BIO2023: Biogen CEO Slams IRA and Talks M&A Opportunities


Speaking at the 2023 BIO International Convention Chris Viehbacher who joined Biogen as CEO only a few months ago, criticised the US’s Inflation Reduction Act (IRA), legislation that will allow Medicare to negotiate prices for the drugs it spends the most on as of 2026. Viehbacher, who was brought in to return the company to growth, also discussed his potential M&A strategy.


Whenever you hear that this is a negotiation, it’s not. In Merck’s lawsuit, they talk about extortion and that’s accurate


IRA “Extortion”

When asked about the IRA and his reaction to Merck’s recent lawsuit directed at the Department of Health and Human Services (HHS) to revoke the drug pricing measures set forth in the new US legislation, Viehbacher claimed that the “lawsuit is a tiny bombshell compared to the bombshell we got in the industry when the law passed.”

The drug pricing reform pushed through by the Biden administration aims to save USD 25 billion annually by 2031 through price negotiations for drugs paid for by Medicare, the government healthcare plan for seniors. Drugmakers have been up in arms ever since the law was passed and Merck’s action is a demonstration of how far their disgruntlement can go. Filed in US District Court for the District of Columbia, the lawsuit argues that under the law, pharma companies would be forced to negotiate prices below market rates. “This is not ‘negotiation.’ It is tantamount to extortion,” Merck claimed.

Viehbacher more than agrees. ““Whenever you hear that this is a negotiation, it’s not. In Merck’s lawsuit, they talk about extortion and that’s accurate,” he argued. The Biogen boss went on to compare the new US measures to Europe, asserting that although pharma companies must negotiate with governments there, the new US negotiations will be much more severe. “I’ve lived a long time in Europe, where you have to negotiate with the government and the governments in Europe have never put anything in place near to the draconian measures in the IRA.”

Although he was not surprised by Merck’s action, Viehbacher did not commit to following suit and simply said, “I think we’ll look at it,” when asked if Biogen would file a similar action.

Doubling Drug Development Risk

With respect to how the IRA will impact the company’s strategy, Viehbacher detailed the existing risk involved in R&D. “The part of our industry story that we’ve never really been good at telling, is just how much risk is undertaken in research,” he said. Viehbacher further claimed that costs have only gone up for pharma companies, increasing that risk. “There are more safety requirements, more necessary information to obtain reimbursement and health technology assessment; all of these things add an awful lot of cost. And then one day, you hope that [the drug] actually launches and you get revenues. And after another period of deficit while you launch the product, one day, there may be a profit.” The IRA, he asserted, will compound that risk further. “Now, we don’t even know whether the commercial success is going to [lead to a profit].”

Biogen’s CEO also pointed out the that there is a level of uncertainty still surrounding IRA price negotiations. “The amount of revenue you’re going to get is clearly being truncated by the IRA … [and] there is going to be a lot more uncertainty because we don’t really know exactly how the IRA is going to work,” he said. Specifically, he identified the probable penalization of small molecules as opposed to large molecules, a lack of clarity around combination therapies and the overall impact the new law will have on pricing. “If you’re selling already to the government, you’re paying much bigger rebates than to commercial payers. So, when they come to propose a price, is this really a price that just brings the list price down or is that going to be lower? All of those things we want to know really for about a couple of years.”



Impact on New Indications

Regarding Biogen’s R&D spend and how it will potentially be impacted by the IRA, Viehbacher pinpointed new indications as the area that will probably suffer the most, citing the time and cost involved in carrying out new clinical studies, getting approvals and going to market. “I have to look at my return on investment. How much remaining patent life do I have? And does that justify the expense of an additional indication?” Under the new law, he argues, that timeline stands to be further reduced. “Now, I have to say, well, how much time do I have left before the IRA timeline? And that’s going to be in a lot of cases shorter than that.”


Growth Through M&A

Beyond weighing in on IRA, Viehbacher, who joined Biogen six months ago to stimulate Biogen’s growth, discussed the company’s potential M&A strategy. Having previously led Sanofi through the acquisition for USD 20 billion of Genzyme, Viehbacher  was possibly brought to Biogen to activate deals. At BIO, however, he demonstrated caution. “One of the things you want to do before you start doing deals is make sure your existing business is in good shape.”

Biogen’s CEO did not exclude the possibility of future deals. “I think it only makes sense to be looking outside all the time. And, and we do just that because I think that’s part of the job of a CEO.” However, when pressed about specific strategies for potential M&A, Viehbacher asserted that he would not be following the lead of big pharma. “I have always found that the best way to create value is not to look at everything that everybody else is looking at,” he said.

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