Wall Street Journal: Biden’s IRA Is Harming Cancer Patients
By Tomas J Philipson
Democrats’ 2022 Inflation Reduction Act wasn’t designed to kill cancer innovation, but new evidence reveals that’s what it’s doing. The law strongly discourages drug companies from performing the “follow-on” research after initial discoveries that accounts for a disproportionate share of progress in the fight against cancer.
The crux of the problem is that the IRA imposes price caps that shorten the effective life of a patent and applies those price controls even to later-approved uses. Thirteen years after FDA approval, biologics, which are typically infused or injected, become subject to price controls. For small-molecule drugs, typically pills or tablets, the window is only nine years. The clock starts at a drug’s first approval, leaving a follow-on or alternative use, approved years later, an insufficient period to make up the cost of research.
Two weeks ago, a study I conducted with colleagues at the University of Chicago appeared in Health Affairs. It reveals how much these provisions harm cancer research. In reviewing every Food and Drug Administration-approved cancer drug between 2000 and 2024, we found a large part of innovation in cancer treatment takes place after a therapy is first approved. About 42% of the 184 cancer therapies that were initially approved during that period had follow-on approvals—involving new uses or “indications” for an existing drug—such as treating additional cancer types or being used earlier in the disease, when treatment outcomes tend to be better.
This cumulative progress through follow-on discoveries is a big driver of new cancer treatments, the largest drug class making up about 35% of the overall FDA pipeline. Cancer drugs are generally first tested in patients with late-stage disease, after which the drug is studied for use in earlier stages of that cancer and for new uses, including treating other cancers. Our study found that 60% of follow-on drugs treated earlier stages than the initial drugs. This is important because treating earlier stages is often more successful than when a cancer has spread more.
But that cumulative progress depends on incentives for sustained research well after the first FDA approval—often years of additional trials and investments. And those incentives were killed by the IRA.
As our study details, on average, the first follow-on approval for the drugs we studied came about three years after the original. The second follow-on typically comes 1.5 years after that. For the average small molecule, that leaves only 4.5 years to earn returns on investments made to expand a drug’s approval into earlier-stage cancers or other indications before the IRA price caps kick in. And these are averages; many follow-on approvals take significantly longer, leaving even less time on the market to justify the expense and uncertainty of continued research.
Examples illustrate this clear risk. Enzalutamide, a prostate cancer drug, was first approved in 2012 for late-stage patients. Almost six years later, it was approved in earlier-stage patients. Letrozole, a breast cancer drug, followed a similar path, moving from Stage IV cancer treatment to Stage II over more than a decade. Under the IRA, those follow-on approvals likely wouldn’t have been economical.
The IRA will severely hurt future cancer patients—particularly because the law is so punitive toward small-molecule drugs. Many experts see these as especially important for the future of cancer treatment. Pills often have fewer side effects than biologics, are easier to take, and can be engineered to hit precise targets inside cells. Yet the IRA price cap kicks in four years earlier for pills than it does for biologics, even though the latter are typically doctor-administered and thereby more expensive.
The result has been exactly what you’d expect and what I warned about in these pages prior to the IRA’s launch. Since its passage, companies have halted at least 55 research programs and abandoned 26 medicines. That’s orders of magnitude larger than the Congressional Budget Office’s prediction that the IRA would result in only one less drug coming to market in the decade after it became law. Even my larger estimate of the damage to innovation may have under-predicted the law’s destructive force.
The IRA is shortsighted. Each innovative medicine that’s never developed is one less drug that ultimately becomes a cheap generic. About 93% of all U.S. prescriptions are filled with generics after innovators have been rewarded for making the generic launch feasible.
The ongoing damage the IRA is doing to medical innovation reaches beyond follow-on research. Early stage biotech investment in small-molecule development dropped a whopping 70% between the law’s introduction and May 2024, according to one study. And new cancer program starts for small molecules fell 43% in 2024 compared with the pre-IRA average. This means fewer drugs entering the pipeline, and fewer opportunities to expand existing therapies through follow-on research.
My colleagues’ and my new evidence suggests that fully repealing the IRA’s price controls would greatly benefit patients. But until that happens, giving both biologics and pills 13 years before price controls begin would minimize the damage. The bipartisan EPIC Act would eliminate this “pill penalty” of the IRA, enabling countless follow-on uses that might not otherwise be discovered.
Policymakers need to ensure the IRA doesn’t kill off the cumulative research that could make cancer easier to endure and more affordable to treat. More broadly, lawmakers must understand that for cancer and other diseases, medical progress doesn’t end at FDA approval—many times that’s only where it begins.