University of Chicago Study Reinforces Unintended Consequences of the IRA on Drug Development
- gpuckrein
- Jan 14
- 2 min read
Evidence continues to show that government price control policies like the Inflation Reduction Act (IRA) slow drug innovation, particularly for small molecule medications, which are typically found in pill and tablet form.
Late last year, the University of Chicago’s Kenneth C. Griffin Department of Economics published research revealing unintended consequences of the IRA on oncology drug development. The University of Chicago’s researchers examined 184 cancer drugs approved between 2000 and 2024, tracking how these medications evolved after their initial approval.
The new research suggests that the IRA may inadvertently be creating a treatment gap precisely where therapeutic impact is greatest by disincentivizing the development of small molecules via the “pill penalty” as well as changing manufacturers’ strategies for post-market approval.
The IRA’s “pill penalty” limits market exclusivity for new drugs to nine years for small molecules and thirteen years for biologics. Previous research has found that the IRA deprioritizes investment in small molecule drugs, even though these medications account for more than 90% of all prescriptions and are generally more accessible to patients.
Since the IRA’s enactment, biologics have accounted for 58% of new oncology approvals, surpassing small molecules for the first time, a clear signal of shifting development strategies.
Biopharmaceutical companies frequently expand a drug’s use beyond its original purpose – and these expansions follow a clear pattern. Nearly 60% of follow-on drug approvals target earlier stages of cancer compared to the drug’s initial approval. In practical terms, this means a medication might first be approved for late-stage, metastatic cancer, then later proven effective for earlier, more treatable forms of the disease. This progression is significant: catching cancer earlier dramatically improves patient outcomes and survival rates.
But due to the IRA, companies now appear to be changing their strategies; shifting from “depth-oriented” development – perfecting drugs for progressively earlier stages of the same cancer – toward “horizontal expansion” – developing drugs that work across many different cancer types from the start.
This shift is likely occurring because the IRA’s “pill penalty” limits the exclusivity period biopharmaceutical companies have to recoup their research investments to only nine years. This shortened timeframe may inadvertently discourage the lengthy research needed to prove medications work in earlier disease stages.
The consequences for patients could be significant. Fewer drugs approved for early-stage cancers means more patients may progress to advanced stages before being able to access effective therapies.
We Work For Health strongly urges policymakers to address the negative impact of the IRA on drug innovation and patient access, ensuring that lifesaving treatments remain available and development continues to advance.
Learn more on the consequences with drug price controls: