With the US Inflation Reduction Act now law, many in Washington DC are saying that it’s provisions reducing pricing by $80 billion dollars annually in Medicare for drugs near the end of their patent life will not have any negative impacts on the US biopharma ecosystem. 

Enter Amitabh Chandra, the director of health policy research at the Harvard Kennedy School of Government, and a professor of business administration at Harvard Business School. Dr Chandra has been sounding the alarm of the unintended consequences of the many pricing bills that have been emerging from both the Trump and Biden Administrations, as well as the US Congress.  

In this Vital Health Podcast, Duane Schulthess and Amitabh Chandra discuss the pricing provisions of the inflation reduction act (IRA), particularly price controls for Medicare therapies with the highest amount of spending at two different time points, 9 years for small molecules and 13 years for large molecules. Amitabh discusses the ramifications of this decision from the perspective of venture capitalists, who are vital for their willingness to take early-stage risks in developing new medicines. 

As well, we discuss the concept of the US Government acting as a price negotiator and offer potential market-based solutions in contrast to what will surely be price-setting by the largest buyer on the planet. These solutions, however, require fixing the many perverse incentives baked into the US pharmaceutical benefit manager (PBM) system, as people who are the sickest currently subsidize the 95% of healthy Medicare beneficiaries through pricing rebates.