WTAS: Inflation Reduction Act already impacting R&D decisions

Nicole Longo
Nicole Longo January 17, 2023

WTAS: Inflation Reduction Act already impacting R&D decisions.

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The Inflation Reduction Act’s (IRA’s) drug price setting provisions, as predicted, are already impacting biopharmaceutical research & development (R&D) decisions. Whether you are looking at estimates of how many fewer medicines or indications will be developed, or noting shifts away from areas of unmet patient need because the law is signaling those innovations are not valued, the IRA’s price setting provisions are a loss for patients everywhere.

In late 2022, PhRMA commissioned a survey of its member companies on the impacts they expect the law to have on their R&D. As you might expect, companies are concerned with how price setting undermines current incentives for many advances critical to patients. As one company expert explained, the price setting provisions of the IRA “are likely to fundamentally change the economics of the pharma industry and disincentivize the industry from placing big bets on diseases with large unmet burdens.” 

While companies will be differentially impacted depending on their specific product portfolios, most respondents project that over time, the IRA’s drug price setting provisions will have significant ripple effects across the R&D ecosystem, impacting companies large and small. 


The survey also asked a number of additional questions to dive in deeper. Among respondents, it was clear the IRA price setting provisions are already impacting, and are expected to have a growing impact on, R&D plans moving forward:

  • 78% expect to cancel early-state pipeline projects.
  • 63% said they expect to shift R&D investment focus away from small molecule medicines.
  • 95% said they expect to develop fewer new uses for medicines because of the limited time available before being subject to government price setting.
  • 82% or more of companies with pipeline projects in cardiovascular, mental health, neurology, infectious disease, cancers and rare diseases expect “substantial impacts” on R&D decisions in these areas.

It’s clear the Inflation Reduction Act institutes an unprecedented government price setting system that jeopardizes access to medicines and future innovations. One company shared that “We’ve already said no to business development acquisitions because of the IRA.” 

Download our infographic for key takeaways or learn more about the impact of government price setting at PhRMA.org/Inflation-Reduction-Act.

Note: Survey commissioned by PhRMA and conducted in November-December 2022 with 25 of 33 PhRMA member company responses.

Topics: Research and Development, PhRMA Member Company, Government Price Setting