June 20, 2023

The need-to-know this morning

Eli Lilly said it was buying DICE Therapeutics, a developer of experimental, oral medicines to treat autoimmune diseases. DICE's lead drug is a pill that blocks an inflammation-causing molecule called IL-17, currently in a mid-stage study for psoriasis. The $2.4 billion acquisition values DICE at $48 per share — a 42% premium over Friday's close.
Arcellx Therapeutics said the FDA placed a clinical hold on its experimental CAR-T therapy for multiple myeloma following a patient death in an early-stage clinical trial. The company said "bridging therapy" — chemotherapy given before the CAR-T is infused — contributed to the patient's death. The FDA has allowed Arcellx to continue treating patients with its CAR-T therapy who have already undergone bridging therapy.

Pharma

Will drugmakers have to choose between the U.S. and China?

AstraZeneca has drafted a plan to spin out its sizable Chinese business in the event geopolitical tensions become untenable, the Financial Times reported yesterday, the latest sign that multinational companies are concerned about the deteriorating relationship between the U.S. and China.

The plan, which might not take place, would involve hiving off AstraZeneca’s Chinese division and listing it on the Hong Kong exchange, according to the FT. Similar moves have been discussed among a host of multinational drug companies, according to one banker.

On a smaller scale, biotech companies with operations in the U.S. and China have seen their valuations dip since President Xi Jinping tightened his control of the country in October. The underlying fear is that Xi’s third term in power will escalate state control at the expense of the private sector, which, combined with the White House’s efforts to reduce the U.S.’s dependence on China, will leave Sino-American biotech companies caught in the middle.

R&D

Bayer is buying into the U.S. — despite the IRA

Amid stern warnings that drug pricing legislation will stifle investment in the U.S., German pharma giant Bayer is planning to spend $1 billion on research in the country in hopes of doubling its stateside revenue.

Speaking to STAT’s Rachel Cohrs, Bayer executive Sebastian Guth said the company has some issues with the Inflation Reduction Act — specifically how it prizes biologic treatments over small-molecule drugs — but it’s not a deterrent from investing in American R&D.

“Questions of pricing and the policy environment and so on and so forth come to the table, but in my mind, that’s not the first question,” Guth said. “And hopefully it won’t become the first question, because that would be detrimental to ultimately the progress of science. And at its core, this is just a very exciting time for science.”

Read more.

PBMs

The secret middleman pocketing drug payments

Employers big and small pay consulting firms to deal with pharmacy benefits managers, tasking them with getting the best deal possible on prescription drugs. What they might not realize is that some of those same consulting firms are getting paid more by the PBMs and health insurance carriers they are supposed to scrutinize than by companies they contracted to look out for.

In a year-long investigation, STAT’s Bob Herman uncovered a largely hidden flow of money in which PBMs are paying consulting firms by the prescription, by the patient, or by getting cut in on the rebates that are supposed to go back to clients — all while those firms are collecting fees from employers.

“It’s unethical,’’ said Jon Levitt, an attorney at Frier Levitt who represents employers and analyzes PBM contracts. “It’s beyond unethical.”

Read more.

Washington

We probably haven’t seen the end of drug pricing lawsuits

Bristol Myers Squibb’s move to sue the federal government over a law that would allow Medicare to negotiate certain drug prices is likely a sign of more to come, according to Evercore ISI analyst Umer Raffat.

In a note to clients, Raffat said he expects more drugmakers to follow the lead of Bristol Myers and Merck, suing to block negotiation by citing the First and Fifth Amendments. Each claims the government is violating its Fifth Amendment right by forcing companies to sell products without “just compensation” and then violating their freedom of speech by compelling them to call that deal a fair one.

Whether those arguments end up holding water is another matter. The consensus among outside attorneys, Raffat said, is that the Fifth Amendment claim won’t hold up to scrutiny because companies have the choice of whether to participate in Medicare, making it difficult to argue they’re being forced into an unfair process.

More around STAT