How the Inflation Reduction Act Is Impacting New Drug Development

Written By Lina LD

The Biden-Harris Administration is celebrating two years of the Inflation Reduction Act (IRA), but behind the scenes, the healthcare industry—especially drug development—is feeling the pressure.

What’s Going On:

  • The IRA allows Medicare to “negotiate” drug prices, but with steep penalties for non-compliance (up to 1,900% in daily excise taxes), it’s more like price-setting.

  • Pharmaceutical companies now face tighter margins and rising risks, leading many to cut back on R&D.

Real-World Impact:

  • Charles River Laboratories says R&D spending is being slashed industry-wide.

  • Roche, AstraZeneca, and Bristol Myers Squibb have paused or canceled drug trials, especially in cancer and rare disease areas.

  • Companies are now prioritizing large-population drugs (to maximize early profits) instead of innovative treatments for smaller, high-need groups.

Why It Matters:

  • Fewer clinical trials = fewer new treatments in the pipeline.

  • Patients with rare diseases or cancers may miss out on breakthrough medicines.

  • The IRA may save short-term costs, but at the risk of long-term innovation.

Bottom Line:

While drug pricing reform is important, policies like the IRA may unintentionally discourage the research needed for tomorrow’s life-saving treatments. Investors, healthcare providers, and patients should be watching this trend closely.

For more healthcare insights or to explore our services, please contact us.


Ava Sullivan

Senior Market Research Analyst at Savoir Strategy Group

Lina LD
Previous

Whole Foods Union Vote Could Spark a Larger Shift in Grocery Retail
Next

Japan’s Bond Yields Are Rising—Here’s What It Means