts maintain that the impact of the Senate bill is likely to be “negligible” and will impact about 2% of drug sales. The three main elements of the bill involve a restructuring of Medicare Part D, which could reduce Medicare patients' out-of-pocket costs, a cap for drug price increases above inflation, and another move that would cause some manufacturers to pay a penalty for drugs with negative Medicaid prices.

Similarly, the Trump administration’s International Pricing Index for Medicare Part B drugs, which may be released as a proposal as soon as this week, but is expected to face a legal challenge, will impact about 3% of sales, according to Bernstein analysts, who note that it’s “uneven in its effects – impacting few companies sharply but having very modest effects on most.”

By contrast, Pelosi’s bill, which President Trump has criticized recently and which is derided by industry as potentially catastrophic, would allow the government to directly negotiate the price of up to 250 brand name drugs, with the largest price negotiations made available to commercial payers as well.

“Unlike the other plans, it applies to the totality of the US market (including commercial payers). It will also equate US pricing to international pricing AND require 30% discount in the catastrophic payment window of Part D. While the industry will absorb the SFC [Senate Finance Committee] plan without missing a beat and the Trump IPI will do some damage, but is manageable, the Pelosi plan in its current version will be a fundamental change of business model for the drug industry,” Bernstein analysts wrote.

Rachel Sachs, associate professor of law at Washington University in St. Louis, told Focus that she agreed with the general findings of the report, adding: “In large part, this is because the Senate package does nothing to address the underlying drivers of the problem of high drug prices, and may even encourage companies to set higher prices in the first instance. The House bill addresses these incentives.”

For the IPI, Sachs previously questioned what would happen if pharmaceutical companies refuse to sell their products at the new prices based on the international prices. “One possible answer: nothing,” she wrote.

Bernstein analysts further explained how companies will be unevenly impacted by any actions aimed at reducing government spending on drugs.

“As can be expected, the largest exposure to government program belongs to companies with drugs who primarily serve the elderly – Regeneron's Eylea and BMY's Opdivo exposure to Part B, Celgene's Revlimid, and Novo's insulin to Part D. Gilead's Medicaid exposure on HIV and Hep C. Note the very low exposure of Jazz and Allergan to government program, which is driven by business model mix,” they wrote.

They also noted how Regeneron could be at risk from the IPI, while AbbVie and Celgene are both “very exposed to pharma sharing of catastrophic insurance costs in Part D” in both the Senate and Pelosi bills, while Alexion has limited exposure to Medicare.