The Inflation Reduction Act of 2022, signed into law by US President Biden on August 16, 2022, includes several provisions to lower prescription drug costs for people with Medicare and reduce drug spending by the federal government. CBO, Congressional Budget Office, estimates that the drug pricing provisions in the law will reduce the federal deficit by $237 billion over 10 years. How the inflation Reduction Act will have impact on pharmaceutical industry?
The federal government requires to negotiate prices for some high-cost drugs covered under Medicare.
Some medicine eligible for negotiation with the federal government, which are Medicare Part B (retail prescription drugs) and Part D (administrated by physicians). For small-molecule drugs, it’s 9 years after approval by FDA. For biologicals, it’s 13 years after approval by FDA. This could have impact on R&D and the pipeline strategy in pharmaceutical companies. Some companies may change the direction to negotiate with the federal government. Some medicines with the latest technology such as Oligonucleotide therapeutics, Radioligand Therapy are categorized as small molecule drugs.
What is the concern for pharmaceutical companies?
The federal government may think that biologicals drugs are more advanced technology than small-molecule drugs if we consider background of the decision based on the length of re-negotiation. Oligonucleotide-focused biotech companies, such as Ionis Pharmaceuticals and Alnylam Pharmaceuticals as well as big pharmaceutical companies like Johnson & Johnson, Roche, Novartis and AstraZeneca, will have impact on their business. To avoid negotiation with federal government, R&D of Oligonucleotide therapeutics, Radioligand Therapy may lose momentum, or the predictable losses of the sales mighe be offset by other cost such as supply chain and downsizing. This law will be a controversial issue between pharmaceutical industry and federal government.
For further detail, please see below information.
- Explaining the Prescription Drug Provisions in the Inflation Reduction Act. by KFF
- Understanding the Inflation Reduction Act by CSG
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