The pharmaceutical sector expresses cautious optimism regarding the new administration's policies, particularly in addressing pharmacy benefit managers (PBMs) and revising aspects of the Inflation Reduction Act. Drug manufacturers hope for reforms that could enhance innovation and patient access to treatments while alleviating pressures on pricing.

Potential Reforms Targeting Pharmacy Benefit Managers

The pharmaceutical industry is eager to see changes in how PBMs operate, aiming to improve transparency and ensure savings reach patients. Companies argue that current practices inflate costs and hinder fair distribution of rebates. With bipartisan concerns growing, there is a renewed push for legislative action.

Industry leaders are advocating for three key reforms: decoupling drug prices from PBM compensation, ensuring rebates directly benefit consumers at the pharmacy counter, and increasing transparency in PBM operations. These changes could significantly impact the healthcare supply chain, making it more efficient and cost-effective. For instance, Eli Lilly CEO David Ricks emphasized the need for passing savings directly to consumers, highlighting the opaque nature of PBM business models. While PBMs deny contributing to higher drug prices, placing blame on initial list prices set by manufacturers, calls for reform continue to gain momentum. The previous administration's FTC Chair Lina Khan had initiated investigations into these practices, setting a precedent that the new administration may either build upon or challenge.

Revisiting Medicare Drug Price Negotiations

Drugmakers are also hopeful about potential revisions to the Inflation Reduction Act, specifically targeting Medicare's ability to negotiate drug prices. This provision, though popular among patients, poses challenges for the industry, which argues it could stifle innovation and lead to unintended consequences. The industry seeks legislative or administrative changes to address perceived imbalances in the law.

One major concern is the "pill penalty," which grants biologics longer protection periods compared to small-molecule drugs. This discrepancy could discourage investment in smaller, more affordable medications, potentially reducing the availability of generics. Pharmaceutical Research and Manufacturers of America (PhRMA) CEO Stephen Ubl has highlighted this issue, suggesting that adjustments could be made without congressional approval. Additionally, drug companies are fighting the law through legal challenges, arguing that mandatory price negotiations amount to government-imposed pricing rather than true negotiations. Despite these efforts, health policy experts suggest that significant changes might be difficult due to bipartisan support for lowering drug costs. However, the industry remains committed to finding common ground with the new administration, especially in areas like cancer research and chronic disease management, where collaboration could yield mutual benefits.