Possible Wed turbulence in pharmaYou'll recall SPCEO told us the biotech/pharma index is down 30% from it's top on drug price concerns. Just a note in case you are trading the stock, Wed may be when the House bill slips in drug price regulation and creates a bit of volatility. Here's a quick thought from an analyst. We know THTX and their drugs won't be affected much at all, but industry correlation may impact the stock temporarily. It all has to do with your drug being large, globally sold, and lots of use by Medicare patients. Looks like they are only targeting top 50 or so drugs in the first years if it gets passed.
-----------------
"As a reminder, H.R.3 from the 116
th Congress, sought to establish multiple programs to address drug prices and healthcare coverage, although clearly the most significant aspect would have been allowing HHS to negotiate prices for single-source drugs (prioritized by spending) under Medicare Part B and D via a reference-pricing mechanism (no more than 120% of the average price across Australia, Canada, France, Germany, Japan, UK). Beyond that, the bill sought to cap the pace of price increases, institute an Out of Pocket Cap for Medicare beneficiaries, and provide for dental, vision, and hearing coverage as well.
·
Timeline for Implementation? The 2019 bill called for implementation to begin in FY23, with the negotiations initially limited to 25 drugs, then 50 in FY24. We will be interested if the Administration adjusts timelines, or if there is a later start (given that ~16 months have passed since H.R.3 was passed). Theoretically, if we are talking about a potential 2025 implementation, then the mix of drugs impacted shifts. Yes, drugs like Eliqiuis and Enbrel with longer-dated LOEs would still be impacted, but Humira, Revlimid, Eylea, Prolia/Xgeva are all expected to face generic/biosimilar competitors over 2023-early 2025 timeframe.
Impact to Our Coverage Universe. Given the points we outlined above, we would argue that nuance matters significantly here – particularly after years of waves of drug pricing concern. That said, we also acknowledge that that nuance may not matter on day 1 and that investors had increasingly discounted drug pricing risk in recent months. In terms of most direct impacts from an H.R.3-type effort, we would bucket them into categories (1) anti-PD-1s (i.e., Bristol’s Opdivo, Merck’s Keytruda – particularly given concentration risk with the latter), and (2) older products with pronounced US/OUS pricing differentials and later-decade LOEs (Amgen’s Enbrel, Bristol’s Eliquis, Pfizer’s Ibrance). From a stock-perspective, we would expect AMGN, BMY, and MRK to be most impacted if these efforts came to pass.
Biopharma Estimated Exposure to Medicare (as % of Net U.S. Sales)
