Drug pricing legislation will affect biopharma revenue, but impact is manageable - RBC
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Proposed drug pricing legislation from Senate Democrats, if passed, would have an impact on revenue for pharmaceutical and biotech companies, but the influence wouldn't be that significant, according to RBC Capital Markets.
The legislation would affect pharma more than biotech at least initially. It would initially impact only 10%-15% of revenues for most affected companies, according to the firm.
RBC noted that the legislation appears more likely to happen this time around compared to the past.
The Senate proposal says that beginning in 2026, HHS can choose 10 drugs from among the top 50 in Medicare Parts B and D to be discounted. Twenty more would be added by 2029.
The discount is based on how long the drug has been on the market. For drugs marketed more than nine years, a minimum 25% discount is required; greater than 12 years, 35%; and greater than 16 years, 60%.
In addition, drug prices can't rise faster than inflation. Also, Medicare enrollees would have a $2k out-of-pocket max. After that level is reached, the cost would be split between the Medicare plan, government, and the drugmaker. The manufacturer would be responsible for 20% of that cost. 
The report noted that some of the biggest spend drugs by Medicare will actually lose patent exclusivity or be approaching it by 2026. While this would help in decreasing Medicare spend, it could also negatively impact pharma companies bottom lines without taking into account the legislation.
These drugs include Pfizer (NYSE:PFE)/Bristol-Myers Squibb (BMY) Eliquis (apixaban), AbbVie's (NYSE:ABBV) Humira (aducanumab), Regeneron Pharmaceuticals' (REGN) Eylea (aflibercept), Bristol's (BMY) Revlimid (lenalidomide), and Merck's (MRK) Keytruda (pembrolizumab).

With high-dose Eylea -- which has yet to be approved -- as an example, with discounting beginning in 2028, the negative top/bottom-line impact would be 6â9%/9â13%, according to RBC. 
However, companies that are planning on launching drugs aimed at the elderly population could face more long-term risk, the firm added.
"Our analysis indicates that companies are already beginning to accelerate their rate of price increases, perhaps in part due to inflationary factors but potentially also due to anticipation of the legislation and its possible long-term impact," the RBC team wrote.
But there are many unanswered questions that would dictate the full impact of the the legislation on drugmakers. Among these are what drugs HHS would choose and on what basis, how long for negotiations to take place, and when those discounts would actually be seen. 
Other pharmas/biotechs that could be impacedt by the legislation include Eli Lilly (LLY), Johnson & Johnson (NYSE:JNJ), Roche (OTCQX:RHHBY), AstraZeneca (AZN), Sanofi (SNY), Novartis (NVS), Gilead Sciences (NASDAQ:GILD), and Amgen (AMGN). 
In March, the House passed legislation capping the cost of insulin at $35/month.
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