How Price Setting Undermines IP And Restricts Access to Medicines

What’s happening: The Inflation Reduction Act (IRA) presents challenges to the intellectual property (IP) incentives that have historically fueled American life science innovation. These incentives are crucial for developing new treatments that improve save and improve lives. The IRA's government price setting undermines these incentives, affecting the ability of American patients to access new treatments and cures.

Benefits to Patients: Strong IP incentives have been instrumental in bringing groundbreaking treatments to market, offering hope and improved quality of life to millions of patients. These incentives have led to the development of therapies for rare diseases, more affordable generic drugs, and pediatric research that addresses the unique needs of children. The IRA's current approach could hinder these advancements.

Price Setting Restricts Access to Medicine: While the IRA itself does not end market exclusivity for medicines, its price setting mechanisms will affect the financial viability of new medicines. This shift could discourage investment in innovative treatments, particularly those requiring significant research and development. Some of the key IP incentives undermined by the IRA include:

• Orphan Drug Act: This act incentivizes the development of treatments for rare diseases by offering a seven-year market exclusivity period. The IRA's price negotiation provisions undermine these incentives by penalizing manufacturers for pursuing additional indications for orphan medicines, as receiving either an additional designation or an approval would open the medicines to price setting. Such additional designations and indications are an important source of new treatments.
• Hatch-Waxman Act: This law facilitates the entry of generic drugs into the market while encouraging branded innovation. Given the small margins on generic medicines, Hatch-Waxman provided a 180-day exclusivity period to encourage generic entry. But the IRA’s artificial price control policies could deter generic manufacturers from entering the market to compete against brand medicines. Additionally, the IRA’s “pill penalty” undermines incentives for branded small molecule medicines.
• Pediatric Research: The Best Pharmaceuticals for Children Act provides additional exclusivity for conducting pediatric studies. But the IRA's imposition of price setting prior to when medicines would otherwise face competition could diminish the incentive for such research, potentially leaving American children underserved.

The Bottom Line: To ensure continued patient access to life-saving treatments, Congress must reinforce strong IP rights and reconsider policies that undermine them.

About the authors

Brad Watts

Brad Watts is the Vice President for Patents and Innovation Policy at the U.S. Chamber of Commerce's Global Innovation Policy Center (GIPC). He works with U.S. Chamber members to foster a political, legal, and economic environment where innovators and creators can invest in the next big thing for the benefit of Americans and the world.

Read more