Big Pharma’s Reliance on Pricing Negotiation Loophole Means Trouble

Guidance from the Centers for Medicare and Medicaid Services (CMS) could spell trouble for Johnson & Johnson, Merck, Bristol Myers Squibb, and other major drugmakers that had been counting on a pricing negotiation loophole the Trump administration now appears to want to close.

The drugmakers saw shifting patients to new injectable versions of their drugs as a way to blunt the inevitable revenue declines when patents for these cancer therapies expire. I Photo: Bristol Myers Squibb

Revenue from top-selling cancer drugs is at risk, Josh Nathan-Kazis reported for Barron’s Daily.

The drugmakers believed they could delay upcoming Medicare price cuts by shifting patients to new injectable versions of their drugs that wouldn’t be eligible for price negotiations for several years.

They saw it as a way to blunt the inevitable revenue declines when patents for these cancer therapies expire.

Complex drugs known as biologics are eligible for Medicare price negotiation after 13 years, but the clock resets for new versions that include an additional active ingredient.

CMS is now considering grouping original and newer versions together when the new ingredient does not significantly affect treatment.

This would mean negotiations for both would occur simultaneously. Merck had hoped to offer a new injectable version of its mega-blockbuster Keytruda that it believed would not be subject to renegotiation until well after 2028.

For Johnson & Johnson, revenue from its cancer treatment would drop years earlier than expected, as would revenue from a drug developed by Bristol Myers Squibb.