Inflation Reduction Act Could Have Devastating Consequences for Americans
The Inflation Reduction Act puts in place an unprecedented government price setting system that jeopardizes access to medicines and future innovations. At the same time, it doesn’t do nearly enough to address the real affordability problems facing patients at the pharmacy.
Learn more about the negative impacts of the Inflation Reduction Act.
Impact on Access to Treatments
Impact on Post-approval Research
Impact on Biosimilars and Generics
Impact on Jobs
Impact on Access to Treatments
- The law is projected to cause an immediate decline in research and development (R&D) spending, resulting in fewer new medicines coming to the market in the future. By some estimates, it could sacrifice more than 100 new treatments over the next two decades. History shows that when foreign governments have set the price of medicines, R&D investment and innovation have greatly declined because governments choose which diseases are worth investing in and which are not.
- This policy jeopardizes access to today’s medicines for Medicare Part B patients because it changes how doctors who administer Part B medicines are paid. Under the new system, doctors are reimbursed based on the much lower government-set price instead of the market-based price used today. It translates to an average reduction in reimbursement of nearly 40%. That could be the difference for some doctors of whether they can afford to administer certain medicines or not. And for rural providers, that could be the difference between whether they can keep their doors open or not. Either way – it means many seniors have less access and have to potentially travel further for care.
- The Part D program relies on competition to control costs and provide seniors with the ability to choose the plan that best fits their needs. Under the program today, Part D plans compete against one another and negotiate discounts from manufacturers as part of this competition. By altering the competitive dynamics of the Part D program, government price setting is likely to lead to more standardized Part D plans and fewer plan options for seniors to choose from.
Impact on Post-approval Research
The law completely ignores the value of post-approval research – the time, effort and investment in drug development that continues long after a medicine is first approved. The policy imposes government price setting as early as nine years after approval for small molecule medicines and 13 years after approval for biologics. These pre-defined times will inhibit the development of countless new treatments and cures. For instance, nearly 60% of oncology medicines approved a decade ago received additional approvals in later years. By setting a pre-determined year after FDA approval for a medicine to be subject to price setting, the law cuts these research efforts off at the knee.
Impact on Biosimilars and Generics
Today, 90% of all prescriptions filled in the United States are lower-cost generics and a robust biosimilars market has emerged. Together, they yield increased competition and substantial savings for patients and the government. The Inflation Reduction Act fails to fully accommodate the time needed for generics and biosimilars to come to market. Additionally, it enables the government to impose a set price for medicines even after a biosimilar or generic competitor comes to market, disincentivizing biosimilar and generic manufacturers from bringing their products to market at all. In the absence of government price setting, biosimilars are projected to drive a more than five-fold increase in savings as new biosimilars launch and existing biosimilars see continued uptake and price declines. These savings are expected to exceed $100 billion between 2021 and 2025. Unfortunately, the biosimilar and generic market is now threatened.
Impact on Jobs
Studies find the negotiation provision alone in the Inflation Reduction Act is likely to reduce biopharmaceutical industry revenues by at least $455 billion over the next decade. On top of that, analysis from the Congressional Budget Office implies an additional $80 billion reduction in industry revenues from the inflation penalty provisions. That brings the total cost to the industry to more than $535 billion.
If industry revenues decline by $535 billion over the next decade, it is estimated that more than half a million industry-supported jobs across the United States would be lost. Another study found that the United States would lose nearly 600,000 jobs supported by biopharmaceutical sector and its extensive supply chain by 2031. This includes more than 100,000 jobs in California and nearly 50,000 jobs in New Jersey. The list goes on and the impact will be felt in every single state where there is a pharmaceutical presence.
Building A Better Health Care System
Medicines should be more affordable for patients in the United States and America’s biopharmaceutical industry is ready to do our part. We support policies aimed at making medicines more affordable and building a more just, equitable health care system. Common-sense, patient-centered reforms built on these goals will help ensure everyone benefits from America’s engine of innovation and gets the care they need and deserve.
We are willing to work with all stakeholders to deliver a stronger, more resilient, affordable and equitable health care system for all. Government price setting is not the answer.
