New research conducted by the Center for Integration of Science and Industry at Bentley University has debunked claims that the anticipated price reductions under the Inflation Reduction Act (IRA) would lead to a decrease in research and development (R&D) spending or investment in innovation within the biopharmaceutical industry. In fact, the study found that the industry actually increased R&D spending, equity offerings, and acquisitions of clinical-stage biotechnology companies as a strategic response to maintain profitability and productivity.
Published in Drug Discovery Today, the paper titled “Sustaining pharmaceutical innovation after the Inflation Reduction Act; trends in R&D spending, equity investment, and business development” analyzed R&D spending, public and private equity investments, mergers & acquisitions, and licensing agreements in the biopharmaceutical sector in the six quarters following the passage of the IRA in August 2022. The results showed a significant increase in R&D spending, equity offerings, and acquisitions, along with a decrease in licensing agreements.
Contrary to arguments suggesting a decline in pharmaceutical innovation due to lower drug prices, revenues, or returns, the study revealed that large pharmaceutical companies have ramped up investments in internal R&D and acquisitions of clinical-stage products to sustain their product pipelines. Equity investors also continued to support biotechnology companies responsible for new product development.
Lead author Henry Dao, along with Dr. Fred Ledley, Director of the Center for Integration of Science and Industry, emphasized the industry’s strategic response to the IRA and upcoming patent expirations by focusing on innovation investments. The study built upon previous reports that modeled the potential impacts of the IRA on pharmaceutical innovation and drug approvals.
The research suggests that large pharmaceutical companies, relying on product revenues for innovation capital, can offset any negative effects of the IRA by strategically allocating R&D spending and increasing acquisitions of clinical-stage companies. The industry’s response aligns with this strategy, indicating a proactive approach to sustaining innovation in the face of regulatory changes.
For more information, the study titled “Sustaining pharmaceutical innovation after the Inflation Reduction Act: trends in R&D spending, equity investment, and business development” can be accessed in Drug Discovery Today. This research sheds light on the industry’s resilience and adaptability in navigating regulatory challenges while maintaining a focus on innovation and drug development.
