Lilly, AZ, AbbVie and J&J face big potential hit from Medicare pricing bill: analysts

2 min
August 01, 2022


By Eric Sagonowsky

August 1, 2022

After years of government standstill on drug prices in the U.S., could the Senate this week pass a “watershed” bill enabling drug price negotiations? It remains to be seen, but analysts are busy poring over the available details to see how the legislation may affect the industry’s top players.

Among big drugmakers, Eli Lilly, AstraZeneca, AbbVie and Johnson & Johnson are particularly exposed to the current Medicare negotiation proposal, analysts with SVB Securities wrote in a Friday note to clients. The companies sell a mix of lucrative oncology and diabetes medicines in Medicare.

As the legislation stands, if passed, Medicare would be able to control drug prices for 10 medicines in 2026, with the number growing to 60 by 2029, the analysts said. In 2026 and 2027, Medicare would only control Part D drug prices, but in 2028, it could also negotiate prices in Part B, where doctors administer therapies, according to the SVB team.

Medicines would be eligible for Medicare negotiations after nine or 13 years on the market, depending on whether they are a small molecule or a biologic. But because pharmaceutical companies often secure much longer periods of exclusivity than either nine or 13 years, the bill risks cutting off the “tail” of profitable drug sales, the SVB analysts pointed out. Drugs at risk of losing their “tail” include Johnson & Johnson’s multiple myeloma med Darzalex plus AstraZeneca’s cancer therapies Tagrisso and Calquence.

For drugs facing a generic or biosimilar rival, Medicare would no longer seek to negotiate prices, the SVB team pointed out.

“We are concerned about the negative impact of proposed legislation on future innovation and the financials associated with some of the most helpful drugs for Medicare recipients,” the SVB analysts wrote. “Not only would the economics for many drugs be curtailed before loss of exclusivity, but innovators’ willingness to develop new drugs, in particular small molecule therapies for seniors, would likely diminish.”