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Report flags US pricing

Future revenues of many biotech companies are at significant risk because of new US government powers to lower the costs of drugs administered by physicians and clinicians, the UK-based industry research firm Wood Mackenzie in Edinburgh warned in Medicare Insight, a report reviewing 520 drugs from 60 manufacturers, which was published on April 5.

The study highlights the Medicare Modernization Act (MMA), affecting 40 million senior Americans and signed into law in 2003, which has given administrators at the US Centers for Medicare and Medicaid Services (CMS) authority to control prices in a market heavily targeted by biotech firms. This makes “20% per annum price increases in this class a thing of the past,” the report says.

One new option for CMS is to link reimbursement levels to average market prices, and the practice is already “wreaking havoc in oncology,” says Keith Redpath, Wood Mackenzie’s vice president of life sciences. Many oncologists report they can no longer afford to supply patients because of lower reimbursements, forcing producers to market to wholesalers instead.

Anticipating steep rises in overall Medicare costs, Redpath expects the US government to use all the new tools in its box. He adds, “I would not be surprised if CMS is going to press the [US Food and Drug Administration to more quickly approve generic versions of existing biotech drugs.”

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