In a reassuring development for Wall Street, concerns over the pricing negotiations for the first 10 drugs under Medicare's Part D plan, as part of the Inflation Reduction Act (IRA), appear to be easing. Pharmaceutical executives from major companies have indicated their confidence in managing the final reduced prices set by the federal government, as the much-anticipated September 1 reveal date approaches.

During recent earnings calls, executives from Bristol Myers Squibb (BMY) and Johnson & Johnson (JNJ) addressed the final agreed-upon price, known as the maximum fair price (MFP), set by the Centers for Medicare and Medicaid Services (CMS), without disclosing specific figures.

Bristol Myers Squibb confirmed that its blockbuster blood-thinner Eliquis was on the list and that the company had received the maximum fair price from CMS. CEO Christopher Boerner stated that they were increasingly confident in navigating the impact of the IRA on Eliquis. In the second quarter, Eliquis generated $3.4 billion in revenue, representing a year-over-year increase of 7%. Furthermore, Eliquis contributed $12.2 billion, nearly a quarter, to BMS's $45 billion in revenues in 2023.

Similarly, Johnson & Johnson was asked about the anticipated IRA impact on its drugs, Stelara and Xarelto, during their earnings call. Jennifer Taubert, executive vice president and worldwide chairman of innovative medicine at J&J, acknowledged the company's disagreement with the process but stated that they would not be adjusting their guidance once the prices were revealed. She noted that the numbers had already been included in their provided guidance and remained consistent. Stelara, which will lose its patent next year, recorded sales of nearly $2.9 billion in the second quarter, marking a 4.9% increase year over year. Xarelto contributed $587 million in revenue, representing a decrease of 7.9% year over year. Combined, the two drugs brought in $13.2 billion in revenue in 2023, with Xarelto experiencing slower sales compared to the previous year.

The positive response from industry leaders has led to optimism among investors on Wall Street. Analyst Chris Schott from JPM stated that the indications provided by pharmaceutical companies suggested a more reasonable price cut associated with the IRA than had originally been feared.

As the September 1 reveal date approaches, all eyes will be on the final reduced prices set by CMS. The pharmaceutical sector's ability to manage the impact of the Inflation Reduction Act will greatly influence market dynamics and investor sentiments moving forward.