OBJECTIVES: The Inflation Reduction Act (IRA) will have impact on drug development and commercialization strategy throughout the product lifecycle. This study aimed to assess the potential consequences on the different steps of the drug development process.

METHODS: We analyzed the preliminary implications of the IRA for drug development, launch, Life Cycle Management (LCM) and Loss of Exclusivity (LOE) using the Inflation Reduction Act of 2022 (H.R.5376 – 117^th Congress), Congressional Budget Office “Additional Information About Prescription Drug Legislation” Report, and relevant hand desk research.

RESULTS: Drug discovery and development emphasis may shift away from small molecule drugs to biologics with longer protection from price negotiation (11 years vs. 7 years exclusion post-approval) and towards the patient population extremes (lower cost general medicine drugs less impacted by the Medicare Part D benefit redesign and orphan drugs excluded from price negotiation). For new drug launches, to counteract the shorter free pricing period that the Medicare drug price negotiation rule creates, manufacturers are expected to launch new drugs or biologics at higher prices per patient to mitigate impact on lifetime sales potential. For LCM, manufacturers may revisit the development of follow-on indications particularly those (1) for which development costs may be NPV-negative given the reduced timeframe between follow-on approval and expected price negotiation, (2) that may push drugs over the Medicare negotiation risk threshold, and (3) could invalidate orphan designation exclusions conferred by the launch indication. Finally, for LOE, as drugs with generic or biosimilar competition are negotiation-ineligible and “imminent” generic or biosimilar entry can delay negotiation eligibility, manufacturers may be less incentivized to employ legal tactics to delay biosimilar entry.

CONCLUSIONS: This qualitative analysis illustrates how the IRA can impact the drug lifecycle from early development to LOE. Further research will be needed to monitor the consequences, expected or unexpected, over time.