Vital Transformation (VT) modeled the impacts of the drug pricing provisions of President Biden’s 2024 Budget, now proposed by Senators Klobuchar and Welch as the “Smart Prices Act (SPA)”, which would impose government price setting for selected Medicare drugs at only 5 years after initial FDA approval.

We modeled the impacts on industry revenues and future R&D investments and estimated future lost innovation impacts including the impact on industry jobs.

We estimate a loss of between 146,000 – 223,000 direct biopharmaceutical industry jobs and a total of 730,000 – 1,100,000 U.S. jobs across the economy if the proposed IRA expansion were to be implemented.

Looking forward, we estimate that the expanded government price setting could result in roughly 230 fewer FDA approvals of new medicines over a ten-year period, once the impacts are fully reflected in the pipeline.

-> Impacts will be felt most heavily in many areas of unmet need, including in rare disease, oncology, neurology, and infectious disease.
->The most significant ecosystem impacts would be concentrated primarily in CA, MA, and NY.

Had the drug pricing provisions of the SPA been in place prior to the development of today’s top-selling medicines, we estimate that 82 of the 121 therapies we identified as selected for price setting would likely have not been developed.

Vital Transformation (VT) modeled and estimated the impacts of the Inflation Reduction Act’s (IRA) pricing provisions for a cohort of the top 200 Part B and D drugs by CMS spend, resulting in 92 drugs impacted by IRA in the next 10 years, which are produced, collectively, by 41 biopharmaceutical companies.

Had the IRA been in place beginning in 2014, we estimate the reductions in revenue on the impacted drugs to be up to 40%.  Because of this, between 24 and 49 therapies currently available today would most likely not have come to market and therefore not available for patients and their providers.

Looking forward, we estimate that because of the IRA pricing provisions, the substantial reduction in revenue will significantly narrow investment opportunities. Conservatively, as many as 139 drugs over the next 10 years are at risk of not being developed at all. Both biologics and small molecule drugs are impacted, with an average reduction in revenue per therapy of $4.9 billion and $4 billion respectively.

IRA provides a negotiation exemption for orphan drugs that treat only one rare disease. This disincentivizes investments in orphan drugs and areas of high unmet patient need as the broader indications will provide a superior return on investment, as much as $500 million over three years.

Based on two impact scenarios, we estimate a loss of between 66,800 - 135,900 direct and 342,000 - 676,000 indirect jobs in the U.S. biopharma ecosystem.