IRA survey: biotechs bracing for impact

Companies are upending pipeline and business strategies, and M&A will become more of a buyers’ market

Biotechs are bracing for impact of the Inflation Reduction Act, with most anticipating changes to their business model or pipeline, and only a minority — mostly small companies — believing they can carry on as usual, based on a survey conducted by BioCentury with the support of BIO.

A sizeable proportion aren’t yet sure of the impact, and are working to figure it out. A memo released by CMS Wednesday shed at least some light on how the agency intends to implement the IRA’s price-setting provisions. A host of unknowns remain, however, from the magnitude of the discounts that will be imposed to precisely which products will be exempt from the program. 

The IRA, signed into law on Aug. 16, 2022, reshapes the commercial landscape for biopharma companies, primarily by changes to the prices Medicare pays for drugs, imposing price negotiations on certain high-spend Medicare drugs, penalties for price increases that exceed inflation, and changes to the financial liabilities companies incur to subsidize coverage.

Changes to Medicare pricing are likely to be echoed by private payers, and reductions will create pricing pressures for other medicines in the same therapeutic class.

Passage of the IRA has caused companies large and small to get up to speed on the complexities of the act, which applies to small molecules and biologics, but carves out exemptions for orphan drugs, if the drugs are approved for a single indication, and blood- and plasma-derived products. It creates a new decision tree, which many companies are still navigating, for how to build a pipeline and commercialization strategy in the new framework.

BioCentury surveyed biotechs and VCs to gauge how they are thinking about the IRA, what impact the act will have on their programs, and how they expect it to change the dealmaking landscape.

A pdf version of the slide deck can be found here.

BioCentury and Putnam are hosting a webinar on the Inflation Reduction Act, “Navigating the IRA: What Biopharmas Need to Know,” on Thursday, March 30. Registration details can be found here.