Medicare Proposes Rule to Close 'Evergreening' Loophole, Targeting Subcutaneous Keytruda and Opdivo for Price Negotiation
核心洞察
CMS published a proposed rule that would subject subcutaneous formulations of Keytruda and Opdivo to Medicare price negotiations at the same time as their IV counterparts.
The rule aims to close a loophole that allows drugmakers to extend patent-protected life through formulation switching, a practice known as "evergreening."
Opdivo and Keytruda had combined global sales of $41 billion last year, with IV patents expiring in 2028 and biosimilars expected by December 2028.
The Centers for Medicare and Medicaid Services (CMS) published a proposed federal rule on Friday that would close a regulatory "loophole" enabling pharmaceutical manufacturers to extend the patent-protected life of blockbuster drugs through formulation switching — a practice commonly referred to as "evergreening." Under the proposed rule, new subcutaneous injections of the cancer immunotherapies Keytruda and Opdivo would be subject to Medicare price negotiations at the same time as their intravenous counterparts.
The rule could most immediately affect Keytruda maker Merck & Co. (搜索) and Opdivo developer Bristol Myers Squibb (搜索), along with Halozyme, which developed the delivery technology that helped Opdivo and Johnson & Johnson's Darzalex transition from IV to subcutaneous shots. Halozyme, however, stated it forecasts "zero to minimal impact to its royalty revenues through at least 2035."
The Evergreening Concern
The proposed rule targets a strategy in which drugmakers launch new formulations of existing blockbuster drugs nearing the end of their patent-protected lives, potentially securing additional years of market exclusivity. CMS explicitly stated the rule would close this loophole, though the agency carved out an important exception: Medicare could exempt the newer formulation from its price ceiling should biosimilars of the IV version enter the market and compete on price.
Financial Stakes and Market Impact
Opdivo and Keytruda had combined global sales of $41 billion last year, and because both treat a wide array of cancers, they have a significant impact on the Medicare budget. Their IV formulations are approaching the end of their patent-protected lives in 2028 and could soon thereafter be subject to biosimilar competition.
The transition to a subcutaneous formulation is an important part of Merck's and Bristol Myers' commercial strategies to sustain revenue from their mega-blockbuster products, aiming to sell the convenience to patients along with healthcare facilities that have limited capacity at their infusion centers.
Negotiation Timeline and Uncertainty
The federal government is preparing for its fourth annual talks with pharmaceutical manufacturers over the prices of drugs charged to the Medicare program for enrollees 65 and older and people with disabilities, which will apply in 2029. The price negotiations are required by terms of the Inflation Reduction Act of 2022, with the first round going into effect this year.
The proposed rule does not name Keytruda and Opdivo as being subject to price negotiation, but they are expected to be a part of the 2029 round. CMS will release the list of 20 drugs by February 1, 2027.
A key wrinkle in the rule is that CMS also stated that drugs subject to biosimilar or generic competition can be "deselected" from the program, and this would apply to all formulations. Leerink Partners analyst David Risinger wrote in a client note that biosimilar versions of Opdivo and Keytruda are expected to enter the market in December 2028, creating some uncertainty around price negotiations.
"We don't know if that is soon enough to preclude CMS selecting Opdivo Qvantig and Keytruda QLEX," Risinger wrote, referring to the under-the-skin-shot forms of the two drugs.