David Ricks, CEO, Eli Lilly.

Scott Mill | CNBC

Eli Lilly CEO David Ricks said Tuesday Negotiating the price of Medicarewhich they aim at reduce costs for older Americans, it can potentially harm drug development.

“I’m really worried about how it’s going to hurt new drugs and opportunities in medicine,” Ricks said in an interview with CNBC. “Exchange.”

Ricks meant a provision in the Biden administration’s Inflation Reduction Act, which will allow the Medicare program to negotiate the prices of the most expensive prescription drugs each year.

He is the latest pharmaceutical executive to publicly denounce the provision and the law, which is likely to reduce the company’s profits. Global drugmaker Merck last week he sued The Biden administration on Medicare price negotiations in an effort to weaken the program.

Ricks said the “biggest problem” with the provision stems from the difference in the timeline for negotiating prices for small-molecule drugs — that is, drugs made from chemicals that have a low molecular weight — versus biologics or drugs derived from living sources such as animals or people.

Under the Inflation Reduction Act, Medicare can begin negotiating prices for small-molecule drugs as early as nine years after receiving approval from the U.S. Food and Drug Administration, compared with 13 years for biologics.

Ricks said the resolution will “really reduce investment” in small-molecule drugs, which are “one of the most effective parts of health care.”

“We will get fewer of them [small-molecule drugs] because investors are already telling me, ‘Why would you invest in more small molecules when biologics have 13 years to go?'” Ricks said.

Small molecule drugs make up 90% of pharmaceutical drugs, according to a studies in ScienceDirect.

Novartis CEO Vas Narasimhan expressed similar concerns about the changing timeline in February, saying it was the industry’s top priority to close the four-year gap between the two types of drugs. according to Fierce Pharma.

Next provision of the Inflation Reduction Act requires drug companies to reimburse Medicare through rebates if their drug prices rise faster than the rate of inflation.

The first set of eligible prescription drugs was subject to Medicare inflation discounts starting April 1, according to the U.S. Department of Health and Human Services.

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