Thank the IRA for Cuts to Critical Drug Research
By Sally C. Pipes
President Biden's Inflation Reduction Act is just eight months old. It hasn't yet slayed inflation. But it's already gutting drug research and development.
The law gives Medicare the power to impose price controls on certain prescription drugs for the first time in history. By this September, federal officials will select the first 10 medicines subject to price-setting from those covered by the Medicare Part D prescription drug program. The price caps for these drugs will go into effect January 1, 2026.
In the months leading up to the IRA's passage, biopharmaceutical innovators and investors warned that price controls would scare away investment in drug research. And they're being proved right.
Alnylam Pharmaceuticals recently decided not to move forward with a trial for a drug that could treat a rare eye disorder, citing the IRA. Both AstraZeneca and Bristol Myers Squibb have said they plan to cut drug development programs, thanks in part to the IRA.
These aren't edge cases. They're just a few examples of a concerning industry-wide trend. One recent survey of biopharmaceutical companies found that 78% plan to cancel early-stage projects because of the price-setting provisions in the IRA
A collapse in drug research won't affect all diseases or patients equally. The IRA favors biologic drugs, which are produced using living organisms, over small-molecule drugs, which are typically manufactured using chemical synthesis. Biologics are exempt from price controls for 13 years following approval; small-molecule drugs get just nine years.
Small-molecule drugs can typically be taken as oral pills, making them easier and less painful to administer than their biologic counterparts, which are often given via injection or infusion. Small-molecule drugs can also travel across the blood-brain barrier. That makes them important treatment options for patients with neurological conditions like Alzheimer's disease. Many breakthrough cancer drugs are also small molecules.
There's no scientific rationale for privileging biologic medicines over small molecules. But the extra years of sales for biologics are causing drug companies and investors to pause, delay, or cancel efforts to develop new small-molecule medicines.
Inventing a new medicine is famously risky. Just 12% of drugs entering clinical trials end up gaining approval from the U.S. Food and Drug Administration. Of course, investors don't get a refund for the 88% of new drugs that don't pan out.
These failures are why it costs $2.6 billion to develop just one new drug that successfully makes it through the FDA approval process, according to research from the Tufts Center for the Study of Drug Development. Price caps make it all but impossible for drug makers and their investors to make up for their losses by earning a reasonable return on the small number of drug development projects that do succeed.
The Inflation Reduction Act's price controls may keep a lid on the prices of some medicines. But they'll prevent many more from ever being developed. For countless patients hoping for more effective therapies or even cures for life-threatening diseases, that's a tragedy.
Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is False Premise, False Promise: The Disastrous Reality of Medicare for All (Encounter 2020). Follow her on Twitter @sallypipes. This article originally appeared on InsideSources.com.
