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How the IRA May Shift Economic Incentives for Drug Manufacturers: Dr Julie Patterson


The Inflation Reduction Act (IRA) has potential to shift incentives for drug manufacturers and impact the amount of long-term evidence generated for approved drugs, said Julie Patterson, PharmD, PhD, senior director of research at the National Pharmaceutical Council.

Aspects of the Inflation Reduction Act (IRA) have potential to shift incentives for drug manufacturers and impact the amount of long-term evidence generated for approved drugs, said Julie Patterson, PharmD, PhD, senior director of research at the National Pharmaceutical Council.

In a study published in The American Journal of Managed Care® (AJMC®), Patterson and colleagues discussed potential unintentional effects of the IRA. The paper, "Unintended Consequences of the Inflation Reduction Act: Clinical Development Toward Subsequent Indications," highlights several areas of small molecule drug research and development that could be impacted as the IRA's Medicare Drug Price Negotiation Program is implemented.

In previous video interviews with AJMC, Patterson spoke about the study's findings and what they could mean for pharmaceutical innovation, as well as how the unintended consequences may impact patients.


How does the IRA shift economic incentives for manufacturers, and how could shifting incentives impact drug development?

We already talked a bit about what the research showed and what the potential unintended consequences of the IRA might mean for clinical development. There's another area that will also be impacted by the IRA's clock for small molecule drugs that could reduce the amount of available information typically used by providers to inform patient-centered medicine and establish clinical guidelines. It takes a long time to generate evidence about the safety and effectiveness of new medicines. This is true for evidence required to gain FDA approval of a subsequent indication, which we've talked about already. It's also the case for long-term outcome studies that don't necessarily result in a subsequent indication, but do help to provide critical information that clinicians and providers rely on to inform best practices to treat patients and help establish guidelines.

We published a case study late last year exploring how the IRA's short timeline to potential price setting reduces the incentives to generate this evidence. The concern is that providers and their patients may know less about the benefits of new medicines as a result.

What questions remain around implementation, and what are potential policy recommendations to address the issues you've identified in the paper?

We'll be closely watching the implementation of the Drug Price Negotiation Program because there is still so much unknown about how the program will be implemented, and the choices that are made can exacerbate or perhaps help mitigate the potential unintended consequences that are being identified.

For example, what evidence is the government going to value in determining the set price? Is the government engaging solely in a cost-reduction exercise, or is it trying to pay based on the value of a medicine? And critically, how will the patient perspective be incorporated into the process, both for the first 10 drugs and going forward? People living with diseases, their families, their caregivers, ought to be critical voices in a process that is supposed to help patients. The final guidance from CMS about how their price determination process will be implemented was not clear about the patient experience, how that or the patient preferences and priorities will be incorporated into their decision. Failing to incorporate the patient voice in a systematic and transparent way threatens access and continued innovation.

Our paper provides important data about the potential impact that the IRA's clock towards potential selection for price setting of small molecule drugs may have in delaying launches and reducing the number of diseases and patient populations that see newly approved therapies. It's important to note that the IRA's clock towards selection for the drug price negotiation program is shorter for small molecule drugs than biologics. So, many have called for extending the clock for small molecule medicines to at least be the same as biologics to prevent the so-called "pill penalty." Others have noted the potential unintended consequence of the IRA on innovation and access to new treatments that treat orphan or rare diseases. There are proposals designed to help dampen the negative impacts of the IRA for patients living with rare conditions.

And finally, how the patient perspective and clinical evidence—including real-world evidence—is incorporated by the Centers for Medicare and Medicaid Services in implementing the drug price negotiation program could exacerbate or help mitigate the unintended consequences on patients that the paper outlines.

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