February 8, 2022 | less than a minute read

An analysis of the effect of drug pricing provisions in the Build Back Better Act on pharmaceutical innovation

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Kirsten Axelsen

Get in touch

Kirsten Axelsen

Having previously examined the impact of implementing international reference pricing in the United States, Charles River Associates (a leading global consultancy firm) predicted that this would have an adverse impact on new drug R&D investment. Their recent report from December 2021 was produced for PhRMA with the intention to assess the implications of two alternative approaches to drug price regulation, government price setting, and inflation penalties on pharmaceutical innovation. The Build Back Better Act (BBB) is responsible for these policies, passing the House of Representatives in November 2021 and pending consideration for passage by the Senate.

Download the full report below for elaboration on the exact impact on R&D and innovation; the directional shifts in types of R&D; and the unintended consequences in more detail.

"We find that the government price setting and inflation penalty provisions in the BBB would reduce and skew R&D investment, resulting in fewer new medicines. As of November 2021, the Congressional Budget Office (CBO) found that drug price controls in BBB would result in fewer new drugs: one fewer from 2022–2031, four fewer in the next decade, and five fewer in the following decade. However, the CBO’s methodology lacks consideration of the shift in incentives and investment behavior, which indicates that its score is unlikely to capture the full impact of price controls on innovation of new medicines. The results of our assessment imply that the CBO’s score of BBB is likely an underestimate."