Magazine Article | December 1, 2022

What Impact Do You Think The Inflation Reduction Act Will Have On The Biopharma Industry Over The Next Five Years?

Source: Life Science Leader

NEUROSURGEONS WOULD BE UNWISE TO EXCHANGE THEIR SCALPELS FOR CHAINSAWS to perform complex brain surgery, yet the Inflation Reduction Act (IRA) has metaphorically done so in its approach to the issue of drug access and pricing. The act allows government to “negotiate” drug prices for drugs that are (partially) reimbursed by Medicare. This may seem common sense, but in fact there is no true negotiation here, as there is with commercial insurers. Drug innovators that refuse to “negotiate” will be subject to fines of up to 95% of a product’s sales or withdrawal of all the company’s products from government insurance programs. And while the IRA sets upper limits for the discounted prices that will be demanded by Medicare, it sets no floors, such that the government, like Don Corleone, now has the power “to make you an offer you can’t refuse.”

So, let’s at least call this what it is: government price controls. The history of such controls across many industries and economies has been dismal, resulting in shortages of the controlled goods, in this case the new medicines we all need.

Another perversity in the IRA is differential treatment of biologic vs. small molecule drugs. The former have 13 years from approval before “negotiated” prices take effect, whereas the latter have only nine. This provides a clear incentive to invest in more biologics and fewer small molecule development programs, despite the fact that small molecule treatments tend to be less expensive, less costly to manufacture, and easier to deliver to patients.

RON COHEN is president and CEO at Acorda Therapeutics.