TLDR:
- Federal judge in New Jersey upholds Inflation Reduction Act challenges by Johnson & Johnson and Bristol Myers Squibb
- Pharma companies and VCs reconsider R&D strategies due to IRA impact on drug price negotiations
Drug companies and venture capitalists are reevaluating their research and development strategies in light of the Inflation Reduction Act (IRA) standing strong in court. The IRA, which outlines drug price negotiations, has faced legal challenges from various pharmaceutical companies and trade groups, but with the recent federal judge ruling in New Jersey, it seems the law is here to stay. This has prompted Big Pharma firms like Pfizer to shift their R&D focus towards biologics in response to the IRA’s “pill penalty,” which shortens patent protection for small molecules.
While some companies like Eli Lilly and Daiichi Sankyo are maintaining their current strategies, others are considering how the IRA will impact their net present value and market opportunities. The law’s effect on the Medicare Part D program, capping individual out-of-pocket drug spending, is also prompting a shift towards “safer science” investments, such as me-too drugs. Startups and early-stage firms are advised to avoid pitching small molecules for investment due to the IRA’s implications.
Although bipartisan legislation has been introduced to align the grace period for all drugs at 13 years, it remains uncertain if this will pass before the next presidential election. In the meantime, the IRA’s current form is seen as hindering drug development, urging the industry to focus on incremental gains rather than riskier pursuits. The future of pharmaceutical R&D and investment strategies remains complex and uncertain in the face of evolving regulatory landscapes.
