What Impact Will the US Inflation Reduction Act Have on Our Bio Industry?

U.S. President Joe Biden (center in the photo) signed the 'Inflation Reduction Act,' which focuses on addressing climate change and expanding healthcare coverage, at the White House in Washington, D.C., on the 16th of last month (local time). [Image source=Yonhap News]

[Asia Economy Reporter Lee Chun-hee] The Inflation Reduction Act (IRA), which will be implemented in the United States starting next year, is expected to have a significant impact on the bioindustry. As price negotiations are conducted for drugs that have not seen the launch of biosimilars (biopharmaceutical generics) for a long time, there is also a prospect that this could be a boon for the domestic bioindustry, where biosimilars play a major role.

According to the recent report "U.S. Inflation Reduction Act and Biosimilars" published by the Korea Bioindustry Association's Bioeconomy Research Center on the 12th, under the Inflation Reduction Act, chemical drugs without generics launched for over 9 years or biopharmaceuticals without biosimilars launched for more than 13 years must undergo price negotiations.

Earlier, on the 16th of last month, U.S. President Joe Biden signed the Inflation Reduction Act, which includes energy response, climate investment, prescription drug price reform, and extension of health insurance subsidies. Accordingly, starting next year, rebates must be paid for drugs priced higher than inflation, and from 2026, price negotiations will begin between the top 50 drugs by expenditure, starting with 10 drugs under Medicare Part D, and the U.S. public health insurance agency, the Centers for Medicare & Medicaid Services (CMS). Medicare Part D is a program designed to reduce excessive drug costs for those with low annual income or high out-of-pocket drug expenses. It targets seniors aged 65 and older, people with disabilities, and patients with end-stage renal disease.

The Bioeconomy Research Center pointed out that once the Inflation Reduction Act is implemented, drug manufacturers subject to price negotiations will face the dilemma of whether to include their biopharmaceuticals in Medicare qualification negotiations or to change their patent strategies to allow biosimilars to enter the market. Unlike the previous strategy of delaying biosimilar launches as much as possible to protect profits from original drugs, manufacturers might delay biosimilar launches up to a certain point but encourage their launch after that point. This is because drugs with generics or biosimilars are excluded from price negotiations, and even if not yet launched, negotiations can be delayed by two years if there is a possibility of launch.

U.S. Centers for Medicare & Medicaid Services (CMS)

In particular, since the status of 'interchangeable' biosimilars has not yet been defined in the Inflation Reduction Act, it is expected that when interchangeability is included in the future, there will be greater pressure for price reductions. Interchangeable biosimilars allow pharmacists to substitute prescriptions, and even if the original developer tries to maintain market share by expanding indications, extrapolation to other indications of the original drug is possible, making it easier to respond. However, among the 37 biosimilars approved so far by the U.S. Food and Drug Administration (FDA), only three?Siltezo (Humira biosimilar), Semglee (Lantus biosimilar), and Simlaris (Lucentis biosimilar)?have been recognized by the FDA as interchangeable biosimilars.

However, there is also a view that the impact on the industry will be limited. Jae-kyung Park, an analyst at Hana Securities, said, "While price reductions for some blockbusters are possible, considering the exceptions, the number of items subject to this law will be limited," and added, "If big pharma lawsuits proceed, the actual implementation of the law may be delayed or scaled down." Regarding the biosimilar industry, he also said, "It is positive in that the direction to reduce drug prices and healthcare spending has become clearer," but forecasted, "It could be negative in that the prices of new drugs, which serve as references for biosimilar prices, will be reduced."

This content was produced with the assistance of AI translation services.