6 Things You Need to Know About MFN Drug Pricing | MJH Life Sciences Webinar

Last week MJH Life Scienceshosted the first installment of its three-part webinar series, “The Most Favored Nation Mandate: What the President’s Drug Pricing Push Means for Pharma, Payers, and Patients.” The roundtable discussion featured Brian Corvino, principal and global market access practice leader at Deloitte US; Neal Masia, Ph.D., co-founder and CEO of EntityRisk, Inc., and founder of Health Capital Group, LLC; Ali Pashazadeh, founder, chairman and CEO of Treehill Partners; and George Van Antwerp, MBA, senior vice president of product innovation and strategic planning at Prime Therapeutics.

MFN drug pricing may just be the opening bid in the White House’s negotiations with pharma

Neal Masia, Ph.D.

The White House issued its first most-favored nation drug pricing order in May, and President Donald Trump followed up with a letter in late July to 17 pharmaceutical company executives that says that a collaborative approach to “achieving global pricing parity” would be the most effective. “But if you refuse to step up, we will deploy every tool in our arsenal to protect American families from continued abusive drug pricing practices,” the letter says.

Masia described MFN as unworkable, misguided and a blunt instrument with uncertain consequences. He suggested the administration may be using MFN to get drug companies “to the table and change some behaviors."

Get ready for more direct-to-consumer marketing

The July letter from Trump mentions direct-to-consumer and direct-to-business distribution models for high-volume, high-rebate prescriptions. Masia said the positive effect of MFN pricing is that it may force the drugmakers “to think seriously about some of these direct-to-consumer models” and that if he were a drug company executive, he would be asking, “Who around here is accelerating our direct-to-consumer model? We need to get that going ASAP.”

George Van Antwerp, MBA

Van Antwerp said he also saw more direct-to-consumer distribution in the future, including the incorporation of direct-to-consumer into benefits that would take cash payments into account. Masia said direct-to-consumer sales will put attention on how drugs are priced and on efforts to tie price to their clinical value. “There are a million and 1 different value frameworks,” and no agreement about which ones to use and how they should be applied, he said.

Drug companies may shift development strategies to drugs with more patients and lower prices

Covino said the MFN and the administration’s other policies affecting drug prices have spurred some “real conversations about strategic portfolio complexion” by drug manufacturers. Research and innovation have been concentrated on high-cost drugs for relatively small populations of patients with rare diseases and cancer. Now, he said, drug company executives are considering a shift to treatments with larger populations and what percentage of a company’s drug development portfolio might have cash payment as a choice once it’s on the market. “That’s not an option today in CAR-T. It’s not an option in oncology,” he said, but it can be for other diseases, such as obesity.

Companies may steer clear of Europe

Masia said drugmakers are not going to forsake the U.S. market, so if prices in the U.S. were to get linked to those in Europe, drugmakers may elect not to launch their products there. Drug companies will sacrifice or jeopardize their European markets before their U.S. market, which accounts for a large percentage of their profits, he said.

Pashazadeh, comparing pharma companies to oil tankers, said they have a relatively limited ability to make short-term changes. Rather than run the risk of waiting to see how MFN pricing plays out and having to respond, they may just decide to withdraw from certain markets. He said there was precedent for companies leaving some European countries after those countries dropped the price they would pay for drugs.

Research budgets were already under pressure

Pashazadeh said that MFN pricing in Europe had greatly reduced Europe — and Switzerland in particular — as a biotech hub and that the United Kingdom has a biotech “brain drain.” Moreover, MFN pricing would come on top of other uncertainties, including changes at the FDA, he said. “You put all of these together, you would start thinking that we’re in the perfect storm when it comes to drug development and then commercialization,” said Pashazadeh. He also discussed efforts to improve the ratio of drugs that are assessed in clinical trials and those that actually make it onto the market. Masia said that there has been some tightening of research and development budgets, but so far it is related to Inflation Reduction Act price negotiation, not the more speculative effects of the yet-to-be MFN drug pricing. He added, though, that “I’ve seen some companies who have decided not to pursue European strategies or even contemplate them in future cash flows” till the future of MFN pricing becomes clearer.

Covino noted that apart from MFN drug pricing and Trump administration drug pricing policies, new drug launches have been less profitable for drugmakers lately and market access more difficult. As a result, the rate of return on research and development has gone down. Van Antwerp was more sanguine than the other webinar participants. “Innovation doesn’t require unchecked pricing power,” he said.

Brian Covino

Hospitals and physicians think they are safely on the sidelines. They aren’t.

Masia noted that current drug pricing and supply channels have resulted in high list prices. Hospitals (through the 340B) and doctors (through average sales price [ASP] plus % payment) have benefited from the current pricing structure. If list prices are disrupted or lowered, it could affect other entities in the drug supply chain, not just drugmakers, he said. “I don’t think that this is purely a drug industry effect,” Masia said, “and I think that’s underappreciated, frankly, in the market, especially by doctors and hospitals, who have kind of kept it more or less at arm’s length. I honestly don’t know which direction it would go for them, but I can’t see how it would be good for them.”

Covino made the related point that MFN drug pricing shouldn’t be considered in isolation and that there is “important connectivity” in drug pricing and access to the Inflation Drug Act and ASP calculation, not to mention tax and tariff policies and state-level actions. “There’s a lot of conversation around the topic of MFN. I continue to feel very strongly about the necessity of having a holistic look.”