Could the Inflation Reduction Act (IRA) adversely impact the Pharma industry?

Signed into law by President Joe Biden in August 2022, the IRA contains measures aimed at curbing drug costs. Specifically, it mandates that drug companies pay a rebate to Medicare if their drug price hikes outpace inflation. According to projections by the Congressional Budget Office, the IRA could result in savings of over $287 billion in the next decade. Furthermore, the CBO anticipates a slight decline in new drug approvals by about 1% over the next 30 years.

Such a dip in revenue could indeed strain the profitability of the Pharma sector. Nevertheless, there's a silver lining. By leveraging the latest in software-driven automation combined with advanced AI/ML technologies, the industry can offset some of these profitability challenges. Although large Pharma often acts as a hub for molecules frequently sourced from smaller biotech firms, their true strength lies in executing expansive clinical trials, maintaining robust manufacturing infrastructure, adeptly managing global supply chains, and effectively commercializing treatments. To enhance these core capabilities, there's a need to foster a comprehensive tech infrastructure that bolsters efficiency across all these areas. By integrating AI/ML into this framework, the Pharma industry can transform software-driven tech capability into a pivotal asset. Realizing this potential requires deliberate creation, investment, and execution of such a strategy by big Pharma.

References:

https://www.forbes.com/sites/forbesfinancecouncil/2023/03/28/how-the-inflation-reduction-act-could-affect-the-biopharma-industry/?sh=1774d33617aa

https://www.kff.org/medicare/issue-brief/explaining-the-prescription-drug-provisions-in-the-inflation-reduction-act/

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