The Inflation Reduction Act’s Devastating Impact on Biotech, Health, and Jobs
The implementation of the Inflation Reduction Act (IRA) has sparked concerns and raised alarm bells in the biotech and pharmaceutical industry. Lawmakers touted the legislation as a means to combat inflation, but the unintended consequences are becoming increasingly evident. Biotech and pharmaceutical companies are already feeling the effects of the law’s government price-setting provisions, resulting in a significant reduction in investments in research and development (R&D) in specific therapeutic areas. If left unchecked, the IRA is projected to impede the development of 139 new therapies over the next decade and lead to a staggering loss of 400,000 to 800,000 jobs. Moreover, proposed additional measures could further exacerbate the situation, potentially causing over 230 fewer therapies to reach the market and resulting in a loss of up to a million jobs. This article will explore the consequences of the IRA and additional ill conceived policy proposals and will shed light on the detrimental impacts it will have on biotech, patient health, and jobs.
A Threat to Research and Development
The biotech and pharmaceutical industry currently invests 28 percent of its revenue into R&D, making it one of the highest R&D-intensive sectors. This investment drives innovation and the development of life-saving therapies. However, the IRA’s significant loss of revenue is projected to trigger a downward spiral in biopharma R&D investment, disrupting the delicate balance established by the Hatch Waxman law enacted over 40 years ago.
The Hatch Waxman law was designed to incentivize innovators by granting them exclusive rights to sell their medications for a specified number of years. After this exclusivity period, generic drugs enter the market, promoting competition and lowering prices. The market dynamics established by Hatch Waxman have proven successful, with prices dropping by as much as 80–90 percent when multiple generics enter the market. However, the implementation of the IRA and potential additional measures such as the Smart Prices Act undermine this established framework, creating an environment of uncertainty and disinvestment.
The Consequences of Expanded Government-Mandated Drug Pricing
A study conducted by research firm Vital Transformation assessed the impact of expanded government-mandated drug pricing policies on the development of new medicines and job losses. The study estimated that if the proposed expansions are implemented, there would be 237 fewer FDA approvals for new medicines and new uses over the next decade. This reduction in new therapies would be particularly felt in areas of unmet medical need, including oncology, neurology, rare diseases, and infectious diseases.
Moreover, the study highlighted the severe economic consequences of these policies. Approximately 70 percent (80 out of 121) of currently available therapies subject to price setting would likely not have been developed if the pricing provisions had been in place earlier. The loss of these therapies and the associated revenue would result in the elimination of 146,000 to 223,000 direct biopharmaceutical industry jobs and a total job loss of 730,000 to 1,100,000 jobs across the U.S. economy. Investments in 50 different therapeutic indications would also suffer, impacting every state and wreaking particular havoc on innovation hubs in California, Massachusetts, and New York.
Preserving Incentives for Small Molecule Research
It is crucial for policymakers to consider the unintended consequences of the IRA and avoid supporting similar policies before fully understanding and correcting the current law’s impact. We Work for Health, an advocacy group dedicated to preserving our nations pharmaceutical ecosystem and the jobs it creates, emphasizes the importance of preserving incentives for small molecule research. Under the IRA, biologics are granted a 13-year period before the government can intervene in setting drug prices, while small molecule drugs are limited to nine years. This discrepancy is projected to discourage investment in small molecule drugs, further hindering medical innovation.
Protecting the Biopharmaceutical Ecosystem
The implementation of government-mandated drug pricing policies is a flawed big government approach that fails to address the root causes of high out-of-pocket drug costs, such as those practiced every day by pharmacy benefit managers that drive up costs. Instead, it places a significant burden on the development of life-saving medicines and the researchers and scientists behind them. Protecting the innovative biopharmaceutical ecosystem is crucial for ensuring continued advancements in healthcare and improved patient outcomes.
Conclusion
The Inflation Reduction Act and its government-mandated drug pricing provisions have severe consequences for the biotech and pharmaceutical industry, patient access to therapies, and job opportunities. The projected loss of 139 therapies over the next decade and the potential million-job loss underscore the need for policymakers to reevaluate and correct the current law. Expanding these policies will only exacerbate the detrimental effects on innovation and patient care. It is vital for policymakers to consider the long-term implications and work towards a balanced approach that fosters innovation while addressing the underlying issues of high drug costs.
Dan Leonard is the former president and CEO of the Association for Accessible Medicines, former president and CEO of the National Pharmaceutical Council, and former executive vice president of public affairs for America’s Health Insurance Plans.
