On January 27, I hosted Ryan Collins of Edenbridge Pharmaceuticals, Robyn L. Peters of Viver Health, and Kent Rogers of EQRx to discuss the implications for the Inflation Reduction Act (IRA) on private-sector initiatives, specifically how it pertains to private-sector companies focused on value and cost reduction in medicine. The panelists considered the IRA from their diverse perspectives working in health care, including their experiences in drug development, market access for drugs and contracting, value-based care delivery, specialty pharmacy, and insurance benefit design.
With such a far-reaching multitude of health care–related provisions, drug developers and manufacturers and those who help manage patient care with medications are examining how the bill may affect their ability to develop new drugs and get them used to the most efficient degree possible. The panel raised a few issues. First, there is no focus on value in the IRA; what is cost-effective is not always the cheapest, and the IRA does not recognize that. Furthermore, instead of expanding the use of efficiently developed drugs and biosimilars, the IRA selects the biggest for price control, not the most wasteful or the most inappropriately priced. Private companies might be disincentivized from investing in new indications or pursuing new uses of a medicine proven safe and effective.
In addition, it should be considered that the drug delivery supply chain is tightly connected to the price of drugs, with physicians, hospitals, pharmacies, and insurers often getting paid based on a percentage of the price of the drug. When the drug prices are affected, practice patterns are likely to change—and not toward the less expensive treatments. The IRA also increases the amount of risk taken on by insurers and biopharmaceutical companies for higher-cost patients in Medicare Part D; this is likely to put further pressure on smaller health insurers and biotechs, which can result in consolidation. All panelists cited examples in which the IRA may result in decisions and actions that drive up costs, including more investment focus on single indication drugs and large molecules, health plans, and provider consolidation.
It remains to be seen exactly how health care businesses will be affected. It is clear that the IRA does not enhance value or pay for value in care delivery. It is solely focused on price with a ceiling. Even if a drug has value, it can still have the price set to a level that is well below what health technology assessors would evaluate is its worth. Furthermore, government intervention in price does not make it easier for businesses developing low-cost medicines to successfully compete with one another, as they enter a market with an artificially low price bar.
The panelists stated that the law’s implementation should be slowed down to allow the biosimilars market to develop, assess how that market event will drive down costs, and support the growing trend in the market toward value-based payment. Importantly, they also said that investors are particularly wary of uncertainty, so clarity is important to allow investors and business operators to set expectations and adjust to the law and its implications.
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