(Bloomberg) -- The Biden administration’s drug-price negotiation law threatens new product development and will lead to fewer new medicines in the future, Johnson & Johnson Chief Executive Officer Joaquin Duato said.
Biden’s signature Inflation Reduction Act “is misguided and it’s going to chill innovation,” Duato said in an interview on Bloomberg Chief Future Officer. “The number of medicines that will be there will be less,” because drug development will become less attractive for investors, he said.
Under the 2022 legislation, 10 of the biggest-selling drugs in the federal Medicare program, including three from J&J, will see price cuts in a range from 38% to 79% starting in 2026. Drugmakers and biotechnology companies have said that price restrictions will lead them to stop developing products that are less likely to pay off under the new rules.
Under the IRA, J&J’s Stelara for autoimmune disorders and blood thinner Xarelto each face 2026 Medicare price cuts of about two-thirds compared with 2023 list prices. Imbruvica, a leukemia drug that J&J sells with partner AbbVie Inc., will be hit with a 38% price reduction. More drugs from throughout the industry will undergo price negotiations in the years to come.
As a large, diversified company, J&J can deal with the challenges posed by the IRA better than rivals, according to Duato and J&J Chief Financial Officer Joe Wolk, who also spoke with Bloomberg’s David Gura in the wide-ranging interview.
“We’ve got a stable of products that will offset any of the losses that we have” in the short term, Wolk said in the interview.
The IRA adds to revenue pressures posed by rebates and discounts that drugmakers pay to pharmacy benefit managers — middlemen that manage drug coverage plans for insurers and employers. Drugmakers pay PBMs in part to make sure their products are covered without restrictions.
J&J is currently paying PBMs and others about 60% of its list prices in rebates and discounts, compared to about 25% six years ago, Wolk said. Yet patients often don’t benefit from those payments, he said.
Tech Partnerships
While drugmakers spend billions of dollars on developing new therapies, PBMs “are not making that sort of investment,” Wolk said. “They are not passing on the discounts and rebates to the patients that they’re supposedly serving.” He didn’t go into detail about which companies he was referring to.
Regarding health-care industry deals, Wolk said he would like to see more partnerships with tech companies over the coming decade.
“Right now, technology companies don’t have the health-care knowledge,” Wolk said. “Health-care companies probably don’t have the breadth of knowledge they need for technology.”
“If we can figure that out together with great minds from both sides, I think that leads to a much better place,” he said.
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