The Inflation Reduction Act was created and passed to reduce patient and government burden in paying for expensive drugs. While the new legislation is intended to provide Medicare patients with better access to the treatments they need, certain provisions have the effect of penalizing research and driving companies away from developing specific types of drugs—in particular, potential treatments for rare diseases.
These parts of the legislation unintendedly complicate the situation of patients living with rare diseases, and mitigating solutions that help spur development of medications for these rare conditions may need to be enacted. For example, in October 2022, Alnylam made news with suspension of research into its treatment for Stargardt disease, a rare eye disorder, because of the company’s need “to evaluate impact of the Inflation Reduction Act.”
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Alnylam’s decision turned on part of the law exempting drug companies from price-setting negotiations for drugs that treat only one rare disease. With the drug currently approved for treating amyloidosis, if Alnylam proceeds with research into treating Stargardt, it loses its exemption, which has the practical impact of making many such clinical development programs prohibitively costly.
Many of the changes resulting from the Inflation Reduction Act are good for patients. The $2,000 cap on out-of-pocket prescription drug costs for Medicare patients will provide significant relief for seniors and will help ensure patients stay on their medication. The law’s $35 per-month cap on insulin payments is extraordinarily important for the three million-plus Medicare patients who take insulin. Through these measures and others, including expansion of Part D low-income subsidy eligibility and the elimination of the 5% coinsurance payment in catastrophic situations, the law relieves the financial pressure of high drug costs on Medicare patients.
Despite these wins for many patients, the new law is already impacting the discovery and development of new drugs for people living with orphan diseases. Not only are drugs that could treat more than one disease being disincentivized, small molecule medicines, which play an important role in treating neurological disorders, cancers, and other diseases, may also be disadvantaged by the law.
By allowing Medicare to negotiate prices after just seven years, compared with the 11 years afforded to large molecule or biologic treatments, the act negatively impacts developers of small molecule drugs, which can be difficult to discover and manufacture. This lack of parity between small molecules and biologics is set to tip the drug development scales in a way that impacts patient care by reducing the range of targeted treatment options and will likely have inadvertent healthcare spending consequences as well.
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These were not intended outcomes of the legislation, but as written, the Inflation Reduction Act means that those impatiently waiting for a cure will continue to wait while manufacturers explore workarounds, or worse, drop programs altogether. We are on the cusp of new drug breakthroughs, but by de-incentivizing development of therapeutics that can treat more than one rare disease and small molecule drugs, the law may force drug developers to suspend research.
Since politics and government policies are constantly shifting, we have the opportunity to fix these aspects of the Inflation Reduction Act that may cause unintended patient impacts.
First, we should re-incentive the development of drugs for more than one rare disease indication. Unmet patient need is immense; the costs of developing and marketing orphan drugs is equally large, though their potential for return on investment can be low compared with those of drugs that treat more common diseases.
Likewise, the penalty for small molecule drug development should be removed. Creating parity at 11 years can be done without affecting the budget implications of the overall bill. These small, smart changes will again incentivize development of treatments that will likely produce significant benefits for patients with urgent, unmet need.
Although the Inflation Reduction Act primarily changes the administration of Medicare, because it is such an important payer, the law will substantially affect all US payers and patients and even those outside the US. It will alter how new drugs are marketed and prices are established and negotiated. Assessing its full impact is critically important. By fixing provisions in the law that will influence drug development and investment decisions, we have the opportunity to incentivize research that has a clear benefit to patients waiting for cures.
Maximilian Vargas, PhD MBA, is vice president and US Access Strategy team lead for Certara. His experience cuts across all major therapeutic areas and care settings with special emphasis on CV/metabolics, oncology, gene therapies, ophthalmology, GI, and dermatology. After earning a bachelor’s degree from Wesleyan University, Max earned a PhD in Biochemistry and Molecular Biology and MBA in Healthcare Policy and Management at the University of Connecticut.
Caitlin Verrilli, MBA, is Director, US Access Strategy, for Certara, where she specializes in data presentation and visualization, Medicaid and Medicare policy and reimbursement strategies. Prior to Certara, Caitlin worked at Ipsen; and at BPHC, part of the NYS Medicaid DSRIP program, as Director of Project Management; and at NYC Health & Hospitals, where she was project director for grant-based programs. Caitlin holds an undergraduate degree from Columbia University and an MBA from Columbia Business School.
