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Updated: January 8, 2024 Viewpoint

Viewpoint: IRA's impact on medical innovation

The debate over drug price negotiation policies, particularly those in the Inflation Reduction Act, has become the centerpiece of discussions about healthcare affordability, job creation, and innovation. Finding a balance between making lifesaving medications affordable while sustaining the incentives for innovation is critical. Policy must consider the entire drug supply chain and take steps to avoid unintended consequences that may stifle job growth, impede future breakthroughs, and impact treatment.

A headshot of Ari Fine Glantz
PHOTO | Courtesy of Ari Fine Glantz
Ari Fine Glantz

At NEVCA, we aim to make New England the best place in the world to start, grow, and invest in companies. When it comes to the life sciences, it certainly is. However, government-mandated drug pricing policies included in the IRA, and efforts to expand those policies to the commercial sector, could prevent Mass. from remaining a national life science hub.

The IRA’s impacts on medical innovation are already being felt. The bill includes a small molecule penalty, which mandates small molecule drugs – like aspirins, and medications to treat high cholesterol and allergies – become eligible for government-mandated price negotiation nine years after hitting the market. Meanwhile, more complex biologics become eligible for negotiation after 13 years. This policy discourages investment in small-molecule medications, particularly when 50% of a drug’s revenue is seen after year nine. New proposals, such as the SMART Prices Act, would mandate all drugs be eligible for price negotiation after only five years. Such a change would be devastating for biotechnology startups.

According to research conducted by Vital Transformation, expanding the IRA’s government-mandated drug pricing policies would lead to nearly 230 fewer U.S. Food & Drug Administration approvals of new medicines or new uses over 10 years, impacts felt most heavily in oncology, neurology, and rare diseases.

Another top concern about drug price negotiation policies is their potential impact on jobs within these critical industries. Vital Transformation estimates the U.S. life sciences ecosystem could lose 66,800-135,900 direct jobs in the next decade. Massachusetts would take a significant hit, likely losing more than 78,000 jobs.

The intent of this legislation is admirable, but Congress should assess the entire drug pipeline. For example, three of the biggest pharmacy benefit managers control roughly 77% of all U.S. prescription drug claims and pocketed more than $450 billion in revenue in 2020, up from $300 billion eight years ago.

There is ample opportunity to improve our drug pipeline to ensure patients can affordably access the lifesaving medications they rely on while encouraging continued research and development of new treatments and cures. We can’t sacrifice innovation by moving forward with these untested policies.

Ari Fine Glantz is the executive director of the New England Venture Capital Association.

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