Episode Summary

In this episode, host Nick Mazing from AlphaSense interviews Emily Coriale, Senior Principal Pricing & Market Access Lead at LifeSci Consulting. They discuss the far-reaching implications of the Inflation Reduction Act (IRA) on the US healthcare system, with a particular focus on drug pricing and price negotiations between the US federal government and pharmaceutical companies, as well as the impact on health plans.

Emily explains that the IRA is the most significant federal legislation in the last 20 years and highlights three main aspects of the act: drug price negotiation, prescription drug inflation rebates, and Medicare Part D redesign. These changes will not only impact profitability, investment, and strategic choices for health plans and manufacturers but also have a domino effect on the entire healthcare system, including patients, insurers, and private funding sources.

As the industry prepares for the IRA’s implementation, Emily emphasizes the importance of understanding and mitigating risks, proactive stakeholder communication, and collaboration between healthcare sector partners. This episode provides a comprehensive overview of the IRA’s potential impact on pharmaceutical companies and the healthcare value chain.

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Guest-at-a-Glance

💡Name: Emily Coriale

💡What they do: Senior Principal Pricing & Market Access Lead

💡Company: LifeSci Consulting

💡Noteworthy: Emily is a PharmD 15+ years of healthcare leadership experience

💡Where to find them: LinkedIn

 

Key Insights 

The Inflation Reduction Act’s Three Main Components. The Inflation Reduction Act (IRA) has three key components that are expected to impact the US healthcare system. First, drug price negotiation will allow the Centers for Medicare and Medicaid Services (CMS) to negotiate with drug manufacturers for high-spend drugs within the Medicare program, a first in the US. Second, prescription drug inflation rebates will require manufacturers to pay certain rebates for Medicare Part B and Part D drugs if drug price increases exceed the rate of inflation. Lastly, the Medicare Part D redesign will reduce the maximum out-of-pocket expenses for Medicare Part D beneficiaries, shifting financial exposure to manufacturers and health plans.

IRA’s Ripple Effect on the Entire Healthcare Value Chain. The Inflation Reduction Act (IRA) will not only impact Medicare but will also create a domino effect on the entire healthcare system. The reduction in out-of-pocket expenses for patients could influence investment in drug discovery and clinical development, affecting venture capital funds and public markets. The IRA’s impact on drug negotiations and financial exposure could change the balance of technologies and disease states that are funded in the future.

Preparing for IRA Implementation – Manufacturers’ Perspective. As the Inflation Reduction Act (IRA) is set to begin its rollout in 2023, manufacturers must understand the impact on their existing portfolio and future investments. To mitigate risks and proactively develop strategies, manufacturers need to consider their position in the development phase and the implications for their investors. Open communication and collaboration between manufacturers and health plans will be vital to navigate the challenges presented by the IRA effectively.

 

Episode Highlights 

The Unknown Outcomes of the Inflation Reduction Act

The Inflation Reduction Act (IRA) introduces uncertainties in the healthcare industry, as the specifics of how health plans and manufacturers will react to the new financial exposure remain unknown. This includes questions about potential changes to rebates and the implications for preferred products, as well as the overall impact on the healthcare market.

“The biggest, you know, unknowns are actually what aren’t outlined. It’s the, ‘What are health plans going to do with this financial exposure? What are the manufacturers gonna do? How are they going to navigate what rebates look like? What products are gonna be preferred?'”

Biosimilars and Rare Orphan Disease Drugs 

The IRA’s impact on the healthcare system raises concerns about the future of biosimilars and rare orphan disease drugs, as well as their investments. The legislation could affect how these drugs are developed and funded, and the potential consequences for patients who depend on them.

“What does this mean for biosimilars, those rare orphan disease drugs, investment, and really the implications for the entire healthcare market, both commercial, as well?”

The Domino Impact on Commercial Sector 

The Inflation Reduction Act’s effects go beyond Medicare, as the commercial sector will likely feel its impact as well. The legislation’s influence on Medicare drug negotiations could have implications for the commercial sector, potentially changing the way drugs are negotiated and priced in that market too.

“If you’re looking at the negotiations of the Medicare products, they have to be provided on the formulary, but what does that mean for the commercial sector?”

Proactive Partnership in the Healthcare System

Navigating the changes brought by the IRA requires collaboration between all stakeholders in the healthcare system. Understanding not only one’s own risks but also the potential implications for partners will be essential for manufacturers and health plans to work together and ensure the best possible patient care in a changing environment.

“I think really understanding what your own personal risk is is important, but also understanding what your partner’s implications can be, as well. I think often we live in our swim lanes, but if we think about the system as a law, as in a large, you know, all of our system and really taking care of patients, it’s really important for plans and manufacturers to work together to make this work.”

Top quotes: 

  1. (00:08:00) Emily Coriale: “The biggest, you know, unknowns are actually what aren’t outlined. It’s the, ‘What are health plans going to do with this financial exposure? What are the manufacturers gonna do?'”
  2. (00:09:00) Emily Coriale: “What does this mean for biosimilars, those rare orphan disease drugs, investment, and really the implications for the entire healthcare market, both commercial, as well?”
  3. (00:09:30) Emily Coriale: “If you’re looking at the negotiations of the Medicare products, they have to be provided on the formulary, but what does that mean for the commercial sector?”
  4. (00:11:00) Emily Coriale: “I think really understanding what your own personal risk is is important, but also understanding what your partner’s implications can be, as well.”

 

Full Transcript

 
[00:00:00] Emily Coriale: This is the most significant federal legislation, approved and passed in almost 20 years since Part D. So, when you look at the implications of this act, they’re really both direct and indirect to our entire system. And there’s pieces that are gonna impact profitability, investment, strategic and operating choices, both for health plans and manufacturers.
[00:00:22] And so. Really the system is going to shift as we know it today in the US. And why is that, is really, there’s three main pieces that are part of the act that really kind of break down why this changes the US healthcare system.

[00:00:47] Nick Mazing: Hello and welcome. You’re listening to Signals by AlphaSense, and I’m your host, Nick Mazing. Today we’re going to discuss the effect that the Inflation Reduction Act or IRA will have on pharmaceutical companies and more specifically on drug pricing and drug price negotiations. As many of you know, the IRA is a major piece of legislation which has a number of industrial policy aspects.

[00:01:12] To me, personally, it’s not clear how it reduce inflation overall, but that’s a very different topic. One piece covers drug price negotiations between the US federal government and pharmaceutical companies. For our non-US listeners, the US government programs typically have not negotiated drug prices. So, we have the perfect guest to discuss this topic.

[00:01:34] Emily Coriale, PharmD, from LifeSci Consulting. Emily’s Senior Principal Pricing & Market Access Lead. And we’re going to have all the links in the show notes. So, Emily, can you tell us a little bit more about yourself and about your company?

[00:01:49] Emily Coriale: Sure, Nick, thanks so much for having me today. I really appreciate it. So, yeah, so, I’m the Senior Principal at LifeSci Consulting. Lifecycle Consulting is actually a global boutique strategy consultancy. We partner with our clients to really support them navigating the complexities in our ever-changing healthcare system, really optimizing reimbursement across the product lifecycle.

[00:02:09] And so, I am the Senior Principal who leads the Pricing & Market Access team. I’m actually a pharmacist by trade. I have over 15 years of executive leadership and consultative experience within the industry’s leading healthcare and pharmaceutical organizations. So, my job has been to really partner to really improve access in the US healthcare system, providing that plan and payer perspective, and really taking those insights into actionable pricing and market access strategies for our clients.

[00:02:39] Nick Mazing: Okay. So, let’s start with kind of the, the big-picture question. Why is the Inflation Reduction Act such an impactful piece of legislation when it comes to the US healthcare system?

[00:02:51] Emily Coriale: Yeah, absolutely. Well, I think, you know, this is the most significant federal legislation approved and passed in almost 20 years since Part D. So, when you look at the implications of this act, they’re really both direct and indirect to our entire system. And there’s pieces that are gonna impact profitability, investment, strategic and operating choices, both for health plans and manufacturers.

[00:03:16] And so, really the system is going to shift as we know it today in the US. And why is that? Is really, there’s three main pieces that are part of the act that really kind of break down why this changes the US healthcare system. The first is, what you mentioned earlier, that drug price negotiation. So, for the first time, CMS is going to be negotiating with drug manufacturers really in that bucket of those high-spend drugs in the Medicare program specifically. And this is gonna be a huge shift for manufacturers. As we know outside of the US

[00:03:47] that’s not new to be able to negotiate with government agencies on drug price. But this is very new in the US and so, that’s really going to shift the dynamics as we know it. And that’ll actually start this year in September. So, it’s going to be a slow rollout, but it is starting this year. The second piece is there will be prescription drug inflation rebates, rebates for drug manufacturers. So, they will be required to pay certain rebates on both Medicare Part B,

[00:04:16] those are those drugs that are administer, administered by a provider, and Part D drugs that are self-administered. So, any drug price increase that is faster than the rate of inflation and, like you said, there’s a calculation that goes to this, but the reason this is important is when manufacturers are moving their product along the lifecycle and they’re looking at how to price their product. This is gonna be a significant consideration and their, uh, profitability projections and really how that looks for their investors and ultimately for the organization themselves.

[00:04:50] But the last piece, I think that’s the most impactful to really the whole system at large, is really the Medicare Part D redesign. So, what they’re doing is they’re going to reduce the max out-of-pocket for Medicare Part D beneficiary. So, it’s going to shift down the financial exposure for our Medicare patients at large wishes ultimately going to help improve adherence and patient outcomes, that’s the ultimate goal. When you look at that shift at how many, how Medicare is designed today, we have three phases. The first is the initial, the second is the coverage gap, otherwise known as the doughnut hole, and the last is the catastrophic phase.

[00:05:29] You smile ’cause you’ve heard that doughnut hole phase, right? We’ve definitely heard that, uh, from anyone in our, in our worlds impacted by Medicare. And so, that middle phase, that doughnut hole phase is going away. And so, then there will be a shift in 2025 to reduce that out-of-pocket, but that reduction in out-of-pocket for the Medicare beneficiaries will then shift the dynamics to financially increase exposure for both manufacturers and health plans.

[00:05:56] And so, Medicare today is 80% financial. They’re actually shifting that 80% and dividing it between health plans and manufacturers.

[00:06:06] Nick Mazing: And when you think about the entire value chain, so what is the IRA impact, so, from patients to insurers, to manufacturers, and potentially to private funding sources like VCs and NPs that have been pretty active in the space?

[00:06:20] Emily Coriale: Exactly. And, you know, I always say, you know, when you break down the healthcare system, always start with the center of care. And that’s the patients, right? That’s why we’re here in the healthcare system. We really believe in improving patient care. And I think the biggest piece is when you start with that, you see a reduction in out-of-pocket and drug spend, which is, as we know in the US, has been a huge hurdle for patients getting products they need. We need to improve access and affordability that will improve adherence in health outcomes. However, when that shift in financial responsibility moves to both payers and manufacturers, manufacturers will really have to deeply evaluate their existing portfolio, but even more so how they’re going to invest in drug discovery and clinical development moving forward.

[00:07:04] And when you look at the venture capital funds, thi, this could ultimately favor whether they want to invest in large molecules versus small molecules because of the impact of the drug negotiation and the financial exposure. And this shifts could really change the balance of technologies. It could change the disease states that are funded.

[00:07:26] It will impact the public markets. So, really just looking at, you know, those who will be impacted on the negotiation versus not could really impact the investor market as we know it in this space.

[00:07:39] Nick Mazing: Mm-hmm. And zeroing in on manufacturers and health plans. So, what are the main components that must be understood there?

[00:07:47] Emily Coriale: Yeah. So, I think, you know, I broke down the three main components and how they’ll heavily impact, you know, both manufacturers and health plans. It’ll impact their projection of their revenue and the broader financial en, environment at large. The biggest, you know, unknowns are actually what aren’t outlined.

[00:08:05] It’s the, “What are health plans going to do with this financial exposure? What are the manufacturers gonna do? How are they going to navigate what rebates look like? What products are gonna be preferred?” And so, it’s really those considerations of what’s not outlined in the act and what the domino effect is gonna be.

[00:08:22] So, those outliers. And I think what you look at is, you know, what does this mean for biosimilars, those rare orphan disease, drugs, investment, and really the implications for the entire healthcare market, both commercial, as well? Because if you’re looking at the negotiations of the Medicare products, they have to be provided on the formulary, but what does that mean for the commercial sector?

[00:08:44] So, I think the, often the assumption is, “This is just a Medicare issue.” But it really is an entire healthcare system domino impact to really how we’re functioning today.

[00:08:58] Nick Mazing: Any, any other implications to consider there?

[00:09:01] Emily Coriale: No, that’s all I had.

[00:09:03] Nick Mazing: Okay. We, we’ll cut that out. That’s fine.

[00:09:06] Emily Coriale: Okay.

[00:09:06] Nick Mazing: Okay. So, I’ll, I’ll, I’ll go to the next question now, which is the steps that manufacturers are taking. Okay.

[00:09:10] Emily Coriale: Okay.

[00:09:11] Nick Mazing: And what steps are, are we seeing right now that manufacturers are taking in order to prepare, since you’re obviously very active in, in, in that space, for implementation of IRA?

[00:09:24] Emily Coriale: Exactly. So, I think the biggest is there, the manufacturers now know this is real. This is happening, right? So, as we know, this rollout is starting in 2023. I think the biggest thing is they’re looking at what their impact is today and the biggest issue is that we really need to look at what that means tomorrow, as well.

[00:09:45] And, also, if you look at your pipeline and where you are in the development phase, how can you mitigate risk accordingly? What are the things you need to prepare for? How do you proactively understand strategy, stakeholder communications, and really ultimately how to prepare as an organization, both for yourselves and, as we mesh, mentioned, for investors, as well?

[00:10:08] Nick Mazing: Any final takeaways regarding the IRA?

[00:10:12] Emily Coriale: I think the biggest thing is just to really be a proactive partner in the, in the healthcare system, no matter where you are in the sector. I think really understanding what your own personal risk is is important, but also understanding what your partner’s implications can be, as well. I think often we live in our swim lanes, but if we think about the system as a law, as in a large, you know, all of our system and really taking care of patients, it’s really important for plans and manufacturers to work together to make this work because it’s going to be a very nuanced, challenging system moving forward.

[00:10:50] Nick Mazing: Emily, thank you for joining us.

[00:10:51] Emily Coriale: Thank you so much for having me today, Nick.

[00:10:54] Nick Mazing: This was a great overview of the impact that the Inflation Reduction Act or IRA will have, not just on pharmaceutical companies but the entire value chain in the sector. Our guest today was Emily Coriale, Senior Principal Pricing & Market Access Lead at LifeSci Consulting.

[00:11:12] My name is Nick Mazing, and this was another episode of Signals by AlphaSense. Thank you for listening.