Negative Effects of the Inflation Reduction Act on the Life Sciences Manufacturing Industry

US Launches Attack on Drug Developers

The Life Science Manufacturing industry has long been hailed as the bedrock of groundbreaking medical research and innovation, particularly in the realm of drug development. With the United States leading the charge, accounting for 55% of approved drugs globally, the mutualistic relationship between public and private sectors has undeniably set a global standard. However, the recently introduced Inflation Reduction Act (IRA) threatens to destabilize this fine balance, sending shockwaves through the industry.

Public-Private Symbiosis Underpins Drug Development Success

The National Institutes of Health (NIH) plays a pivotal role in facilitating biotech advancements. Dr. Hans Sauer of the Biotechnology Innovation Organization (BIO) emphasizes that the existing alliance between NIH and private biotech firms is the cornerstone of American leadership in drug development. In 2020, U.S. investment in biomedical R&D stood at a staggering $245 billion, with the federal government contributing $61.5 billion (25%). Meanwhile, the private sector bore the lion’s share with $161.8 billion (66%).

While a significant portion of NIH funding aids drug development, most of its resources are channeled into basic research. This foundational research subsequently propels private entities to invest in the next stages of drug development, fostering an environment of innovation and risk-taking.

The Price Debate: More Than Meets the Eye

Recent discussions around NIH-supported drug development have steered towards potential price controls. Detractors argue that NIH backing should correlate with reduced drug prices. However, Dr. Sauer refutes this notion, pointing out that private sector contributions significantly outweigh public investments. Moreover, the private sector predominantly shoulders the risk of potential drug failures, emphasizing the peril in introducing arbitrary price caps.

Echoing these concerns, Rachel King, CEO of BIO, warns that the IRA’s price controls are detrimental to the biotech industry’s intricate innovation ecosystem. The disincentives introduced by the IRA, particularly regarding orphan drugs that treat rare diseases, could stymie critical research endeavors. By limiting orphan drugs to a single indication for pricing exemptions, the Act inadvertently hampers the exploration of these drugs’ wider potential applications.

Bridging the Policy Gap: The Way Forward

The backlash against the IRA isn’t just limited to industry stakeholders. Legislative voices have also begun acknowledging the Act’s potential pitfalls. As King articulates, there’s a pressing need for bipartisan efforts to rectify problematic facets of the IRA, ensuring that it doesn’t stifle innovation.

Highlighting the crux of the issue, Christina Hochul of Alexion Pharmaceuticals underscores the unintended challenges presented by the IRA’s orphan drug exclusion. Following the Act’s implementation, various entities, from patient advocates to biotech investors, have spotlighted this legislative blind spot, advocating for prompt amendments.

Amy Rick, Chair of the IRA Orphan Task Force, elucidates the long-term ramifications of the current legislation. Decisions influenced by the IRA today could adversely affect the industry for the next decade. With some companies already halting orphan drug research and venture capitalists growing hesitant, the repercussions are palpable.

As discussions intensify, the Centers for Medicare and Medicaid Services (CMS) emerges as a key player. Over the past year, organizations have actively engaged with CMS, emphasizing the need to reevaluate the IRA’s ramifications, especially concerning orphan drug exclusions.


While the Inflation Reduction Act was designed with commendable intentions, its inadvertent consequences on the life science manufacturing sector cannot be ignored. Collaboration between industry stakeholders, patient advocates, and policymakers is paramount. As the industry continues to navigate these challenging waters, it’s essential to strike a balance that upholds both patient welfare and innovation. Only with mutual understanding and comprehensive legislative revisions can the life science manufacturing industry continue its legacy of pioneering drug development.


Inflation Reduction Act: Unintended consequences for rare disease, orphan drugs
BIO Vice Chair John Crowley to Congress: IRA reduces access to innovative drugs
Why drug price controls ‘risk the future of investment’ in R&D
BIO’s Rachel King weighs in on IRA and the biotech industry in new podcasts
BIO expert lauds beautiful relationship between NIH and biotech