The Inflation Reduction Act (IRA) directs the federal government to set the prices of the drugs with the most expense to the Medicare program. Price controls in any industry result in less supply of the item being price-controlled. So, the IRA‘s Medicare Drug Price “Negotiation” Program might have been a sensible policy if the price intervention was focused on wasteful or useless medicines. But it isn’t; price controls can target some of the most valuable drugs. By doing so the policy will reduce investment in clinical development of drugs most likely to be price controlled. But, in a new year with a new administration, there are opportunities to fix some of the most significant flaws in the IRA.
When drafting the law, Congress decided to impose price controls after 9 years if a drug was approved by the FDA through a New Drug Approval pathway (NDA). The price controls in the Inflation Reduction Act are imposed after 13 years for biologic drugs approved with a Biologics License Application (BLA). This decision to impose price controls with differential timelines was based on no current empirical evidence or value assessment.
Biologic drugs (BLA-approved) are made from living things such as proteins. In early evaluations of their clinical development process, biologic drugs tended to take longer to develop and with more expense. Biologics are also typically more expensive to manufacture. For the most part, drugs approved with an NDA are small-molecules made by chemical synthesis that are not particularly complex to manufacture. This includes most pills that people take for heart disease and pain reduction. However, the NDA pathway is also used to approve some complex medicines, such as long-acting injectables for HIV, some RNA-based longer-acting drugs, and genetically targeted treatments for cancer. This is where some simplistic shortcuts in IRA policymaking clash with the complexity of science and regulation, with potentially serious effects on drug development.
Consider the example of medicines made through RNA-based technology, which affect protein delivery. There are many types of RNA-enabled medicines, including drugs that use small interfering RNA (siRNA). There are six approved siRNA-based medicines for metabolic and neurodegenerative diseases that are approved through the NDA pathway. A clinical trial in people demonstrated that one shot of an siRNA reduced a harmful, genetically driven type of cholesterol to undetectable levels. There are no known treatments for this type of cholesterol. It cannot be reduced by diet and exercise, but one shot may be able to reduce the risk of heart disease. Developing this technology is a long and expensive process; the first siRNA-based drug was approved 20 years after the discovery of RNAi.
There are 40 industry-sponsored clinical trials underway examining siRNA-enabled technology for other diseases, including rare diseases and cancer. Four industry-sponsored studies use RNAi-based technology. There are 17 industry-sponsored studies on long-acting drugs for HIV. These are just some examples of the clinical investigations that would be limited by the IRA as drafted today. If approved, these medicines could be transformative.
Mistakes were made in the IRA design that Congress can rectify. There is no basis of evidence for the nine-year price controls for NDA-approved medicines, and this should be fixed. If the government feels price controls are necessary, putting them at 13 years for both NDA and BLA approval would mimic the time that most drugs experience generic competition. Fixing this error in the law is essential; complex and vital science is at risk.
Kirsten Axelsen is a visiting scholar at the American Enterprise Institute.
