By Michael Erman
SAN FRANCISCO, Feb 11 (Reuters) – Some drug companies not targeted by President Donald Trump for a deal to lower U.S. drug prices are looking to forge their own deals to avoid potentially tougher tariffs and new pricing plans, according to six industry sources.
The two lobbyists and other industry sources say the companies have begun reaching out to the White House and the Centers for Medicare and Medicaid Services to try to craft their own deals. They have not revealed the names of those companies.
“The Trump administration certainly wants to negotiate deals with every pharmaceutical company that lowers drug prices for American patients,” White House spokesman Kush Desai said in an email.
The administration hasn’t communicated to companies how they could potentially proceed if they don’t receive a letter from Trump, an industry source said.
The companies are particularly concerned about new pilot programs that could cap the price of Medicare drugs in large parts of the country, industry sources said. Those programs require manufacturer rebates for drugs paid for by Medicare health plans for millions of Americans age 65 and older if U.S. prices exceed international standards.
Companies that do not strike contracts
So far, 16 major drugmakers, including Pfizer and Eli Lilly, have already settled with the government after receiving directives from the Trump administration to cut prices. But many companies, including about half represented by PhRMA, the largest pharmaceutical lobby group, have not yet been contacted.
Bayer Global Head of Pharmaceuticals Stefan Oelreich said in an interview that companies like his that did not receive a letter from Trump would be given the opportunity to strike similar deals with their competitors.
“Otherwise that would be very strange, that you have a size that you would get different treatment,” he said.
Some smaller companies have formed their own industry lobby group, called the Midsize Biotech Alliance of America, to advocate against the new price-setting plans. The 11 companies that joined that organization include Alkermes, BioMarin, Incyte and Alnylam.
“There’s a large group of companies that don’t have contracts and what are they left with?” Sanofi CEO Paul Hudson told reporters at the JP Morgan Healthcare conference in San Francisco in January.
According to Hudson, the nature of the deal, which some companies have exempted them from future government pricing initiatives, could make it difficult for the government to offer similar options to smaller companies.
“It’s very difficult to deliver 30, 50, 80 deals from here. There could be some sort of catch-all offer from the government or trying to manage it a certain way,” said Hudson, who is set to take over as PhRMA’s president later this year.
Avoiding Price Setting in Medicare
American patients pay by far the most for prescription drugs, often nearly three times more than in other developed nations.
Agreements signed by major drugmakers commit to lower prices for drugs sold in the U.S. Medicaid program for low-income Americans. Analysts note that the impact will be lessened by the fact that Medicaid accounts for only 10% of US drug spending and in some cases more than 80% of the cost.
But drugmakers that don’t have contracts would be subject to Medicare pilots — called Globe and Guard — that would set most-favored-nation-style prices in the much larger Medicare program, bringing those prices in line with lower prices paid outside the US.
One concern is that some small drugmakers have licensed their drugs to international companies for sale abroad, where partners have no incentive to raise their prices, potentially forcing U.S. companies to undercut prices for Medicare.
Another concern for mid-sized drugmakers is that they have fewer products to deal with than larger companies, meaning they may not have low-revenue drugs to divest.
“A lot of them are very concerned that … they did what the big guys did that worked for them and didn’t work for the middle-sized guys,” said one pharmaceutical industry lobbyist.
(Reporting by Michael Erman; Editing by Carolyn Hummer and Bill Berkrot)
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