U.S. health authorities have announced the first group of drugs targeted for price cuts under its Inflation Reduction Act (IRA).

Included among them are original biopharmaceutical products, including Stelara (ustekinumab) and Enbrel (etanercept), drawing the attention of Korean industry executives to effects it would have on the entry of their biosimilars into the U.S. market.

According to the KoreaBIO, an industry group, the White House and the U.S. Department of Health and Human Services (HHS) announced the first 10 drugs to be subject to the IRA’s price reduction on Tuesday (local time).

The 10 drugs are BMS/Pfizer’s Eliquis, Eli Lilly’s Jardiance, Johnson & Johnson’s Xarelto and Stelara, Merck’s Januvia, AstraZeneca’s Forxiga, Novartis’ Entresto, Amgen’s Enbrel, AbbVie’s Imbruvica, and Novo Nordisk’s Fiasp.

These drugs were selected by the Center for Medicare and Medicaid Services (CMS), the U.S. public health insurance agency, based on a one-year analysis of Medicare spending from June 1, 2022, to May 31, 2023. The 10 drugs resulted in $50.5 billion in the government’s drug expenses, 20 percent of the total Medicare Part D (Specialty Drug Insurance) spending.

Starting in 2026, drug manufacturers must reduce their prices to levels negotiated with CMS. However, the timing of these negotiations and price reductions could change, depending on the outcome of legal actions brought by pharmaceutical companies against the government and next year's presidential election.

Companies also have until Oct. 1 to decide whether to participate in the negotiations. If they refuse, they could be excluded from Medicare or subject to a tax of up to 90 percent of their drug sales.

Drugmakers participating in the price reductions will have until the end of the year to submit detailed data on their R&D expenditures, sales and distribution costs, and product revenue. CMS will provide companies with an initial negotiated price by next Feb. 1, and companies will have to decide whether to accept or reject the negotiated price within 30 days.

CMS will hold three meetings with each company to finalize prices by Aug. 1 of next year and announced final reduced prices a month later. CMS will then have to explain things about its final price determination until March 1, 2025.

The price reductions will apply to public insurance but not private insurance.

"Most pharmaceutical companies' attention has been on which drugs will be included in the first 10 drugs to be negotiated for price reductions under the U.S. IRA," a KoreaBIO official said. "With this announcement, it seems inevitable that drug prices will be reduced and sales will fall."

As the number of drugs covered by the IRA will be expanded yearly, the number of pharmaceutical companies affected by the IRA Act will gradually increase, the official said.

He added that it is necessary to observe whether the decrease in sales of these companies will lead to a decrease in R&D investment costs, which will negatively affect the open innovation ecosystem such as technology transfer and M&A with external companies in the future.

"It will also be necessary to see whether this will lead to increased investment in biopharmaceuticals as the 10 drugs are original drugs that have not had a biosimilar for 13 years after their release or they will change strategies in protecting these drugs from biosimilars to be excluded from drug price reduction negotiations," the official said.

Celltrion and Samsung Bioepis, which are developing biosimilars of Stelara and Enbrel, or are close to entering the U.S. market, said it is too early to determine the impact of the IRA price reductions on their entry to the U.S. market as there is still time for patent expirations and winning marketing authorizations.

"Biosimilar price reductions will be inevitable when original drug prices are lowered," an industry executive said. "However, the announcement of IRA price reductions reaffirms the Joe Biden administration's commitment to reducing healthcare costs. The move is expected to encourage biosimilar prescriptions to save money and to reinvigorate the entry of Korean biosimilars into the U.S. market."