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  • The Inflation Reduction Act and the Future of Drug Evidence

    The Inflation Reduction Act and the Future of Drug Evidence

    The Inflation Reduction Act and the Future of Drug Evidence

    The Inflation Reduction Act (IRA), enacted in 2022, denotes a momentous shift in the US healthcare landscape, especially in evidence generation and its application in decisions on drug pricing and market access. By allowing Medicare the authority to negotiate drug prices, proposing inflationary rebates, and limiting out-of-pocket spending, the law is transforming incentives for pharmaceutical companies and payers alike. While the immediate impact of this enactment can be seen on pricing, the wider and long-lasting effect lies in how it changes evidence generation across the product lifecycle.(1)

    One of the most crucial changes is the condensed timeline of value demonstration. Since Medicare negotiates prices after market entry, manufacturers cannot rely only on early regulatory approval data anymore. They must maintain, improve, and distinguish their evidence generation strategies throughout development and post-launch to back these negotiations. Consequently, real-world evidence (RWE), comparative effectiveness research (CER), and health economics and outcomes research (HEOR) will be instrumental in showing long-term value and differentiation against existing therapies.(1)

    In reality, this change is urging manufacturers to invest earlier in vigorous trial designs, whether superiority, non-inferiority, or pragmatic real-world trials, as well as developing post-launch RWE packages that can withstand payer scrutiny. The demand for reliable, contextualized evidence reiterates practices from European health technology assessment (HTA) systems, where continuous value demonstration is the norm and evidence packages have a direct impact on pricing. By tightly aligning US evidence expectations with global standards, the IRA may help standardize evidence strategies across markets.(1)

    However, the IRA also brings inadvertent challenges. Some experts indicate a “post-approval evidence penalty,” where manufacturers may deprioritize longer-term or late-phase trials for drugs that may face early price negotiations. With shortened revenue windows, manufacturers may hesitate to invest heavily in extended trials, possibly restricting the depth of post-market insights and limiting patient access to powerful real-world data (RWD). Therefore, balancing the need for timely, cost-appropriate access, incentivising continuous evidence generation will be a major challenge as the policy matures.(2, 3)

    Yet, the IRA also offers a significant opportunity to integrate more robust and relevant evidence standards into US healthcare. By improving the role of RWE in comparative value assessments, it promotes methodological innovation, from trial emulation strategies to quantitative bias analysis, allowing for credible and actionable evidence generation for negotiations. This could expedite the adoption of adaptive trial designs, earlier engagement with payers and regulators, and higher integration of patient-centred outcomes into evidence plans.(1)

    In the end, while the IRA transforms financial incentives and condenses conventional revenue models, it also expedites the move toward a more evidence-based, value-driven US healthcare model. IRA’s impact will expand gradually as more drugs are up for negotiations. However, currently, it requires stakeholders to rethink the how’s, when’s, and why’s of evidence generation. It has the potential to both minimize costs and enhance the quality and relevance of evidence that guides patient care and policy decisions.

    Become A Certified HEOR Professional – Enrol yourself here!

    References

    1. Arora P, Gupta A, Mackay E, et al. The Inflation Reduction Act: An Opportunity to Accelerate Confidence in Real-World Evidence in the United States. Value Health. 2024; 27(8): P999-1002.
    2. Zheng H, Patterson JA, Campbell JD. The Inflation Reduction Act and Drug Development: Potential Early Signals of Impact on Post-Approval Clinical Trials. Ther Innov Regul Sci. 2025; 59(4):781-789.
    3. National Pharmaceutical Council. Observational Research Reveals Unintended Consequences of the Inflation Reduction Act on Post-Approval Clinical Trials. 2025. [Accessed on 15th September 2025]. Available online at: https://www.npcnow.org/resources/observational-research-reveals-unintended-consequences-inflation-reduction-act-post

    MarksMan Healthcare

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  • How Can We Cap Skyrocketing Pharmaceutical Prices: The Even Bigger Question?

    How Can We Cap Skyrocketing Pharmaceutical Prices: The Even Bigger Question?

    To most connected with the pharmaceutical industry, it is a common knowledge that the cost of prescription medicine, even traditionally, has always defied the law of gravity. However; what is alarming today is the steep increase in the cost of specialty drugs that target everything from multiple sclerosis to cancer, blood pressure, and even erectile dysfunction.

    In India, the controversy on price control has picked up speed once again following the Supreme Court’s verdict that existing prices are set at unreasonably high levels. Accordingly, the National Pharmaceutical Pricing Authority (NPPA) has expanded the National List of Essential Medicines and the total number of drugs now affected by price controls is a whopping 700!!! Amongst the new products included are those used in treatment of diabetes (gliclazide, glimepiride, sitagliptin and voglibose); high blood pressure (amlodipine and telmisartan); and high cholesterol (rosuvastatin). Additionally the government has asked the pharmaceutical manufacturers to continue producing drugs unless they receive a nod from regulators to stop production.

    The pharmaceutical manufacturers are distressed by these stingy policies of Indian government. They argue that price control alone cannot ensure accessibility to medicine. The government needs to look at alternative methods such as universal healthcare coverage as well as increase its spending on healthcare to address the issue of accessibility.

    While these stingy pricing policies of the Indian government ensure that drugs in India are cheap, often way less expensive than the cost of the same medications in the U.S. or Europe they create another less obvious but nevertheless important downside – they delay the entry of new pharmaceutical products into the Indian market.

    It has been estimated that it takes almost five years for even half of new pharmaceutical products launched in the US to come to market in India. The Indian government must therefore decide the importance of lowering the price of available drugs, given that such policies will delay how quickly its citizens will get access to new ones.

    There is a need to strike a balance between the two important goals, of controlling costs versus expanding access.

    In my opinion price control alone cannot improve the accessibility to medicines. Value based pricing can be considered as a part of the solution to the rising price of prescription medicines. Under value-based pricing agreements, payers and pharma companies agree to link payment for a medicine to value i.e. patient outcome achieved, rather than volume.

    Getting a handle on value based pricing is however not that straightforward. Successful value-based pricing arrangement mandates a clear definition of when the medication works, and when it does not work. The process involves collection of value attributes (e.g., outcome or performance variables of interest) and subsequently aggregating and converting (using a decision rule) to evaluate whether the value metric was achieved. Data collection would need to be initiated early in the product life cycle. The basis of the higher price is always based on incremental value over other treatment options.

    Some drug companies use comparative data and indication-specific pricing to favor “clinically superior” medicines and make sure their treatments are covered across the board. An interesting example is that for erlotinib (Tarceva), a drug that extends life in patients with lung cancer by an average of about 4 months, but for only 12 days in patients with pancreatic cancer. So in indication-specific pricing, one would pay differently for the drug depending on which indication it is being given for.

    Drug pricing is no doubt a complex calculation but value based pricing can be looked upon as a one part of the solution to strike the delicate balance between availability and affordability of essential medicines.

    Become a Certified HEOR Professional – Enrol yourself here!

    MarksMan Healthcare

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