Unintended consequences of the Inflation Reduction Act mandates are causing pharmaceutical companies to retrench.

Glenn Perdue
LST Board Chairman

In Tennessee, we pride ourselves on the advancements we have achieved in biopharmaceutical innovation. The new therapies developed in our state have helped save thousands of lives. So, if any type of proposed legislation would result in fewer lives saved and fewer jobs for Tennesseans, it would seem like a non-starter, right?

Think again.

The Inflation Reduction Act, which was passed by Congress in 2022, created the ability for the government to mandate drug prices in the Medicare program. These price ceilings can be imposed, depending on the classification of drug, at nine or 13 years after they have entered the market following Food and Drug Administration approval.

Already, this mandate has prompted some pharmaceutical companies to withdraw new medicines from clinical trials because of the likelihood that there won’t be a return on their investments in research, development and manufacturing. The implementation of price-setting regulations on companies will cap the amount of revenue available to companies to invest back into R&D for new treatments (38% before this legislation).

The life science industry’s ability to advance innovative, cutting-edge treatments is threatened

New legislation has been introduced that proposes shortening the period from FDA approval to price mandate to just five years, an aggressive move carrying serious consequences. New research has shown such a move would negatively impact patients and state economies in disastrous ways.

study by Vital Transformation has found that, if government-mandated drug-pricing policies are accelerated as proposed, the next decade will see an estimated 230 fewer FDA approvals of new medicines. The impact will be felt most heavily in the therapeutic areas with the greatest unmet need – cancer drugs and therapies for rare diseases being just two.   

At Life Science Tennessee, we believe in advancing the life science industry across our state to provide innovative, cutting-edge treatments; but this mission is unachievable if companies do not have the means or ability to invest in the R&D needed to develop new treatments for patients.

The cause and effect between this legislation and the development of new treatments is clear. Pharmaceutical development requires enormous financial investment. Allowing manufacturers only five years to recoup their investment will significantly impact companies’ abilities to develop lifesaving treatments.

Bipartisan legislation would avoid consequences of potential job losses

If this proposed five-year period were the law of the land a decade ago, the study found, more than 80 of the currently available drugs that are identified as likely to be subject to government-mandated drug-pricing policies would never have been developed in the first place. These are drugs that countless numbers of people rely on every single day.

Additionally, more government-mandated drug-pricing policies will result in pharmaceutical industry job losses of anywhere from 146,000 to 223,000 jobs, with an indirect economic impact that could cost as many as 1.1 million jobs throughout the economy. In Tennessee, it is projected that more than 12,000 jobs will be lost.

Fortunately, there are steps being taken at the federal level to help mitigate some of these disastrous effects, and they’re being led here in Tennessee. Sen. Marsha Blackburn, alongside Sen. Bob Menendez, introduced the MINI Act to extend the amount of time certain lifesaving medications can avoid these drug-pricing regulations. This, alongside Senator Blackburn’s “No Free TRIPS Act,” which aims to protect American intellectual property by requiring congressional approval to modify the World Trade Organization’s TRIPS agreement, is a strong step in the right direction.

Tennesseans shouldn’t have their lives, their jobs and their finances affected by a gamble on expanded government-mandated drug-pricing policies that are bound to have devastating consequences.

Glenn Perdue serves as chairman of Life Science Tennessee, a statewide, non-profit, member organization whose mission is to advance and grow the life science industry in Tennessee through advocacy, partnerships and alignment with economic and workforce development, and as the managing member of Kraft Analytics, LLC.