IRA doesn’t decrease innovation – defense is oversimplified.

The August 2022 passage of the Inflation Reduction Act (IRA) is expected to transform the ways in which Medicare pays for prescription drugs, especially by enabling Medicare to negotiate for the prices of certain high-cost medications used by its fifty million beneficiaries, primarily seniors. The pharmaceutical industry by and large opposed the passage of the law, arguing that its drug price negotiation provisions would dramatically harm innovation,1 “propel[ling] us light years back into the dark ages of biomedical research,”2 <<<FOOTNOTE 2 BEGINS>>> 2 New drug pricing deal could propel us ‘light years back into the dark ages of biomedical research.’ BIO. Biotechnology Innovation Organization, July 6, 2022. https://www.bio.org/press-release/new-drug-pricing-deal-could-propel-us-light-years-back-dark-ages-biomedical-research <<<FOOTNOTE 2 ENDS>>> pointing to the Congressional Budget Office's (CBO’s) estimate that the law would lead to (modestly) fewer new drugs coming to market over the next thirty years (a 1% reduction).3 In our view, however, a full understanding of the IRA's impact on innovation requires considering not merely the number of new drugs that might come to market after the law's passage but the clinical value those new drugs deliver to patients, as well as other policies implemented by the Biden Administration alongside the IRA that are designed to reward and promote clinically valuable innovation. Analyzing these policies in detail demonstrates that IRA opponents’ innovation concerns are overstated and oversimplified, overlooking important dimensions of innovation for patients.