Uncertainties Still Loom Over IRA Negotiations

Editor's note: This article has been updated to clarify that Johnson & Johnson has settled patent lawsuits allowing three Stelara biosimilars to launch in the first half of 2025.

The guessing game surrounding the identities of the first 10 drugs to be selected for Medicare price negotiations under the Inflation Reduction Act (IRA) finally ended on Aug. 29 when CMS published the list of agents. While many on the list were expected, there were still a few surprises, and other uncertainties around the process remain, industry experts say.

The first 10 Medicare Part D drugs selected by CMS to be negotiated — listed in order of their total Part D gross covered prescription drug cost from June 1, 2022, through May 31, 2023 — are:

• Eliquis (apixaban) from Bristol Myers Squibb and Pfizer Inc.;
• Jardiance (empagliflozin) from Boehringer Ingelheim and Eli Lilly and Co.;
• Xarelto (rivaroxaban) from the Janssen Pharmaceutical Companies of Johnson & Johnson;
• Januvia (sitagliptin) from Merck & Co., Inc.;
• Farxiga (dapagliflozin) from AstraZeneca;
• Entresto (sacubitril/valsartan) from Novartis Pharmaceuticals Corp.;
• Enbrel (etanercept) from Amgen Inc.;
• Imbruvica (ibrutinib) from the Janssen Pharmaceutical Companies of Johnson & Johnson and AbbVie Inc.;
• Stelara (ustekinumab) from the Janssen Pharmaceutical Companies of Johnson & Johnson; and
• Fiasp, Fiasp FlexTouch, Fiasp PenFill, NovoLog, NovoLog FlexPen and NovoLog PenFill (insulin aspart) from Novo Nordisk.

During that same time period, approximately 8,247,000 Part D beneficiaries used these drugs, which accounted for approximately 20% of total Part D gross covered prescription drug costs — or about $50.5 billion. Beneficiaries paid $3.4 billion in out-of-pocket costs for the agents in 2022.

To create the list of drugs, CMS first identified potential qualifying single-source drugs — those small-molecule drugs with seven years since FDA approval or licensure and biologics with at least 11 years as of the publication date of the negotiation list that do not have generic or biosimilar competition. Certain orphan drugs, agents with low Medicare spending, plasma-derived products and drugs with a small biotech exception were excluded.

Then CMS selected the 50 qualifying single-source drugs with the highest total Part D covered prescription drug costs and ranked them according to those costs. After excluding any biologics that had a high likelihood of facing biosimilar competition within a specified time, the agency selected the 10 agents with the highest costs.

Four drugs qualified for the small biotech exemption, and no drugs were excluded due to potential biosimilar competition.

Companies with drugs on the list have until Oct. 2, 2023, to submit data and information on those products to CMS. In the fall, CMS and each manufacturer may have a meeting on that data submission, and between Oct. 30, 2023, and Nov. 15, 2023, CMS will hold a public patient-focused meeting for each of the drugs.

Those sessions are:

• Eliquis: Oct. 30 at 12-1:30 EDT
• Enbrel: Oct. 31 at 12-1:30 EDT
• Entresto: Nov. 1 at 12-1:30 EDT
• Farxiga: Nov. 2 at 12-1:30 EDT
• Fiasp, Fiasp FlexTouch, Fiasp PenFill, NovoLog, NovoLog FlexPen and NovoLog PenFill: Nov. 3 at 12-1:30 EDT
• Imbruvica: Nov. 6 at 12-1:30 EST
• Januvia: Nov. 7 at 12-1:30 EST
• Jardiance: Nov. 8 at 12-1:30 EST
• Stelara: Nov. 14 at 12-1:30 EST
• Xarelto: Nov. 15 at 2-3:30 EST

CMS will send a proposed maximum fair price for each drug by Feb. 1, 2024, and drugmakers will have until March 2, 2024, to either accept the price or propose a counteroffer. The negotiation process ends Aug. 1, 2024, and CMS will publish the maximum fair price for the drugs by Sept. 1, 2024. Those prices will go into effect on Jan. 1, 2026.

Drug List Raised Some Questions

Kyra Lee, Ph.D., a consultant for life sciences consulting firm Innopiphany LLC, says that there were “a couple surprises on the list,” such as the absence of Pfizer’s Ibrance (palbociclib) and Xtandi (enzalutamide) from Astellas Pharma US, Inc. and Pfizer Inc. “Astellas likely took legal action against CMS believing that Xtandi will be up for negotiation. Nevertheless, CMS is selecting their top 10 initial drugs drawing from its internal expenditure data spanning from June 2022 to May 2023. Because of this, there will be inherent discrepancies in accuracy when measured against publicly available data.”

On the other hand, she tells AIS Health, a division of MMIT, that she did not expect Stelara and Farxiga to be included based on 2021 spending data. “However, emergence of spending trends for drugs like Farxiga and Stelara likely surpassed earlier predictions.”

Johnson & Johnson so far has settled patent lawsuits allowing three Stelara biosimilars to launch in the first half of 2025. The three products do not have FDA approval at this point, but would those agreements preclude the inclusion of Stelara due to the biosimilar delay section of the IRA? Lee says it’s “important to note that biosimilar delays are only available to ‘extended-monopoly drugs,’” which for applicability year 2026 applies only to drugs receiving Biologics License Application (BLA) “licensure between Jan. 1, 2010, and Jan. 1, 2014, and Stelara was approved in 2009, which falls outside of the scope of this extension.”

When asked during an Aug. 29 press call about the inclusion of certain drugs on the list such as Stelara and insulin, senior administration officials repeated more than once that they followed the process as set forth in the IRA and CMS guidance.

Companies Continue to File Lawsuits

A few days after the release of the drug list, Novartis became the seventh pharma company and ninth claimant overall to file a lawsuit asking a court to declare the IRA unconstitutional.

During a June 20 webinar on navigating the IRA, Mark McClellan, M.D., Ph.D., the Robert J. Margolis Professor of Business, Medicine, and Policy, and founding director of the Duke-Margolis Center for Health Policy at Duke University, said there are likely to be “two big rounds” of cases. The first ones are focused on challenging the constitutionality of the legislation. He questioned whether the First Amendment claims would be successful but said that those invoking the Fifth and Eighth Amendments may stand a better chance.

McClellan, who served as FDA commissioner from 2002 through 2004 and CMS administrator from 2004 through 2006, said he expects a “second round of litigation once CMS…provides this clear framework for how negotiations are going to proceed and then starts implementing it, where I guarantee there will be claims about the administrative process violations” based on the process being “exempted from notice and comment rulemaking for the first few years.…‘You didn’t go through enough of a process. And this was arbitrary, and [there was] no opportunity for public comment.’ There’ll be a whole round of litigation about that.”

Asked if she expects all of the manufacturers to engage in price negotiations, Lee replies, “considering manufacturers can face harsh penalties — pay an excise tax — if they opt out of the negotiations, it is likely manufacturers who are currently litigating against this will also opt to engage in price negotiations.”

Stakeholders Face Other Uncertainties

Industry experts maintain that other unknowns remain around implementation of the IRA’s drug-related provisions. For example, says John O’Brien, Pharm.D., president and CEO of the National Pharmaceutical Council (NPC), it’s unclear how CMS will use patient input and how it will address patient access, negotiated formularies and therapeutic alternatives. In addition, uncertainties exist around the IRA’s “unintended consequences, such as how this process may create perverse incentives delaying launches, reducing subsequent indications and chilling evidence generation.”

“The decisions around the key question of which therapeutic alternatives will be selected as comparators, how clinical superiority and clinical net benefits are demonstrated and how CMS plans to assign a price value to that difference in this first year will come too late for the manufacturers selected today and might come too late for the manufacturers selected for the next year of negotiation as well,” he maintains. “Manufacturers currently face uncertainty about what evidence should be developed and submitted, whether decisions explained in the concise justifications during the first year of negotiation under the program will be the same decisions made in future years and whether the people making the decisions next year will be the same.”

“How this list was put together is a great question for the White House and HHS,” he tells AIS Health. “The many questions people have about today’s announcement are a reminder of the lack of transparency and tremendous uncertainty surrounding the process.”

Julie Patterson, Pharm.D., Ph.D., senior director of research at NPC, also flags the process of how CMS will incorporate feedback from different stakeholders when deciding on appropriate alternative therapies. “While more details have emerged about the timing and structure of the patient input sessions, we still are seeking greater understanding around how that patient input collected will inform and influence each stage of the drug evaluation process,” she says.

She explains that because a therapeutic alternative must be named for each indication a drug is approved for, CMS “now faces the task of selecting therapeutic alternatives for three dozen adult indications in the 10 drugs identified for selection for initial price applicability year 2026. Notably, CMS does not highlight the selection of therapeutic alternatives as a priority for input during its patient listening sessions; CMS has identified that it will be most interested in receiving patient-focused input surrounding clinical benefit, unmet need and drug impact on specific populations from those sessions.”

“As CMS begins this process with this list,” she tells AIS Health, “it will be critical that they use evidence-based best practices for meaningful patient engagement that ensures they are receiving comprehensive and representative information directly from patients.”

Contact Lee at kyra.lee@innopiphany.com and O’Brien and Patterson via Andrew Wishon at awishon@realchemistry.com.