[A]---Revenues. Empirically models globally. Every company’s pulling out.

Dana Goldman 23, PhD, Economics, USC; et al., 4-13-2023, “Mitigating the Inflation Reduction Act’s Adverse Impacts on the Prescription Drug Market”, USC Leonard D. Schaeffer Center for Health Policy and Economics White Paper Series, https://healthpolicy.usc.edu/research/mitigating-the-inflation-reduction-acts-potential-adverse-impacts-on-the-prescription-drug-market/, BEJJP-ATJ [6-22-2023]

Adverse Effects of the IRA on Innovation and Plans

Finding 1: The IRA may reduce the discovery of new treatments.

Lowering pharmaceutical revenues leads to less R&D investment and fewer drug discoveries over time.13-15 The IRA is expected to reduce revenue to pharmaceutical manufacturers from the combined effects of drug price negotiation, inflation rebates, and required manufacturer discounts. Taken together, these provisions have been estimated to lead to an approximately 31% decrease in U.S. pharmaceutical revenues through 2039 and result in 135 fewer new drug approvals during the same period.16

Lowered revenues may lead to less research, especially for follow-on drug innovation. One study demonstrated that introduction of the Part D program and thus increased market demand led to an increase in innovation overall, but skewed toward non-breakthrough innovations.17 Thus, the expected reduction in revenues with the IRA is likely to decrease innovation for both novel, groundbreaking drugs as well as those that are less novel but have large consumer markets, such as the elderly population, which accounts for a significant portion of overall healthcare and pharmaceutical drug utilization in this country.17 Consequently, it would not be surprising that potential decreases in Medicare reimbursements due to the IRA’s price control provisions may reduce financial incentives to develop drugs against diseases that disproportionately impact the elderly, such as Alzheimer’s disease, cancer and heart failure.15

According to drug manufacturers, the IRA is already impacting life science companies’ R&D investment decisions. For example, Alnylam mentioned in its October 2022 earnings report that it had suspended development of a treatment for Stargardt disease as a result of needing to “evaluate the impact of the Inflation Reduction Act.”18 In November 2022, Eli Lilly claimed that the IRA was a key reason it ended investments toward developing a drug for certain blood cancers.19 A November–December 2022 survey from the Pharmaceutical Research and Manufacturers of America indicated that 78% of its member companies are expecting to cancel some of their early-state development projects, and 63% are expecting to shift R&D investment focus away from small molecules as a result of the IRA.20

These statements mirror decreased investment in drug innovation in Europe as a result of pharmaceutical price controls. As a result of the UK National Health Service’s drug cost reductions and 24.4% mandatory manufacturer rebate on branded revenues, only 59% of new medications launched between 2012 and 2021 were available in the UK compared to 85% of those medications being available in the U.S.21 For instance, breakthrough therapies for cystic fibrosis were not available for many years in the UK.22 While not all the uncovered drugs in the UK represent significant clinical advances, many of them do. Trends in decreasing investment are seen in other countries as well, including Germany, France, and Italy, and companies such as Bluebird Bio have indicated withdrawals in developing novel gene therapies for rare diseases as a result of these price controls.21