The historic announcement from the Biden Administration detailing the first 10 drugs slated for Medicare price negotiations next year under the Inflation Reduction Act stirred minimal reaction in the stock market.
The announcement included prominent pharmaceutical companies like Bristol-Meyers Squibb (BMY), Eli Lilly (LLY), Merck (MRK), AstraZeneca (AZN), Novartis (NVS), Amgen (AMGN), Johnson & Johnson (JNJ), AbbVie (ABBV), and Novo Nordisk (NVO), yet the stocks of these companies remained largely flat or saw gains at the end of trading on Tuesday.
While experts were not caught off-guard by the drugs listed, it’s important to note that the prices resulting from these negotiations won’t take effect until 2026. However, financial analysts are eagerly awaiting the final negotiated prices, recognizing that the uncertainty surrounding these figures could have a more substantial impact on the stock market sentiment.
Goldman Sachs analysts highlighted that the limited response in stock prices could be attributed to the considerable unknowns. They emphasized that the critical moment for market reactions might come with the Centers for Medicare & Medicaid Services (CMS)’ initial disclosure of their maximum fair price offer.
Amid legal actions filed by companies to contest or delay these negotiations, the concern revolves around the definition of what constitutes a fair price as determined by the CMS. In response, Medicare Director and CMS Deputy Administrator Dr. Meena Seshamani emphasized the agency’s commitment to engage in an extensive back-and-forth negotiation process to ensure a comprehensive understanding of the real-world impact of these drugs.
Read Also: Biden Administration Identifies First 10 Drugs for Medicare Price Talks
Medicare Negotiations
Despite the announced savings of $90.5 billion over a decade for the Medicare program through these negotiations, analysts anticipate roughly a 40% reduction in drug prices resulting from these proceedings. However, not all drugs on the list are top sellers for the manufacturers, and there is a level of uncertainty about how much these negotiations will impact the overall market dynamics.
The list of drugs subject to negotiation encompasses a wide range, including heart disease and diabetes medications, cancer drugs, and autoimmune disease treatments. Notably, the inclusion of J&J’s autoimmune treatment Stelara was a surprise, as it will face generic competition before 2026.
Experts predict the prices will remain stable through 2026, even if there are generic or biosimilar competitors entering the market before September 2024.While the stock market remained relatively unaffected, the broader implications of these negotiations are profound. With ongoing lawsuits challenging the process, the pharmaceutical industry’s landscape may undergo significant shifts.
Ultimately, these negotiations represent a step towards a more market-oriented healthcare system, potentially leading to more affordable access to essential medications for patients across the United States.
Read also: Maximizing Medicare’s Potential: Embracing Medicare Advantage’s Progress
Source: Yahoo Finance
