J&J joins Pfizer in detailing impact of Part D redesign
Johnson & Johnson expects changes in Medicare’s prescription drug benefit will negatively impact its sales by about $2 billion this year, a modest headwind for a pharmaceuticals division the company anticipates will otherwise continue growing.
The changes are the result of a redesign under the Inflation Reduction Act to Medicare’s Part D benefit, which covers outpatient drug treatment. The 2022 law capped annual out-of-pocket spending by people enrolled in Part D to $2,000 beginning this year, and required drugmakers provide additional discounts within certain phases of coverage, among other tweaks.
J&J provided its estimate of the redesign’s financial impact Wednesday alongside earnings for the fourth quarter. In doing so, the company follows Pfizer, which late last year forecast the changes would have a $1 billion net negative impact on 2025 revenue.
The Part D redesign brought on by the Inflation Reduction Act is proving consequential to drugmakers’ business even as the law’s provisions allowing Medicare to negotiate certain drug prices get more attention. Three drugs marketed in whole or in part by J&J were picked by the Biden administration for the first round of negotiations that wrapped up last summer.
Overall, J&J is guiding to adjusted operational sales growth of 2% to 3% in 2025. Within the company’s pharma division, that growth will be driven by J&J’s drugs for multiple myeloma, including Darzalex, as well as new launches in inflammatory bowel disease and lung cancer.
“The strength of our portfolio enables Innovative Medicine to grow despite expanded Stelara biosimilar competition and approximately $2 billion’s negative impact from Part D redesign,” said J&J CFO Joe Wolk on a conference call with analysts.
Sales of Stelara, an inflammatory disease medicine that was previously J&J’s top-seller, are already declining, and J&J expects they’ll slip further as more lower-cost copies arrive and put pressure on the company.
Wolk added that the anticipated negative impact from the Part D redesign will be “consistently applied throughout the year” as a percent of sales.
J&J’s reported sales totaled $88.8 billion in 2024, up 4.3% over the year prior. Net earnings were $14.1 billion, an increase of 5.6%. Shares in the company fell by 3% Wednesday morning.
J&J is the first large pharma to disclose full fourth quarter earnings for last year. Roche, Sanofi, Novartis and AbbVie are scheduled to report next week.
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