Inflation Reduction Act Impact on the Biotech Industry

The Inflation Reduction Act (IRA), enacted in August 2022, emerged as a central topic of discussion at the annual Biotech Showcase held in San Francisco last January.

This new legislation carries the potential to significantly influence drug development and pricing, with studies indicating a possible 31 percent decline in profits and potential reductions in drug approvals in the years ahead.

Neal Masia, Co-founder and CEO of EntityRisk, addressed attendees, highlighting the evolving landscape for biotech and healthcare companies. He emphasized the growing societal demand to comprehend the value of innovative advancements, placing newfound pressure on US entities to demonstrate upfront the value of their innovations.

The IRA’s provisions, aimed at curbing healthcare costs and enhancing drug affordability, are poised to intensify the pressure to prove innovation’s value.

As participants of the Biotech Showcase, the Investing News Network gained insights from pivotal discussions regarding the IRA’s potential ramifications on the biotech sector in 2024 and beyond. Here are the key takeaways:

Impact on Biotech Funding

The IRA includes measures such as drug price negotiation and rebates, potentially diminishing profits and influencing biotech funding. Despite challenges, regulatory hurdles present opportunities for positive change and growth. Erin Hertzog, Partner at Foley Hoag, stressed the importance of engaging policymakers to drive innovative solutions, emphasizing collaboration between the industry and government to address pertinent issues.

Concerns arose regarding the IRA’s potential to deter new drug development, particularly small-molecule drugs. The act’s provisions, allowing Medicare to negotiate prices for small-molecule drugs nine years post-approval, may lower costs but could hamper profitability and investment in small-molecule therapies. Conversely, biologics enjoy protection from price negotiations for 13 years, affecting research and development incentives.

Impact on Biotech Innovation

Discussions at the Biotech Showcase underscored the regulatory and policy impacts on innovation across healthcare sectors. Samarth Kulkarni, CEO of CRISPR Therapeutics, hailed the approval of CRISPR-based therapy for sickle cell anemia as a pivotal moment for gene editing, highlighting ongoing innovation efforts.

Amidst pharmaceutical interest in biotech innovation, concerns were raised about achieving a balance between affordability and innovation. Peter Rubin, Executive Director of No Patient Left Behind, emphasized the need for alignment to drive positive changes in the IRA, ensuring affordability without stifling innovation.

Regulatory uncertainty poses challenges for investors and companies, necessitating strategic planning and scenario analysis. Despite the optimism surrounding manufacturing innovations, stakeholders must navigate regulatory complexities to safeguard both affordability and innovation.


In conclusion, stakeholders must advocate for biotech’s significance and educate policymakers to uphold the industry’s vitality amidst evolving regulatory landscapes.

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