Industry hopes concessions short of MFN will satisfy Trump, BIO chair says

Bittenbender describes scramble to avoid international reference pricing

Biopharmaceutical companies, under pressure from a Sept. 29 deadline, are racing to propose voluntary concessions to the Trump administration in hopes of avoiding “most favored nation” price controls.

The deadline is being taken seriously, according to Fritz Bittenbender, BIO chairman and SVP for public affairs and access at the Genentech unit of Roche (SIX:ROG; OTCQB:RHHBY). “It’s a real deadline,” he said in an interview with The BioCentury Show.

Trump set the cutoff in letters to 17 biopharma companies and a memo posted on the White House website on July 30.

The president demanded elimination of discrepancies between drug prices in the U.S. and other Organization for Economic Cooperation and Development (OECD) countries, specifically calling on companies to voluntarily provide “most favored nation” (MFN) pricing — prices that are lower than those in other developed countries — on all of their drugs to Medicaid.

The demand came soon after the biopharma industry fought off an attempt to include MFN Medicaid provisions in the Trump administration’s signature budget and tax bill. PhRMA told lawmakers it would impose a trillion dollars in costs over a decade, a hit that would devastate the U.S. pharmaceutical industry.

The president has not given up on MFN.

In the letters, he threatened to punish companies that fail to meet his demands, telling CEOs, “if you refuse to step up, we will deploy every tool in our arsenal to protect American families from continued abusive drug pricing practices.”

Trump backed his threat by ordering HHS Secretary Robert F. Kennedy Jr., CMS, and top White House aides to negotiate with industry, and to draft backup policies in case the talks break down.

CMS Administrator Mehmet Oz, who is leading the MFN talks, has taken a divide-and-conquer approach, refusing to engage with PhRMA or BIO, and instead negotiating separately with each of the companies Trump targeted. Theo Merkel, a special assistant to the president for domestic policy at the Domestic Policy Council, is also discussing MFN proposals with individual companies.

Antitrust laws bar companies from coordinating, raising the risk that proposals from one set of companies could harm others with different portfolios and strategies. For example, companies with little exposure to Medicaid or that derive most of their revenues from orphan drugs may find some ideas acceptable that would undercut other companies’ business models.

Executives told BioCentury they fear the Trump administration may aggregate these proposals into a package and apply it across the industry through voluntary agreements or legislation.

Genentech, Bittenbender said, is exchanging ideas with the administration on ways to reduce out-of-pocket costs to Americans, reduce government spending, and “do it in a way that preserves America's leadership role in bioscience innovation.”

Genentech’s proposals include changes to Medicare Parts D and B, as well as ideas involving payment for gene and cell therapies, Bittenbender said.

The Part B discussions, he said, center on ways to “bring more competition” to the program, which in its current structure pays based on average sales price (ASP) rather than a competitive formulary.

“Hopefully through this dialogue we can offer some alternatives that maybe are not exactly MFN, but actually achieve a lot of the same goals,” Bittenbender said.

This is consistent with conversations BioCentury has had with executives at pharma companies who did not want to be identified. They are focusing on ideas for narrowing gaps between list and net prices by reducing payments to PBMs and other middlemen.

While this approach would slash list prices for many drugs, in many cases it wouldn’t bring them down to the prices paid in Europe.

Bittenbender brought up another issue, what he called a “dirty secret,” that makes popping the gross-to-net drug price bubble problematic. The rebates and discounts paid by pharmaceutical companies subsidize other parts of the healthcare system, so reducing them without taking other steps would increase costs, including for insurance premiums.

Finding comprehensive solutions that reduce drug costs for patients and the federal government without compromising access to medicines or creating unacceptable price increases in other parts of the healthcare system will require time and coordination across industries and sectors, Bittenbender said.

He predicted that industry trade associations will have to be involved in any major policy commitments, the kind of grand bargain pharma executives want to make with the Trump administration.

Meanwhile, the clock is ticking on the White House’s MFN deadline.

If Trump is not satisfied with the voluntary concessions industry has offered, he is likely to try to impose solutions such as Center for Medicare and Medicaid Innovation (CMMI) mandatory demonstration projects or legislation imposing price controls, Bittenbender said.

Commerce Secretary Howard Lutnick has signaled his intention to use the threat of Section 232 tariffs, which are designed to protect U.S. national security, as leverage in MFN negotiations.

Lutnick’s comments represent a shift from the Trump administration’s previous assertions that pharmaceutical tariffs could be imposed to incentivize investments in domestic manufacturing. In Trump’s first comments about pharmaceutical tariffs, Bittenbender said, he told companies, “if you’re investing here, you’ll have a much lower tariff, and if you’re not, it could be a higher tariff.”

Bittenbender noted that pharmas responded by committing hundreds of billions of dollars for U.S.-based manufacturing and R&D in recent months, including a $50 billion commitment from Roche.  

“We have heard recently that the administration is potentially thinking about tariffs as leverage more broadly” on drug pricing, Bittenbender said. “We don’t really know what that looks like because tariffs don’t impact the country of origin, they impact the companies.”

He warned the administration may use tariffs as a “blunt instrument” to force concessions to “bring companies to the negotiating table around drug pricing.”

Over the next year, negotiations on drug pricing policies will unfold against the backdrop of mid-term election campaigns. Both parties are likely to prioritize attacks on the pharmaceutical industry over compromises that balance cost-cutting and supporting biomedical innovation.