Regulating drug prices in Medicare unlikely to lead to ‘revenue targeting’

Biosimilares/Investigación | Posted 22/04/2022 post-comment0 Post your comment

A report from the American Enterprise Institute (AEI) suggests that regulating drug prices in Medicare is unlikely to lead manufacturers to compensate by increasing revenues from the commercial market, based on analysis of similar events in the European Union (EU).

79 MD002389

A report published by AEI, a Washington DC-based think tank, investigates whether regulating drug prices in Medicare might lead manufacturers to increase revenues coming from the unregulated, commercial market.

The report follows intense debate about whether the US federal government should regulate drug prices in Medicare. Some have argued that regulating prices only within the Medicare market would lead manufacturers to compensate by increasing revenues from the commercial market, known as ‘revenue targeting’.

To investigate this, AEI explored how manufacturers responded in a similar situation in the European Union (EU), where manufacturers lost revenues following biosimilar entry but maintained monopoly rights in the US.

They investigated biological drugs with biosimilar entry in the EU between 2008 and 2018, excluding cases where US biosimilar entry occurred less than one year after EU entry.

When a biosimilar did eventually enter the US market, analysis was restricted to the time before this happened. The authors also excluded biologicals sold by different manufacturers in the two markets; that did not have revenue information separately available for domestic and international markets; and insulin products.

The final analysis included Herceptin (trastuzumab), Humira (adalimumab), Neupogen (filgrastim) and Rituxan/MabThera (rituximab).

The results showed that biosimilar entry into the US market clearly reduced international revenues for the originator biologicals. Despite this, the authors found little evidence of compensatory revenue increases in the US market (where manufacturers retained monopoly).

The authors say this suggests that drugmakers ‘currently use the full extent of their negotiating leverage’ and that it is unlikely that manufacturers in the US would offset revenue losses caused by Medicare rate regulation by increasing revenue in the commercial market.

However, it is important to note that this analysis is based on only four biologicals and the authors cannot rule out the fact that other manufacturers might behave differently.

They also say the analysis cannot assess the possibility that market-specific revenue reductions could have longer term and indirect cross-market effects. In addition, the setting considered in this report (the EU) differs from settings where prices are explicitly linked across markets, e.g. in reference pricing models. The authors say that in these settings, policies in one market could directly affect outcomes in others.

GaBI Journal Citation Impact
1.9 – CiteScore 2020 (calculated on 5 May 2021)
2.2 – CiteScoreTracker 2021 (Last updated on 6 April 2022)

Submit a manuscript to GaBI Journal

Related articles
Consortium of US hospitals to manufacture and sell biosimilar insulin

FDA Office of Generic Drugs publishes 2021 annual report

Preparing for future biosimilar opportunities

LATIN AMERICAN FORUM

The new section of the ‘Latin American Forum’ on GaBI has been launched. The objective of this new section is to provide you with all the latest news and updates on developments of generic and biosimilar medicines in Latin America in Spanish.

View this week’s headline article: Nomenclatura de biológicos y biosimilares en Chile

Browse the news in the Latin American Forum!

Register to receive the GaBI Latin American Forum newsletter. Inform colleagues and friends of this new initiative.

LATIN AMERICAN FORUM

Se ha lanzado la nueva sección del ‘Foro Latinoamericano’ sobre GaBI. El objetivo de esta nueva sección es brindarle las últimas noticias y actualizaciones sobre desarrollos de medicamentos genéricos y biosimilares en América Latina en español.

Vea el artículo principal de esta semana: Nomenclatura de biológicos y biosimilares en Chile

!Explore las noticias en el Foro Latinoamericano!

Regístrese para recibir el boletín informativo GaBI Foro Latinoamericano. Informe a colegas y amigos sobre esta nueva iniciativa. 

  

Permission granted to reproduce for personal and non-commercial use only. All other reproduction, copy or reprinting of all or part of any ‘Content’ found on this website is strictly prohibited without the prior consent of the publisher. Contact the publisher to obtain permission before redistributing.

Copyright – Unless otherwise stated all contents of this website are © 2022 Pro Pharma Communications International. All Rights Reserved.

Source: American Enterprise Institute

comment icon Comments (0)
Post your comment
Most viewed articles
Sobre GaBI
INICIO/Sobre GaBI Posted 05/08/2009
EU guidelines for biosimilars
EMA logo 1 V13C15
INICIO/Directrices Posted 08/10/2010