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Biotech Provisions in the IRA

What is the IRA?

The Inflation Reduction of Act, passed on August 16, 2022, was a bill introduced by Rep John Yamurth from Kentucky. It focuses on climate, energy, health care costs, and some other tax changes. The bill also authorizes a massive $740 billion in new spending over the next 10 years

What about the biotech provisions?

This subset of the bill, aimed at lowering healthcare costs for Medicare patients, creates restrictions, price caps and other things that affect the pharmaceutical industry.

  1. Price negotiation for certain Medicare drugs: allows federal government to negotiate the prices for a small number of drugs(certain categories of drugs excluded from negotiation)

  2. Creates 'maximum fair price' for given drug: determined by factors like avg sales price, weighted negotiation price, and % of drugs' average manufacturer price)​​

  3. Rebates for price increases above Inflation: requires drug manufacturers to pay a rebate if price increase exceeds rate of inflation

  4. Caps out of pocket spending for Medicare beneficiaries at $2000

  5. Limits cost sharing for insulin at $35

  6. Improves access to vaccines

Is the law good or bad?

Although the bill aims at lowering healthcare costs for Medicare patients by capping the price of drugs, it does harm innovation and R&D in the pharmaceutical industry drastically. 

For drug companies, this law significantly reduces their profit, much of which goes back into research and development to create new and improved drugs. This is the reason that many big pharmaceutical companies like Amgen, Merc & Co, and Eli Lily have all vocally expressed their discontent for the bill and are anticipating negative implications in the near future. 

Vital Transformation estimated the impacts of the bill's provisions, and found some horrific results. Had the IRA existed since 2014, between 24 to 49 therapies would not have come to the market, far outweighing any benefits that the bill could have. They also estimate that nearly 140 drugs may not be developed at all in the next decade! Read more alarming statistics about the bill here.

What are your thoughts? Is this drastic loss of innovation and new therapies justified?

I'm super interested. Where can I learn more?

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  1. Watch this riveting debate discussing the IRA and the implications it could have: Debate

  2. Discuss the provisions with Councilmember Tanaka at his office hours. Sign up here: Office Hours

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