People have griped about prescription drug prices for years. Soon, Medicare plans to do something about them. But experts following pharmaceutical and biotech stocks warn of unintended consequences. They're sounding the death knell for drug company profits, innovation — and patient care.
The groundbreaking change in how Medicare buys drugs could threaten the coffers of big drug developers such as Pfizer (PFE), Bristol Myers Squibb (BMY) and Johnson & Johnson (JNJ), industry watchers say.
Under the Inflation Reduction Act, or IRA, the Centers for Medicare and Medicaid Services plans to negotiate the prices of the most expensive medicines the agency buys. The first round of new price changes goes into effect in 2026. In later years, the agency will negotiate the prices of an accelerating number of drugs under the act. …
Biotech Stocks: What Will Medicare Consider?
Richard Hughes, an attorney at law firm Epstein Becker Green, says CMS officials will likely consider a drug's clinical benefit, how much a company spent to develop the medicine and unmet need in the market. Hughes is the former vice president of policy at Moderna (MRNA).
It's also unclear which drugs will be on the initial 2026 hit list. The answer could hammer both biotech and pharmaceutical stocks. …
Biotech Stock Moderna Under Pressure
On the flip side, several senators took Moderna Chief Executive Stephane Bancel to task in a mid-March hearing over the proposed price increase of the company's Covid vaccine. The company plans to price its vaccine at $130 per dose after the U.S. public health emergency ends in May, according to Reuters. That's more than four times what the U.S. government paid per shot in 2022.
Pfizer has proposed a similar price for its BioNTech (BNTX)-partnered Covid vaccine, the Associated Press reported. But senators noted Moderna received $1.7 billion in federal funding to develop its vaccine. …
Hughes, the attorney and former Moderna VP, says the hearing may have been a cautionary tale for young biotech companies about accepting federal funding. That political pressure — on top of the looming IRA changes — could also dampen innovation among biotech and pharmaceutical stocks.
"What is the next company with that next undiscovered platform technology that potentially provides a solution in the next pandemic and brings it rapidly to market?" he said. "They're going to look at this and say, 'Well, we don't want to get dragged in the market like that.' "