LSHC Horizons Brochure 2024 - Flipbook - Page 76
Hogan Lovells | 2024 Life Sciences and Health Care Horizons | Cross-jurisdictional
76
Seismic shifts in drug pricing
The policy and regulatory frameworks for drug
pricing in the U.S. and UK are undergoing
significant changes, setting a precedent which
regulators in other markets are likely to follow.
In the U.S., all eyes are on the implementation
of the drug price negotiation provisions
of the Inflation Reduction Act (IRA), with
“negotiations” currently being underway for
the first ten drugs and the resulting “maximum
fair prices” (MFP) set to be announced by
1 September. The MFP for each drug will
be scrutinized by the market in an effort to
divine the Centers for Medicare and Medicaid
Services’ (CMS) reasoning, and the impact
of those prices on commercial markets and
generic/biosimilar launches will be closely
tracked. Finally, the IRA’s impact on industry
investments will continue to be monitored.
Proposed legislation to address the “small
molecule penalty”, by lengthening the nineyear negotiation timeline for small molecules
to the same 13-year period as biologics, is a
priority for industry but that doesn’t mean
Congress will act on it, particularly in an
election year where President Biden has made
drug pricing a central pillar of his campaign.
Activity at the state level has the potential
to be as impactful. In the spotlight are state
prescription drug affordability boards,
(PDABs), and in particular those with
authority to set upper payment limits (UPLs)
on drugs deemed “unaffordable”. Colorado
is the first state out of the blocks to move
toward the setting of UPLs on brand products,
which effectively cap the price at which a
Jane Summerfield
Partner
London
manufacturer can sell a product to anyone in
the state and are expected to be lower than
commercial prices. Due to a requirement that
manufacturers extend their lowest or “best
price” for a drug to all state Medicaid programs,
these UPLs are likely to end up impacting
prices nationwide. As with manufacturer
court challenges to the IRA, expect litigation
challenging these laws as well, particularly as
they proliferate across the country.
In the UK, drug pricing is controlled indirectly
through rebates payable on sales of branded
medicines to the National Health Service (NHS),
the largest single customer in the UK. The rebates
are set out in a voluntary scheme negotiated
between the UK government and industry, or
in the default statutory scheme that applies to
companies not in the voluntary scheme.
The voluntary scheme has recently been
renegotiated, with the new Voluntary Scheme
for Branded Medicines Pricing, Access and
Growth (VPAG) in place from 1 January 2024.
For the first time ever, the voluntary scheme
now differentiates between “newer” and “older”
medicines, with similar changes to the statutory
scheme expected in the coming months.
Under the previous voluntary scheme, all
companies paid the same fixed percentage
rebate on their in-scope sales. Under VPAG,
the rebate percentage will now vary by product,
meaning each company will pay a different
overall rebate percentage based on their
specific product portfolio.
Alice Valder Curran
Partner
Washington, D.C.
The rebate percentage payable for “newer”
medicines, being for the first 12 years after
marketing authorization grant or until the expiry
of any applicable Supplementary Protection
Certificate (SPC), will be a single rate that varies
from year to year calculated on the difference
between the allowed NHS growth in sales and
actual NHS spending. The percentage rebate for
“older” medicines will be a basic rate plus a “topup” rate based on a sliding scale determined by
observed price decline.
The U.S. and UK examples represent
fundamental shifts in national policy on
regulating the pricing of innovator, generic,
and biosimilar medicines – a shift that is
likely to influence drug pricing policy and
regulation globally.
Band one for Life
Sciences &
Pharmaceutical
Sector (International
& Cross Border),
Chambers USANationwide, 2024
