IRA Impact on R&D
PhRMA has made numerous statements about the IRA negatively impacting innovation.
To date, the debate has focused primarily on the fewer number of future medicines that will come to the market. However, what really needs to be understood is exactly what drugs and disease states are likely to see less Pharma innovation in the future, and which are the “canneries in the coal mine” that will give us an early signal of reduced pharma innovation? Having led pipeline re-prioritization secondary to IRA for several companies it is becoming quite clear that there are seven primary areas of R&D that are being targeted for reduction. These include shifts away from:
Oral small molecules to injectable biologics R&D, which is being driven by the fact that the IRA allows for an additional four years before the initiation of Medicare Negotiation for biologics versus small molecules. Companies like Eli Lilly and Pfizer have already stopped development of several small molecules to avoid the IRA “pill penalty.”
Post-Approval R&D, where Phase 4 research of newly approved medications now has a significantly reduced ROI. The biggest impact here will be in Oncology R&D where it will result in either a reluctance to prescribe approved medications for new tumor types and stages where there are non-phase 3 studies that suggest possible patient benefit or an increase in off-label prescribing. Either way, patient care and outcomes will be negatively affected.
Orphan drug R&D, where companies like Alnylam have already scrapped previously planned follow-on indications of a currently approved orphan drug (Vutrisiran for Stargardt disease) because the Medicare negotiation exemption in the IRA is limited to orphan drugs with only a “single” indication.
Pediatric R&D, which often accrues patients at a much slower rate than the phase 3 adult studies and typically are not completed until much later (9+ years post-drug approval) in the drug’s development life cycle.
Drugs with a high Medicare/Medicaid case mix, to minimize the impact of IRA inflation penalties and Medicare negotiation.
Generic and Biosimilar drugs, whose profit margins are frequently being reduced significantly immediately before LOE by Medicare negotiation.
Indications with small patient populations, where manufacturers will delay research, filing and/or launching a new drug in the U.S. in indications with small patient populations to avoid starting the Medicare negotiation clock before they can file and launch in an indication with a much larger patient population.
As we move forward, Pharma will need to closely monitor the unintended consequences of the IRA legislation in these seven areas, and if necessary, look to Congress to adjust IRA legislation accordingly. For those interested in more on the impact of IRA on Pharma R&D I highly recommend the following Michael Abrams interview with Pharma Voice.
You can find the original LinkedIn post here.