On Aug. 29, Medicare released its highly anticipated list of 10 therapies for which it plans to establish a price by 2026. The Inflation Reduction Act (IRA), passed in August 2022, gives Medicare pricing power over therapies that both cost Medicare lots of money and have by 2026 enjoyed market exclusivity for a certain number of years — nine for small-molecule drugs and 13 for biologics.
Analysts have rightly criticized the congressional decision to once again confer greater protection on biologics. Congress previously drew this dubious distinction in 2010, when the biosimilar pathway it set up via the Biologics Price Competition and Innovation Act (BPCIA) conferred 12 years of data exclusivity on originator biologics, seven more than is given to originator small molecules under the Hatch-Waxman Act.
However, as the perhaps surprising presence of three biologics on the Medicare list suggests, originator biologics manufacturers will also feel pressure. In part, this is because the IRA sensibly links the level of mandatory price cut to length of exclusivity. Biosimilar competition since the BPCIA has been quite modest, with biologics often enjoying more than two decades of patent exclusivity (as contrasted with approximately 13-14 years for small molecules). Indeed, all three biologics on the list (Enbrel, NovoLog/Fiasp, and Stelara) will have enjoyed exclusivity for 16 years by January 2026. Under the IRA, they are therefore subject to at least a 60% price cut. In contrast, many of the small molecules on the list will have enjoyed exclusivity for fewer than 16 years and will therefore face mandatory price cuts of only 25%.
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