Next week we’ll have our first glimpse of the Medicare Part D premiums for 2026; I expect them to be pretty awful. The Part D redesign shifted additional liability onto plans without changing enough of the premium calculation. Some articles next week will say it is unintended consequence; I think it is an intended one and may be a fair trade-off for having an out-of-pocket cap. That being said – I’m all for solutions on shifting risk around to make it more palatable for plans to participate but that requires big thinking and that seems in short supply. Or is all of this too much for a summer Friday?

Caught my Eye

Cause and Effect. Congressional Budget Office response on how changes to National Institute of Health funding and Food and Drug Administration review times affect new drug development. Long story short, 10% cut to NIH would result in 30 fewer drugs over the next three decades. Overall good background reading if you’re not as familiar with how it all development to approval works.

Denied. NYT article (gift article) on prescription drug denials rates among private health plans reaching 23% – up 25% since 2016. Cencora put out a report looking at the top pharmacy benefit managers and the charts are eye-popping in terms of exclusion growth over the years.

Data for Days. Kudos to J&J for putting out work on policy research and, in particular, transparency into where the money goes. Apparently $47.8B in discounts and rebates – including $7.4B to 340B providers.

Cue the Lawsuits. This week the FDA released more information on the Commissioner’s National Priority Voucher (CNPV) pilot program. The program reduces the review time from 10-12 months to 1-2 months. Drugs must meet one of the eligibility requirements – address public health crisis, innovative cure, large unmet need, new onshore manufacturing or increasing drug affordability. No more than 5 will be selected during the pilot year.

Reviewing the Fundamentals — API

Pharmaceutical tariffs feel like a “will they or won’t they”, with threats bringing news of investment in American manufacturing plans. And that’s not all bad but it isn’t (necessarily) realistic to produce the drugs entirely here. Why? Let me introduce you to active pharmaceutical ingredients (API).

APIs are the biologically active chemical compounds in a medicine. Medicines often contain a small amount of the API along with other inactive ingredients called excipients (like fillers, binders, or flavorings) that provide volume, stability, or aid in delivery.

The manufacturing of API begins with raw materials. These can be broadly categorized as:

• Commodity Chemicals: These are the most basic chemical building blocks, often produced in large volumes from sources like petroleum, natural gas, or agricultural products.
• Key Starting Materials (KSMs): A step up from commodity chemicals, KSMs are more complex chemical compounds that act as a building block for API. Regulatory bodies pay close attention to KSMs, as their quality directly influences the purity and safety of the final API.
• Natural and Biological Sources: Not all APIs are purely synthetic. Some are derived directly from nature through extraction and purification (e.g., heparin from animal tissues) or produced through biotechnology using microorganisms like bacteria or yeast.

The procurement of these raw materials is globalized. Primary raw material origin can be, and often is, geographically distant from the final API location. Once these foundational materials are in place, the API manufacturing process generally follows several key stages including synthesis, separation of the API from other materials from the synthesis, purification, and drying/finishing.

Historically API manufacturing has been associated with substantial environmental burdens. The processes often lead to potential air emissions and wastewater contamination if not properly managed. There is often significant waste generation that requires complex treatment and disposal.

A substantial portion of API and KSM manufacturing occurs in regions where environmental regulations may be less stringent or less consistently enforced compared to North America or Europe. This can lead to localized pollution issues and a larger global environmental footprint, even as companies operating under stricter regulations strive for “green chemistry” practices.

Current global hubs for API/KSM manufacturing:

• India and the European Union: These two regions collectively supply over half of the APIs for prescription medicines in the U.S.. India is a dominant player, particularly for generic APIs and finished drug products, while European countries contribute significantly to branded, complex, and high-value APIs.
• China: While contributing a smaller percentage of finished APIs directly imported into the U.S. compared to India or the EU, China remains a critical, often indispensable, source for many basic commodity chemicals and KSMs that are then used by API manufacturers worldwide.
• United States: The U.S. does have API manufacturing capabilities, primarily focusing on innovative, high-value, and specialized APIs, including biologics. However, its overall share of global API production, particularly for commodity generics, is relatively small.

Challenges for API Manufacturing in the U.S.

Despite the strategic desire for greater domestic API production, it is an uphill climb due to several hurdles:

1. Higher Labor Costs: Wages for skilled labor (chemists, engineers, technicians) in the U.S. are higher than in other countries.
2. Stringent Regulatory Compliance: The U.S. operates under some of the world’s most rigorous regulatory processes and environmental regulations. Adhering to these standards requires substantial investment in facility design, equipment, quality control systems, and ongoing operational oversight, adding significant cost.
3. Capital Investment and Infrastructure: Establishing new, state-of-the-art manufacturing facilities in the U.S. requires massive upfront capital investment. This includes not just the physical plant but also the automation, environmental controls, and quality assurance systems necessary for compliance and efficiency.
4. Price Competition: U.S.-based manufacturers must compete on cost with international producers who may benefit from lower labor costs, less stringent environmental regulations, and sometimes government subsidies, making it difficult to achieve competitive pricing.
5. Supply Chain Complexity: Even if an API is manufactured in the U.S., the raw materials and KSMs often still originate from global sources, potentially exposing domestic production to international supply chain vulnerabilities and cost fluctuations (e.g., due to tariffs, etc.).
6. Workforce Development: While highly skilled, the specialized workforce needed for advanced pharmaceutical manufacturing (e.g., chemical engineers with specific industry experience) requires continuous development and can present recruitment challenges.

While there is a growing push to revitalize domestic API manufacturing capabilities in the U.S. due to concerns about supply chain vulnerabilities, drug shortages, and national health security, it is not as simple as turning on a switch. It will take years to turn the tide. The challenge for policymakers and pharmaceutical companies lies in balancing these increased expenditures with the strategic imperative for domestic production and developing innovative approaches to reduce costs and enhance supply in the future for policymakers and pharmaceutical companies lies in balancing these increased expenditures with the strategic imperative for domestic production and developing innovative approaches to enhance cost and supply in the future.

For the Files

This JAMA article has a lot of good factoids about patients with different types of cancer – including patient characteristics and out-of-pocket spending. Good to have around when you’re trying to get a look at what a typical patient might look like. I homed in on Table 1 with the mean age, sex, race, income, etc. of patients with different cancers.