President Biden’s Inflation Reduction Act (IRA) is a “penalty on success” and has already led to companies dropping clinical programs, says biopharma advocacy group BIO.

At Bio Europe Spring last week, David Thomas, VP of Industry Research at lobby group the Biotechnology Innovation Organization (BIO), reflected on the “very tough times” the biotech industry has experienced over the past year due to reduced public and private funding.

While he hoped macro-economic factors would resolve themselves to dig the industry out of this slump, he also stressed to the investors and biopharma executives in Basel, Switzerland the need to rally against “the anti-industry political environment,” specifically “the Inflation Reduction Act, or as some are calling it the Innovation Reduction Act.”

Inflation Reduction Act is shown using a text and the US flag

President Biden signed the IRA into law last August with the intention to – as the name suggests – reduce inflationary pressures and avoid a potential recession by boosting clean energy, strengthening supply chains, and increasing tax revenues.

IRA also aims to reduce healthcare costs by extending premium subsidies in the Affordable Care Act’s (ACA) marketplaces and lowering prescription drug prices, but according to Thomas such policy – along with the more recent presidential call to cap insulin prices – will align the US pharma market more closely with its European counterpart and stifle innovation.

“Though there were a few positives in the new law, such as limiting out of pocket costs for patients, and some new climate initiatives, there was a major shift in the way top selling drugs are going to be priced in the United States,” he said. “These top selling drugs will be subject to price negotiation or price fixing and that’s likely to spread across into private markets and across borders.

He added: “This new law in the US is a penalty on success and it’s changing the long-term strategies for companies here in Europe and in the US, and it couldn’t come at a worse time.”

The Act’s different timelines for biologics versus small molecule drugs favors the former, with large molecule products being selected for negotiation 11 years following approval negotiations rather than seven. As such, areas like CNS, depression, or pain and addiction will be significantly hit, Thomas argued, as 85% of the clinical pipeline is small molecule.

“On pain and addiction, specifically, we see that area is already seeing a clinical pipeline drop of over 40% in our overall industry pipeline – just one example of a disease area with a great unmet need that is now likely to have innovative solutions challenged by these new laws,” he said.

“And for rare disease, there are drugs that will lose their exemption from this pricing if they go on to have a secondary indication for their disease drug. We’ve already seen companies drop clinical programs because of this, because they want to remain excluded from the myopic rules that really in the end only ever hurt patients.”

Beyond BIO, there has been Republican pressure to repeal parts of the IRA but such an overturn is unlikely, according to commentators.

Furthermore, President Biden stressed the need to keep the Act in place, writing in statement this month: “What Congress should not do is repeal laws like the Inflation Reduction Act, which would represent one of the biggest Medicare benefit cuts in history and raise costs for prescription drugs, health coverage, and home energy—all to give billionaires a tax cut.”