Strong Biopharma Earnings and Upcoming Drug Price Negotiations Under IRA

The second-quarter 2024 biopharma earnings season has been a positive one, with companies surpassing Wall Street expectations on strong drug sales and raising their outlooks for the rest of the year. However, the nearing deadline for drug price negotiations between the Biden administration and drugmakers under the Inflation Reduction Act (IRA) is interesting. The Centers for Medicare and Medicaid Services (CMS) has until the end of July to conclude negotiations on the maximum fair prices for the initial 10 drugs selected for the program, which will go into effect in 2026.

The initial target list of 10 drugs includes medications to treat diabetes and cancer, which collectively cost the U.S. government $50 billion from mid-2022 through mid-2023. J&J, which filed a lawsuit to block the implementation of the IRA's Medicare Drug Price Negotiation Program, seems unconcerned about the potential impact on its business. Jennifer Taubert, worldwide chairman of J&J's Innovative Medicines division, told analysts that they have received the final numbers from the government and that the guidance provided last year at EBR looks very good to them today.

AstraZeneca, another company that has filed a lawsuit aiming to block drug price negotiations, has completed Medicare drug price negotiations for its diabetes drug Farxiga, stating that the impact of the IRA on Farxiga will be very limited. Despite their efforts, drugmakers seem to be faring well under the Medicare pricing talks.