Post-Inflation Act Spurs Biopharma Innovation Growth
TL/DR –
A study by Bentley University’s Center for Integration of Science and Industry found that the Inflation Reduction Act has not decreased R&D spending or investment in innovation in the biopharmaceutical industry as was previously claimed. The study, which compared the six quarters before and after the Act’s passage, found higher R&D spending ($247 billion versus $211 billion), an increase in equity offerings and acquisitions, especially of companies with products in clinical trials, and a decrease in licensing agreements. This suggests that large pharmaceutical companies are strategically investing in R&D and acquisition of clinical-stage products to maintain their product pipelines and profitability in response to the Act’s impact on drug prices and upcoming patent expirations.
Pharma Innovation Boost Post Inflation Act, Confirms Bentley University Study
New findings from the Center for Integration of Science and Industry at Bentley University contradict claims that the Inflation Reduction Act would decrease R&D spending or innovation investment. Instead, the biopharmaceutical industry showed increased R&D expenditures, equity offerings, and acquisitions of clinical-stage biotech firms, reflecting a strategic industry response to maintain profitability and productivity.
Key Findings of the Study
A paper published in Drug Discovery Today, titled “Sustaining pharmaceutical innovation after the Inflation Reduction Act; trends in R&D spending, equity investment, and business development,” provides crucial evidence. The research compared R&D spending, equity investments, mergers & acquisitions, and licensing agreements in the biopharmaceutical sector following the passage of the IRA with the preceding six quarters and historical trends since 2010.
Interestingly, R&D spending was higher post-IRA ($247 billion vs. $211 billion), equity offerings remained similar (1398 vs. 1406), acquisitions increased (203 vs. 169), and licensing agreements dropped slightly (504 vs. 583).
Implications of the Findings
Contrary to arguments that pharmaceutical innovation would decrease due to lower drug prices, revenues, or returns, this analysis reveals that large pharmaceutical firms have increased investments in internal R&D and acquisitions of clinical-stage products. This suggests a strategic industry response to sustain their product pipelines and equity investors’ continued investment in biotech companies responsible for new product development.
However, any decreases in early-stage drug discovery public investment or financial market instability could impact this strategy.
Modeling the Impact of the IRA
The research builds on earlier reports modeling the potential impacts of the IRA on pharmaceutical innovation. A 2024 paper titled “Modeling impact of inflation reduction act price negotiations on new drug pipeline,” and a related working paper titled “Implications of the Inflation Reduction Act for the biotechnology industry;” established an evidence base for the impact of the IRA. The new study confirms the industry’s response to IRA passage aligns with this model.
The National Biomedical Research Foundation funded this research through grants to Bentley University.
The full findings can be viewed here.
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