This issue brief reviews the evidence-base to assess the impact of HR 5376 on drug innovation and patient health. A large academic literature estimates the effect of future drug revenues on R&D spending and finds that on average that a 1 percent reduction in revenue leads to a 1.5 percent reduction in R&D activity. We find that HR 5376 will reduce revenues by 12.0 percent through 2039 and therefore that the evidence base predicts that R&D spending will fall about 18.5 percent, amounting to $663 billion. We find that this cut in R&D activity leads to 135 fewer new drugs. This drop in new drugs is predicted to generate a loss of 331.5 million life years in the US, 31 times as large as the 10.7 million life years lost from COVID-19 in the US to date. These estimated effects on the number of new drugs brought to market are 27 times larger than projected by CBO, which finds only 5 drugs will be lost through 2039, equaling a 0.63 percent reduction. Click here to read the full paper.
Issue Brief: The Impact of HR 5376 on Biopharmaceutical Innovation and Patient Health
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The HR 5376 bill, also known as the Inflation Reduction Act of 2022, includes provisions that allow Medicare to negotiate prices for certain prescription drugs. While the bill aims to reduce drug costs for consumers, it has raised concerns about its potential impact on biopharmaceutical innovation and patient health.
By lowering the expected returns on high-cost drug development, the bill may discourage investment in new therapies, especially for complex diseases. This could slow down the introduction of innovative treatments, affecting both patients and companies involved in cutting-edge medical research.
In the context of diagnostics, such as ELISA kits (enzyme-linked immunosorbent assay kits), which are crucial tools in drug development and disease monitoring, reduced investment in biopharma could lead to less demand for these diagnostic tools. ELISA kits play a vital role in early-stage research and clinical trials, helping to identify biomarkers, monitor disease progression, and evaluate treatment efficacy.
Therefore, while HR 5376 may bring immediate financial relief to patients, its long-term impact on biopharmaceutical innovation could indirectly limit access to novel treatments and advanced diagnostic tools like ELISA kits, potentially compromising future patient health outcomes.
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