North SGV News

Sally Pipes, the president of the Pasadena-based Pacific Research Institute (PRI), said today that the “Inflation Reduction Act” will reduce availability of prescription drugs for senior citizens.

“This morning, Joe Biden and Bernie Sanders will deliver remarks from the White House about their supposed efforts to "lower" drug costs,” Pipes posted on X. “But Sanders' and Biden's so-called ‘Inflation Reduction Act’ will actually cut back on available drugs for seniors by stifling innovation.”

“The IRA will also raise the potential for drug shortages and undermine the generic drug market," posted Pipes.

President Biden and U.S. Sen. Bernie Sanders (I-Vt) today gave a joint presentation at the White House about the 2022-enacted Inflation Reduction Act’s provision that allows the federal government to negotiate the prices of 20 drugs covered under Medicare. 

Biden has proposed expanding that to more than 500 drugs over the next decade. 

Pipes has said that Biden's expanded Medicare drug price negotiations would be “detrimental” to research and development for “future cures, reported Golden State Today.

The IRA's drug-pricing provisions, "or more accurately, price controls — will most certainly impact our ability to fight many types of cancers,” Pipes told South SFV Today in February, saying these provisions "discourage investment in the development of new treatments.”

She said "small-molecule penalty" contained in the IRA "will have an outsized impact on our efforts to develop treatments for cancer."

Under the IRA, the brand-name drugs for which Medicare "negotiates" prices are split into two categories: small-molecule drugs and biologics. The IRA makes small-molecule drugs eligible for "negotiation" nine years after their approval, compared to a 13-year exemption period for biologics.

“This disparity encourages investors and researchers to turn away from developing small-molecule drugs in favor of biologics, given the lengthier period they will have to recoup their investments,” said Pipes. 

“While both small-molecule drugs and biologics are essential for cancer treatment, small-molecule drugs are the only way to target some forms of breast, lung, colon, and other cancers,” she said. 

Pipes also said that this will discourage companies from investing in research into additional indications for an approved drug.

“Why spend money seeing if a drug that works for one form of cancer can work for another form, with the threat of price controls looming?” said Pipes.

She referenced an October 2023 paper, authored by University of Chicago economists, which said that “price setting under the IRA undermines existing intellectual property laws, reducing incentives for investment in research and development (R&D) that discovers new drugs and identifies new uses and populations who can benefit from already-approved drugs.”

“We conservatively find that the IRA’s policy to set prices at 9 years after market entry for select small molecule drugs will reduce their expected revenues in the U.S. market by 8.0%, which implies a reduction in R&D investment of almost 12.3%, or $232.1 billion over 20 years,” wrote the paper’s authors. “Over the same time frame, we conclude that there will be 188 fewer small molecule treatments, including 79 fewer new small molecule drugs and 109 fewer post-approval indications for these drugs.”

Rather than drug-pricing provisions like the ones contained in the IRA, Pipes said out-of-pocket costs could be reduced and transparency increases by "reforming the practices of PBMs."  

“Our current PBM system directly contributes to drug price inflation,” said Pipes. “PBMs receive rebates based on a drug's list price, so they're economically incentivized to design formularies that promote higher-cost, brand-name drugs and steer patients away from generics and biosimilars.”

Pipes said Congress could direct PBMs to be “more transparent” and “require them to pass discounts and rebates along to patients.”

Founded in 1979, PRI is a free market think tank focused on the policy areas of education, economics, health care, the environment, and water supply. Pipes has been president and CEO of PRI since 1991.