RE:RE:RE:RE:RE:RE:Inflation Reduction Act (IRA) boosts biological drugs May 01, 2024 - Drug Companies, VCs Rethink R&D Strategies as IRA Stands Strong in Court
Drug development had already been trending toward biologics. This drug class received 30% more VC funding in 2022 than small molecule candidates, noted John Stanford, executive director of life sciences venture capital coalition Incubate—but the gap jumped to 50% in 2023, and Stanford contends that
the IRA is driving much of that shift. Pfizer was the first Big Pharma firm to cite the IRA when it decided to
shift its oncology R&D strategy to focus more on antibody-drug conjugates and bispecific antibodies and less on small molecules. Stanford also noted that Vir Biotechnology discontinued its innate immunity small molecule pipeline and that
Protagonist Therapeutics has announced plans to discard a small molecule treatment for ulcerative colitis.
There will be other IRA considerations besides the pill penalty, said Christiana Bardon, co-managing partner of biotech investment firm MPM BioImpact. Because the patent protection clock starts at the first approval, “biotech and pharma companies . . . won’t launch small indications first,” she said.
Bardon said that the IRA will ultimately affect the net present value of drugs, or the total amount of money that products could make over their lifespans, and it will cause shifts in strategy to buffer against losses.
As for the pill penalty, Stanford said that drugs make about half of their revenues in years 10–13 following approval. So, for small molecules to be potentially subject to price negotiations at 9 years would cut out a ton of profit for the companies. That means that startups or early-stage firms seeking private investment simply should not try to pitch small molecules, Stanford said. “Just simply don’t. Reformulate as a biologic because that is what Congress is telling us to do.”