ICYMI: Biden’s Drug Price Controls Kill Innovation and Drive-Up Long-Term Costs
President Biden and Democrats’ so-called Inflation Reduction Act (IRA)—or, more accurately put, the Innovation Reduction Act—has been bad news for America’s leading role in new drug development and patients hoping for new therapies.
A new report released today shows another devastating impact of this deficit-crushing law: it will cause patients to lose access to an estimated 40 PERCENT of new medicines or up to 139 new therapies over the next decade.
The study, released by biotech research group Vital Transformation, analyzed the IRA’s economic impacts to the drug development ecosystem and access to new therapies.
- Notably, the report found that if the IRA drug price controls were in place in 2014, “between 24 and 49 therapies currently available today would most likely not have come to market and therefore not available for patients.”
Looking forward, the report finds that the IRA’s price controls present significant consequences to new drug development by:
- Decreasing R&D: The IRA’s drug price controls will lead to a substantial reduction in revenue for biopharma companies, which reduces their ability to reinvest into future development of new drugs.
- Jeopardizing Future Cures: The law will lead to up to 139 drugs not being developed over the next ten years.
- Discouraging Orphan Disease Therapies: Drug developers continue to conduct research on approved therapies for other diseases. The IRA disincentivizes investments in therapies for rare diseases as the orphan therapies with multiple indications are subject to IRA price controls.
- Driving up Costs: The IRA drug price setting encourages the development of more costly doctor administered large molecule drugs over small molecule drugs acquired from the pharmacy.
- Reducing American Jobs: Less revenue and R&D because of the IRA will result in up to a loss of between 66,800 – 135,900 direct and 342,000 – 676,000 indirect jobs in the U.S. biopharma ecosystem.
CBO Underestimated the Law’s Impact:
The Congressional Budget Office (CBO) estimated government drug price controls in the IRA would result in two fewer drugs being brought to market over the next decade, five fewer drugs in the subsequent decade, and eight fewer drugs in the decade after that.
Unfortunately, CBO’s analysis appears to have significantly underestimated the impact and consequences from the IRA’s price controls on drug development and innovation.
Less than a year into IRA’s enactment, drug makers have already pulled back on as many drugs as CBO had predicted would not reach the market over the whole decade:
- Last October, drugmaker Alnylam indicated it was ending development of a treatment for a rare eye disease so the company could “evaluate the impact” of the IRA.
- In December of 2022, Eli Lilly announced it is discontinuing development of a drug for certain blood cancers as a result of the IRA.
- Just four months after the IRA was enacted, the consulting firm Horizon Government Affairs found that at least 24 companies had announced that they’re curtailing drug development because of the new law.
Others have also found these Democratic policies will harm the economy.
- Tax Foundation: Price controls could raise taxes “up to 1,900 percent” on drug companies.
- Univ. of Chicago Economist: Cuts in innovation in new cures “will lead to health losses valued at $18 trillion” by 2031.
Biden’s Budget Doubles Down on Innovation-Killing Controls:
As if the harmful consequences of the IRA’s drug price controls weren’t already apparent, President Biden wants to double down on this price control policy.
- Specifically, his recent budget proposes to expand the scope of the price controls by “negotiating more drugs and bringing drugs into negotiation sooner after they launch.”
- This will undoubtedly lead to less research and development, drug programs being discontinued, and ultimately fewer cures for patients.
The Bottom Line: The IRA’s price controls will lead to hundreds of new cures for patients not coming to the market, raise taxes on the firms working toward developing life-saving drugs, and jeopardize thousands of jobs. Up till now, America’s leading role in drug development has produced better therapies to manage and treat diseases, which has reduced associated health care costs. The Innovation Reduction Act’s price controls will kill innovation and lead to less therapies reaching patients.
