Why Wall Street is unfazed by Medicare drug pricing threat
Wall Street concerns over the Inflation Reduction Act pricing negotiations for the first 10 drugs under Medicare’s Part D plan appear to be waning.
Big Pharma executives have sent signals that they can manage the final reduced prices set by the federal government, as anticipation for the Sept. 1 reveal date approaches.
On earnings calls in the past few weeks, a couple of major pharmaceutical companies have addressed the final agreed-upon price, called the maximum fair price (MFP), with the Centers for Medicare and Medicaid Services (CMS) — without revealing any numbers.
Bristol Myers Squibb’s (BMY) blockbuster blood-thinner Eliquis is on the list. The company confirmed it had received the maximum fair price from CMS and that it could manage the revenue impact.
CEO Christopher Boerner said on an earnings call Friday, “Now that we have seen the final price, we’re increasingly confident in our ability to navigate the impact of IRA on Eliquis.”
Eliquis brought in $3.4 billion for the company in the second quarter, an increase of 7% year over year. It contributed $12.2 billion, or almost a quarter, of BMS’s $45 billion in revenues in 2023.
Last week, Johnson & Johnson (JNJ) was also asked on an earnings call by analysts about the expected IRA impact on its drugs: immunosuppressant Stelara and blood thinner Xarelto. Executive vice president and worldwide chairman of innovative medicine Jennifer Taubert said that while the company disagrees with the process, J&J will not need to change its guidance once the prices are revealed.
“Those numbers have been included in the guidance that we provided …. that still looks very good to us today. It’s very consistent today,” she said.
Stelara — which will lose its patent next year — brought in nearly $2.9 billion in sales for the second quarter, up 4.9% year over year. Xarelto, meanwhile, contributed $587 million, a decrease of 7.9% year over year. The two drugs brought in a combined $13.2 billion in revenue in 2023, with Xarelto reporting slower sales year over year.
Both BMS and J&J have sued the government over the IRA powers, calling them unconstitutional. The lawsuits have been dismissed in court, and both have pledged to appeal.
The real bottom line? Investors are pleased. “We interpret these cumulatively as suggesting a more reasonable price cut than feared associated with IRA,” said JPM analyst Chris Schott in a note Friday.
Anjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBMs, and health policy and politics. Follow Anjalee on all social media platforms @AnjKhem.
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