As Predicted, Patients Are Paying the Price for the Inflation Reduction Act’s Drug Reform

I t has been about four months since President Biden signed the Inflation Reduction Act (IRA) and, already, the law’s drug-pricing rules have dealt a major blow to medical innovation — one larger than its proponents acknowledged and the Congressional Budget Office forecast.

Since the signing, several biopharmaceutical firms have officially scrapped drug-development programs, citing the IRA among the reasons. At the current pace, even the largest forecast cuts in innovation will turn out to be too small.

This was a predictable outcome. It shouldn’t come as a shock that directing the government to arbitrarily set prices disincentivizes research-and-development investments. In the end, patients who are forced to go without transformative new treatments and cures will pay the highest price for these destructive, ill-conceived “reforms.”

Examples of cutbacks in new-drug development are accumulating quickly.

In October, Alnylam announced that it will cancel work on a new treatment for Stargardt disease because of the impact of the IRA. In November, Eli Lilly told Endpoints News that it will abandon work on a blood-cancer drug in light of the new law. According to a recent Horizon report, biotech corporation Insmed and Acadia Pharmaceuticals are expected to end their work on the bronchiectasis drug brensocatib and the psychosis treatment pimavanserin, respectively. And in a filing with the Securities and Exchange Commission (SEC), Protagonist Therapeutics cited the IRA as one of the reasons for its decision to pause efforts to find additional uses for their drug rusfertide.

It doesn’t stop there. AstraZeneca CEO Pascal Soriot recently said the company may stop launching certain new cancer medicines in the United States because of the IRA. Bristol Myers Squibb expects to defund a number of drug-development programs, most likely for cancer treatments or certain “small molecule” drugs. In recent SEC filings, Merck, Amgen, and Sanofi cautioned that the IRA will reduce sales and profits, which will inevitably reduce pharmaceutical innovation. Several other major biopharmaceutical firms have signaled that a slowdown in research is on the horizon for the same reason.

Some might see these startling announcements as political attempts by the industry to discredit the IRA and the Biden administration — a form of “retaliation” for drug-price controls. But such claims don’t withstand basic scrutiny.

Consider that most of these announcements occurred during calls between publicly traded companies and their investors. A recent report by a government-affairs consulting firm documented no fewer than 26 earnings calls in which companies explicitly raised IRA-related earnings concerns with investors. Deliberately misleading investors would make executives vulnerable to charges of securities fraud — a crime punishable by civil and criminal penalties, including fines and imprisonment. It’s hard to imagine a CEO risking jail time simply to express political disapproval.

Even regulators are concerned. Patrizia Cavazzoni, who directs the Food and Drug Administration’s Center for Drug Evaluation and Research, recently admitted that the agency is “very worried” the IRA will harm drug development and access, particularly for generic and biosimilar medicines.

All of this was foreseeable. An analysis of a drug-pricing policy similar to the IRA, which I led at the University of Chicago, predicted that 135 fewer drugs would launch by 2039. Consider a drug-manufacturer-revenue loss of 15 percent from the IRA, which is close to both our projections and the CBO‘s. If that turns out to be the case, we predict a nearly proportional loss in R&D and new drugs. More precisely, a 15 percent cut in CBO’s predicted 45 new drugs per year would suggest around 6.8 fewer drugs per year, totaling around 121 lost over the 18-year horizon.

But that’s not the loss that the CBO projects. It predicts just five fewer new drug approvals for the same legislation we analyzed — an assessment that now appears wildly optimistic at best, suspicious at worst. Unfortunately, the CBO mainly reports its results, not its analysis, so it is impossible to understand exactly how or why its prediction was so off-base. But there’s little doubt that its 18-year projected harm is inaccurate, as five drugs may have been lost already. Further, these losses account only for drugs already under development, and not those that will be discarded before early-stage development even begins.

Concerningly, both my predictions and the CBO’s have been outpaced by what’s happened, with at least three lost drugs reported in four months, on pace for nine per year. If we consider that recent earnings calls indicate that many more than three drugs are in jeopardy, more severe losses are easy to imagine.

It took years of bipartisan policy to build a U.S. reimbursement environment that encouraged and rewarded medical discovery. Now, with one poorly designed and rushed law, legislators have shaken this system to its core, depriving future patients of breakthroughs that could have been just around the corner. That the IRA has inflicted this much harm in a matter of months is as discouraging as it was predictable and doesn’t bode well for the future of American health care.