THE DEBATE OVER drug price negotiation policies, particularly those in the Inflation Reduction Act, has become the centerpiece of discussions about healthcare affordability, job creation, and medical innovation. Finding a balance between making lifesaving medications affordable while sustaining the incentives for medical innovation is critical. There is no denying the need to alleviate the burden of healthcare costs today, but policy must consider the entire drug supply chain, and take steps to avoid unintended consequences that may stifle job growth, impede future medical breakthroughs, and impact the availability of cures and treatment stretching long into the future.

At the New England Venture Capital Association, we aim to make New England the best place in the world to start, grow, and invest in companies. When it comes to the life sciences, it certainly is. However, government-mandated drug pricing policies included in the Inflation Reduction Act, and efforts to expand those policies to the commercial sector, could prevent Massachusetts and New England from remaining one of the top life science and biotechnology hubs in the nation.

The IRA’s impacts on medical innovation are already being felt. The bill includes a “small molecule penalty,” which mandates that small molecule drugs – like aspirins, and medications to treat high cholesterol and allergies – become eligible for government-mandated price negotiation nine years after hitting the market.

Small molecule drugs are easier to develop and make up 90 percent of the drugs currently on the market. Meanwhile, more complex biologics become eligible for negotiation at 13 years after release. This policy discourages investors and pharmaceutical companies from investing in small-molecule medications, particularly when 50 percent of a drug’s revenue is seen after year nine. New proposals, such as the SMART Prices Act, would mandate all drugs be eligible for mandated price negotiation after only five years on the market. Such a change would be devastating for the biotechnology startup industry – and thus devastating for the future of pharmaceutical innovation.

According to research conducted by Vital Transformation, expanding the IRA’s government-mandated drug pricing policies would lead to nearly 230 fewer FDA approvals of new medicines or new uses over 10 years, impacts that will be felt most heavily in oncology, neurology, and rare diseases.

Currently, the IRA’s price-setting policies are estimated to lead to about 139 new medicines over the next 10 years. Companies are already being forced to reassess whether to pursue drugs for smaller patient populations like rare diseases, and may refrain from performing ongoing research on approved drugs to identify additional uses. Industry leaders like Genentech, Novartis, and Eli Lilly have already confirmed that they are slowing research on medicines for some smaller markets due to the IRA’s policies. Patients living with the hardest-to-treat diseases, like cancer and Alzheimer’s, may well miss out on the lifesaving treatments they hope for.

Another top concern about drug price negotiation policies is their potential impact on jobs within these critical industries. Vital Transformation estimates that the United States life sciences ecosystem could lose 66,800-135,900 direct jobs and 342,000-676,000 indirect jobs in the next decade. Moreover, if these policies are expanded, the United States could see 146,000-223,000 direct industry jobs and 730,000-1,100,000 US jobs lost across the economy. Massachusetts would take a significant hit – likely losing more than 78,000 jobs over the next decade.

Congress must assess the impacts of the IRA’s price-setting policies before it looks to expand them. How many jobs will be lost? How many treatments and medications won’t make it to market? Will patients see any actual savings from these policies? There are far too many unknowns to consider expanding these policies now.

The intent of this legislation is admirable, but Congress should assess the entire drug pipeline for opportunities to achieve patient savings, instead of zeroing in on manufacturers alone. For example, three of the biggest pharmacy benefit managers (PBMs) control roughly 77 percent of all US prescription drug claims and pocketed more than $450 billion in revenue in 2020 – up from $300 billion eight years ago. More than half of every dollar spent on brand medicines went to payers, PBMs, and other middlemen in 2020. Importantly, unlike manufacturers, PBMs don’t reinvest those profits into new R&D. There are other opportunities to achieve savings for patients that should be utilized before more harmful measures are considered.

There is ample opportunity to improve our drug pipeline to ensure that patients can affordably access the lifesaving medications they rely on while encouraging continued research and development of new treatments and cures. We can’t sacrifice innovation by moving forward with these untested policies.

Ari Fine Glantz serves as the executive director of the New England Venture Capital Association.