Personally, I try to pay as little attention as possible to the administration’s current, contradictory federal pronouncements on tariffs. But in terms of biosimilars (and generics), that is not truly possible. If high tariffs on certain countries are implemented, the damage to a biosimilar industry facing several existential challenges today can be easy to grasp but difficult to calculate..
Earlier this month, Managed Healthcare Executive and PBMI sponsored a webinar addressing President Trump’s pharmaceutical tariffs policies and most favored nations (MFN) pricing proposal. These are vague, moving targets, but Luke Greenwalt, MBA, Vice President and Lead, IQVIA Center for US Thought Leadership, and Jeffrey Casberg, PharmD, Senior Vice President of Clinical Pharmacy at IPD Analytics provided their views on these issues, without predicting whether they would be implemented in the end.
Dr. Casberg said, “Everyone thought the Medicare price negotiation program would be a big deal, but MFN would be much bigger.” He expects the pharmaceutical industry to put tremendous resources towards fighting MFN. It would be disruptive to the pharmaceutical ecosystem, including long-term research and development, and it will likely impact drug formulary decisions by payers. “Drug prices may simply rise in other countries,” he suggested, resulting in more “price equalization” than price reduction. He believes that MFN theory is more workable with small economies rather than large ones.
The Trump administration tried to introduce MFN policies during his first term, reminded Mr. Greenwalt. “It was thrown out in the courts at the time. Is there a path forward? Maybe under an innovation project under Medicare,” he suggested, where MFN could be used as a reference price for the Maximum Fair Price program?
Dr. Casberg commented that “It would be tricky to pull off MFN and tariffs concurrently, as they could cancel themselves out.” He mentioned that tariffs would only further hamper biosimilar utilization and development, unless biosimilars were exempt.
And this sums up the problem: There hasn’t been much direction about new pharmaceutical tariffs in weeks, despite the administration’s promise of deals, then unilateral actions, then delays/”pauses”, and then nothing. It may be that tariffs cannot be truly discussed until a budget bill that will rely on their revenue can be agreed upon by both the House and Senate.
But enough about tariffs from the government’s perspective. What about that of the biosimilar manufacturer located outside the US? There is much to unpack (or possibly ignore until there is a reality to address).
As of this moment, companies at the highest risk for impact are the Chinese manufacturers seeking to sell their biosimilars in the US, and their respective commercialization partners (e.g., Bio-Thera Solutions and Shanghai Henlius). It creates uncertainty in existing pricing and profitability, and how they are able to compete in highly discounted drug categories, like adalimumab or ustekinumab. Similar to drugs falling beneath a viable average sales price (ASP) where the manufacturer or marketing partner stops selling the biosimilar, a high tariff in those low-margin categories may pose the same result.
If there are significant differences in new tariffs between their own country and those elsewhere, the company could consider shifting production to another country with a lower tariff. If not, they would have to account for the higher tariff in their net price. The agreement between the marketing partner and manufacturer would have to spell out who eats the increased tariff cost or if they share the pain. To my understanding, the manufacturer ships out the product at a set cost, the marketer sets the list price and negotiates deals with payers and PBMs, sharing a percentage of the net revenues with the manufacturer. In highly competitive categories where net costs are discounted beyond 80% off WAC, that doesn’t leave much room for eating the increased cost of the tariff.
There are two simple, but unattractive answers: (1) stop selling to the US market or (2) raise prices and risk falling behind the competition. Both imply less research and development for future biosimilars. Assuming new tariff policies are applied, the only real answer is to exempt foreign biosimilar manufacturing from any tariff increases.
