Concurrently, a preprint from the industry-backed Vital Transformation found a 50% drop in company investments into small-molecule drug development.
The 25 branded drugs with the highest 2022 Medicare Part D spending have become nearly twice as expensive since they entered the market, pointing to the value of pricing-control policies such as the Inflation Reduction Act, according to a report published Thursday by the AARP. But a recent study by an industry group suggests the IRA also has downsides for small molecule development.
Using 2022 data from the Centers for Medicare and Medicaid Services, the AARP researchers zeroed in on the 25 Part D drugs, which had not yet been selected for price negotiations. The report found that taken together, these medicines were collectively dispensed to more than 7 million beneficiaries—and accounted for almost $50 billion in spending.
Following the prices of these medicines from their respective launches, the researchers found that their list prices have ballooned by 98% on average, with the cost hikes ranging from 0% to 293%. For 20 of the 25 drugs, the lifetime price increases “greatly exceeded” the annual rate of general inflation over the time span that these products have been on the market, according to the report.The lifetime price increases since market launch accounted for more than 40% of the current list prices for these 25 drugs.
“Higher government spending driven by high and growing drug prices will affect all Americans in the form of higher taxes, cuts to public programs, or both,” the report read, adding that the growing expense of the treatments makes them inaccessible to more patients, leading to an overall decline in health outcomes.
“These findings highlight the importance of Inflation Reduction Act provisions that allow the Medicare program to negotiate prescription drug prices and require drug companies to pay penalties when they increase their prices faster than the rate of inflation,” the report states.
While the long-term effect of the IRA drug price negotiation program “remains to be seen,” according to the AARP, “given current prescription drug prices and the magnitude of lifetime price increases seen among many popular brand-name drugs, even a small movement in the right direction will result in a substantial improvement over the status quo.”
Hurting Innovation
In contrast, a study posted on January 7 by the industry-backed analytics firm Vital Transformation highlighted purportedly negative impacts of the IRA on innovation and investment.
The study—which has yet to be peer-reviewed and is currently up on the preprint server medRxiv—focused on biopharma companies below $2 billion in market cap and found that the number of early-stage clinical trials for small-molecule drugs has crashed by 70% since the IRA was passed into law. Investments in the modality, meanwhile, dropped by 50%.
According to the preprint, its results constitute “evidence of a decline in the development of new therapies” for the Medicare-aged population since the passage of the IRA. On the other hand, while its analysis of large-molecule drugs remains “statistically inconclusive,” the Vital Transformation study suggests that “investors perceive large molecules to be of a lower investment risk relative to small molecules after IRA’s passage.”
In an investor note late Thursday, Leering Partners analysts noted that given the results of the preprint, “industry participants need to commit more time and capital to educate industry stakeholders, political officials, and the public about the value of novel therapies.” Still, the analyst firm pointed out that Vital Transformation is an industry-sponsored firm “whose clients include many of the leading biopharmaceutical companies and innovation advocacy organizations.”
