Article Summary –
The Inflation Reduction Act (IRA), set to take effect in 2026, has sparked concerns over potential impacts on research and development in the biotech sector. The IRA intends to control inflation by enabling Medicare to negotiate prices and rebates for certain drugs, and critics argue it could result in lower drug pricing for Medicare patients, decreased returns for investors, and altered business strategies for pharma companies. Additionally, the act’s different timelines for biologics and small molecule therapeutics could lead to fewer small molecule drugs in pharma companies’ pipelines.
Inflation Reduction Act’s Potential Impact on Biotech R&D
The Inflation Reduction Act (IRA), slated for effect in 2026, could significantly affect biotech and pharma R&D, according to discussions at the BioTrinity conference. The IRA, introduced in 2022, allows Medicare to negotiate prices and rebates for certain drugs, which has far-reaching implications, including reduced drug prices for Medicare patients, diminished returns for investors, and potential shifts in business strategies.
“The impact on R&D is likely unintended, but the consequences might be large,” stated Duncan McHale, co-founder of Weatherden.
The IRA follows two different timelines for large (biologics) and small molecule therapeutics. Pharma companies may shift their focus to fewer small molecule drugs due to the shorter nine-year post-approval price negotiation window compared to 11 years for biologics. In 2023, US biotechs saw a 48% increase in biologic drug venture financing compared to small molecule financing, according to GlobalData’s Pharma Intelligence Center Deals Database.
McHale believes that the strategy of starting small and expanding will be less attractive under the IRA, because of the reduced time to recoup additional development costs. However, innovative clinical trial approaches can help keep costs down and decrease time, stated Dean Griffiths, managing director at Clearview Healthcare Partners consultancy.
Pharma companies, including AstraZeneca and Johnson & Johnson (J&J), have launched multiple lawsuits against the Biden administration claiming that the IRA violates the US Constitution.
The information on this site is included in good faith for general informational purposes only. It is not intended as advice, and we provide no representation, warranty or guarantee, whether express or implied, as to its accuracy or completeness. Professional or specialist advice should be sought before taking or refraining from any action based on the content on our site.
—
Read More Kitchen Table News
