Biotech - IRA: Prolific or Propaganda?

On August 16, 2022, US President Joe Biden signed the Inflation Reduction Act bill, or the ‘IRA’. The bill was designed to relieve the country by reducing deficit, backing alternative energy initiatives, and reducing the price of drug costs for patients.    

But the IRA has had its own share of criticisms, especially in the biotech sector. Let’s take a look at how the IRA bill has impacted biotech and determine if the Act is all that it is said to be, or a political ploy that came about during a sensitive election period.  

Why the IRA is necessary

In the United States, the world’s largest market, drug pricing has always been an issue; an issue that is primarily caused by the lack of regulations and negotiations implemented for drug companies. That goes especially for name-brand manufacturers with no competitors. In most other countries, this is not the case as governments regulate drug pricing for manufacturers. 

But in August 2022, the Biden administration lowered the prices of certain drugs for millions of Medicare users in the United States. 

‘They did this through the Inflation Reduction Act,’ said Roop Chandwani, CEO of the life sciences and pharma executive headhunting firm, Mazards. ‘The IRA was posed as a solution to unaffordable drug prices in the US.’ 

It requires the US government to negotiate drug prices with big pharmaceutical executives as well as force big pharma companies to pay rebates when drug prices rise more quickly than inflation rates, amongst other provisions. Insulin users, for instance, now only pay $35 out-of-pocket for products. This is in comparison to the (up to) $120 they were paying before. 

The IRA has already provided a great deal of relief to many, and it came right in time for a sensitive midterm election season for the Democratic Party.

Problems with the IRA

A new set of questions have also arisen concerning the IRA regulations: Will drug quality be compromised? And will it impact the overall health of patients?   

‘One of the main contributors to high drug prices is the struggle to keep R&D costs low,’ says Aamir Butt, Chairman & CTO of Mazards, a life science executive search firm in London. ‘By lowering R&D costs, drug prices can stay low too.’ 

If further pricing restrictions come as a result of the IRA, pressure will be added to big pharma science advisors to continue minimising R&D costs; especially because of increasing inflation. One of the ways that cost-reduction is being accomplished in the biotech industry is by using artificial intelligence. 

Elephant in the boardroom: why aren’t we talking about the IRA? 

Despite all that the IRA has already accomplished, the Act was a generally absent topic at this year’s J.P. Morgan’s Health Conference held in January of 2023. J.P. Morgan’s Health Conferences are one of the biggest global health science conferences each year. 

Silence in San Francisco

This year, the 41st, was the first time the conference was held in several years due to the pandemic. Among the hot topics that were covered in abundance (and rightfully so) were ‘Artificial Intelligence’ and ‘Oncology’. Yet the IRA did not make as many discussions as some felt it should have.      

‘One thing that was not broached,’ said Zach Lomis, ‘was how the IRA will integrate with the healthcare system, as well as how reimbursement will work. I'm still continually surprised that I'm not hearing about that, and I don't know why—biotech investors should be thinking about it now.’ 

Is the IRA just the beginning?

So, are initiatives like the IRA in the US and The Life Science Vision Plan in the UK—a separate plan designed by the UK Government to enrich government support of the life sciences—enough? 

Sam Bruening, founder of Accord Investment Partners, believes conventional methods of innovation should be under review: ‘Have we got the whole macro perspective as investors in balance? Can the global markets support all of these therapies that are priced on the cost-benefit analysis?’ 

Washington awakes

In November of 2022, the United States held midterm elections. Democrats had a strong showing, and it came only a few months after the IRA bill sailed through congress to land on President Biden’s desk to be signed into law. Media was there to cover it. 

The IRA is considered to be one of the most important actions taken towards the fight against big pharma pricing issues, not to mention climate action. Its visual presence sent messages throughout various markets, and even to politicians themselves.

However, the question remains: will the reach of the IRA extend beyond Biden’s administration, and beyond the current economic struggles? Many aren’t sure why it’s not being discussed more in spaces like JP Morgan’s Health Conference, Digital Health World Congress, or Bio Europe 2023. One thing is for certain: the potential disruptions that the IRA could cause are not worth betting against. 

Conclusion

In conclusion, the IRA challenges the notion of how drug pricing is structured. If the IRA can continue to lower drug costs as it did for Medicare insulin users, great impacts are on the way for the innovation stages of pharmaceutical research, primarily, reducing its cost. 

The Inflation Reduction Act has received mixed reviews from politicians, citizens, and news sources alike, but only time will tell if the IRA regulations will reach beyond the Biden administration, or, if the IRA was simply a political move made for good headlines during a vulnerable election period. 

For now, it seems to be a topic we all should be paying attention to. 

 

Mazards, a retained life sciences executive search firm in London, commissioned this piece from Dastrum, a life sciences marketing company.