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Recently proposed Federal legislation would have a very damaging effect on the biotech industry.

Those are the conclusions of a recent report by industry analysts at Vital Transformation . The report modelled the effects of the Inflation Reduction Act (“IRA”), President Biden’s proposed 2024 Budget and the proposed Smart Prices Act (“SPA”), an expansion to the IRA introduced by Senators Amy Klobuchar (D-MN) and Peter Welch (D-VT). have sparked debate about the potential impact on the biopharmaceutical ecosystem.

The main focus of the report was on the SPA’s government price rules for selected Medicare drugs, which would set prices on certain drugs starting five years after initial FDA approval. Here are the key findings:

  1. Job Losses: The report projected that the proposed IRA expansion could lead to a loss of between 146,000 to 223,000 direct biopharmaceutical industry jobs. Additionally, a significant number of indirect jobs, totaling 730,000 to 1,100,000, across various sectors of the economy, could be affected.
  2. Impact on Innovation: The proposed government price setting could result in approximately 230 fewer FDA approvals of new medicines over a ten-year period. This reduction in approvals is expected to be most prominent in areas of unmet medical need, including rare diseases, oncology, neurology and infectious diseases.
  3. Regional Concentration: The most significant ecosystem impacts would be concentrated primarily in locations including California and the Northeast, where the biopharmaceutical industry is concentrated.
  4. Historical Analysis: The report analyzed how the SPA would have affected the development of today’s top-selling medicines had it been enacted during that time. It suggested that around 82 out of 121 therapies identified for price setting may not have been developed had the SPA been in place earlier.
  5. Impact on R&D Investment: The report modeled the SPA’s effects on industry revenues and future research and development investments. It estimated that the reduced revenues from price controls could lead to a decline in R&D spending by biopharma companies.
  6. Economic Impact: The proposed policy could have substantial consequences for the biopharmaceutical sector’s revenue, leading to declines that far exceed other industries. Despite popular belief, the biopharma sector’s profit margins are not excessively high compared to various other sectors.

Vital Transformation’s analysis of the impact of the proposed IRA policy expansion sheds light on potential consequences for the US biopharma ecosystem. If implemented, the policy could lead to substantial job losses, reduced investments in research and development and a decline in the number of FDA-approved new medicines. This report raises important considerations about balancing the need for affordable medications with the necessity of fostering innovation in the pharmaceutical industry. As the legislative proposals continue to be debated, the industry will continue to advocate for legislators and regulators to consider all aspects carefully to strike a balance that benefits both patients and the biopharma sector’s long-term growth.

While the potential consequences of the proposed policy expansion are undeniably concerning for the U.S. biopharma ecosystem, it is essential for stakeholders to remain vigilant and informed throughout this unfolding process. As advisors for our life sciences clients, Crowley Law is committed to closely monitoring the developments in Washington and their impact on the biopharma industry. Our team of experienced attorneys understands the complexities and nuances of the life sciences sector and we are dedicated to providing sound legal counsel to biopharmaceutical companies, investors and other entities navigating these turbulent times.

Please reach out to us (Telephone: 908-540-6901) with your questions about this proposed legislation – or other issues and challenges you face in the legal or compliance areas.  We’re here to help.



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