Inflation Reduction Act May Accelerate Generic And Biosimilar Market Entry, But Questions Remain Around CMS Guidance

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The IRA may alter the incentives drug firms have to pursue evergreening strategies, as having generic or biosimilar competition can exempt a drug from price negotiation.

Notably, besides the manufacturer of Enbrel, the makers of Stelara, Xarelto and Entresto have also pursued legal action in connection with holding off the potential launches of biosimilar or generic competitors.At the time a drug is selected for Medicare price negotiation a small or large molecule must be at least seven or 11 years, respectively, removed from its original FDA approval. But after this CMS guidance—which operationalizes the IRA—becomes ambiguous.

Is it sufficiently meaningful when Janssen simply allows for biosimilar competition? Or does meaningfulness indicate a numeric threshold in terms of numbers of competitors or actual market share figures? CMS guidance is silent on this. Accompanying these problems is CMS’s apparent presumption that the power to exert influence on generic or biosimilar uptake mostly resides with originator drug manufacturers. CMS appears to ignore the important role that payers and pharmacy benefit managers have as it’s their formulary decisions which affect adoption of generics and biosimilars.

Firms may well decide that seeking legal action to preempt competition isn’t worth it. As such, the threat of Medicare drug price negotiations could indirectly lead to a shorter period to generic and biosimilar competition.

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