Ann: Response to ASX Price Query Letter, page-83

The "Most Favored Nation" (MFN) pricing policy announced by President Trump on May 11, 2025, aims to align U.S. Medicare payments for certain drugs with the lowest prices paid by other developed countries. This policy primarily targets high-cost drugs covered under Medicare Part B, which includes medications administered in clinical settings, such as injectables and infusions.

Scope of the MFN Policy

• Targeted Drugs: The MFN model focuses on a select group of high-expenditure drugs under Medicare Part B. While the exact number of drugs affected has not been specified in the recent announcement, previous iterations of the policy targeted approximately 50 drugs that accounted for a significant portion of Medicare Part B spending.
• Revenue Impact: The targeted drugs are among the highest in terms of Medicare spending. For instance, in 2021, drugs like Eylea (aflibercept) and Keytruda (pembrolizumab) had Medicare Part B expenditures of approximately $2.9 billion and $2.7 billion, respectively.

Potential Revenue Impact per Drug

Given the policy's aim to reduce drug prices by 30% to 80%, the revenue impact on individual drugs could be substantial. For example:

• Eylea (aflibercept): With Medicare Part B spending of $2.9 billion, a 30% reduction could result in a revenue decrease of approximately $870 million.
• Keytruda (pembrolizumab): With spending of $2.7 billion, a 30% reduction could equate to an $810 million decrease.

These figures illustrate the significant financial implications for pharmaceutical companies manufacturing these high-cost drugs.

Considerations and Limitations

• Exclusions: The MFN policy does not currently apply to drugs covered under Medicare Part D, which includes most self-administered medications. Therefore, drugs like Sofdra (sofpironium), a topical treatment for primary axillary hyperhidrosis, are not directly affected by this policy.
• Implementation Challenges: The policy may face legal challenges and opposition from the pharmaceutical industry, which argues that such pricing models could hinder innovation and access to medications.

In summary, while the MFN policy targets a relatively small subset of drugs, the financial impact on those specific high-revenue medications could be significant, potentially leading to substantial reductions in Medicare expenditures and pharmaceutical company revenues.