Vital Transformation (VT) modeled the impacts of the drug pricing provisions of the Inflation Reduction Act, with the expansions proposed by Representative Frank Pallone, Jr. (NJ-06) called the, “H.R. 4895: Lowering Drug Costs for American Families Act”, which would impose government price setting for up to 50 selected Medicare Drugs starting in 2029 and expand those negotiated prices to the commercial market.
We modeled the impacts on industry revenues, future R&D investments for the Medicare aged population, and lost innovation including industry jobs.
We estimate a loss of 136,000 – 216,000 direct biopharmaceutical industry jobs and 678,000 – 1,076,000 indirect jobs across the U.S. economy if H.R. 4895 were to be implemented.
We estimate that the expanded government price setting could result in roughly 134 fewer FDA approvals of new medicines treating primarily the Medicare aged population over a ten-year period:
- Impacts will be felt most heavily in many areas of unmet need, including in rare disease, oncology, neurology, and infectious disease targeting those over 65 years of age.
- H.R. 4895 impacts the entire commercial market at the point of negotiated prices entering Medicare.
- The most significant ecosystem impacts would be concentrated primarily in CA and MA.
- Had the drug pricing provisions of the House Bill H.R. 4895 been in place prior to the development of today’s top-selling medicines, we estimate that 76 of the 198 therapies we identified as selected for Medicare price setting would likely have not been developed.

Industry is the dominant source of innovation for novel FDA approved medicines; industry funding for novel patented therapies approved by the FDA from 2011 – 2020 was $44.3 billion, compared to the $276 million the US government contributed to patented drugs that are subject to Bayh Dole. Relevant to this, the previously published report by VT found that over the 20 years leading up to FDA approval of 18 innovative new therapies, the funding contribution from industry to the development of these therapies was 66 times higher than the public funding from all linked NIH grants.

Research and development investments are a significant risk to the pharmaceutical industry and their investors as not all assets result in a marketed product. The high rate of failure in drug development underscores the challenges and risks associated with bringing new treatments to patients.

92% of the therapies in our cohort have no mechanism of action or composition of matter patents with a government interest statement or federally funded co-development program in connection to them.

99% of the therapies in our cohort cannot be marched-in upon, as the key patents studied do not cover the entire asset’s intellectual property. There are only 5 out of 361 pharmaceutical products in which all available MoA and CoM patents include a government interest statement and could be subject to march-in rights.

Enacting march-in rights to control prices will create uncertainty and increase risk for inventors based upon previous experiences with fair pricing requirements for NIH CRADAs:
- Industry, venture capital will avoid investing in commercializing academic inventions and partnerships with the NIH will plumet
- US biopharma productivity will drop significantly, providing an opportunity for competing foreign biopharma markets to expand, with a high potential for industry to relocate their enterprises