Study Finds IRA Negotiation Could Threaten Late-Stage Approvals

When the Medicare Drug Price Negotiation Program became law a few years ago, supporters cheered that CMS would finally be able to negotiate prices on drugs for Medicare beneficiaries. But manufacturers criticized it, calling it government overreach that would threaten drug development. To look into that, researchers at the IQVIA Institute for Human Data Science analyzed initial drug approvals and expansions that followed and found that due to some aspects of the program, clinical development after a drug’s initial approval may indeed be impacted, according to a new report, titled Proliferation of Innovation Over Time: Frequency, Timing and Clinical Value of Expansions Post-Initial Approval.

Genentech USA, Inc., a member of the Roche Group, provided funding for the report.

Established via the Inflation Reduction Act in August 2022, the Medicare Drug Price Negotiation Program outlines a set of characteristics for a drug to be eligible for negotiation to set a maximum fair price (MFP). One of those is that to engage in the negotiation process, small molecule drugs must have received their first FDA approval at least seven years before, and large molecule, or biologic, drugs must have been first approved at least 11 years before. That means when the MFPs take effect, small molecule drugs will have had their initial FDA approval at least nine years, while large molecule drugs will have been first approved at least 13 years prior.

“The key concern among many stakeholders is that manufacturers, investments and post-initial approval innovation may be at risk — not just the initial approval of drugs or decisions about which drugs to put through clinical trials but also many of their expansions that happen after they initially launch,” explained Conrad Bhamani, thought leadership manager at the IQVIA Institute, during a March 3 webinar.  

Such expansions can take various forms. A drug can be approved for a new indication to treat a new disease or organ system. It also may be approved for a different line of therapy within an indication for which it already has approval. The FDA may expand a drug’s use to a new patient population. The agency may approve an agent for combination use with another drug, and it also can approve a medication as a new formulation, such as approving a drug for intravenous use first and then as a subcutaneous injectable or an oral agent later in the product’s lifecycle.

For the report, researchers examined all novel active substances (NASs) receiving their initial FDA approval between 2000 and 2023, as well as four additional drugs with high sales and several expansions during the study time frame: glatiramer acetate (Copaxone), which was first approved in 1996; rituximab (Rituxan), first approved in 1997; etanercept (Enbrel), first approved in 1998; and trastuzumab (Herceptin), which also was initially approved in 1998.

Of the 883 NASs studied, more than half received at least one expansion of their label after their initial approval. While most of those agents received between one and five expansions, a small fraction had more than 15.

About 50% of the biologics had at least one post-approval expansion. Rituximab and trastuzumab had the largest number of expansions: 16 over 26 years and 10 over 20 years, respectively. Among the small molecule drugs, 52% received expansions, and two HIV agents had the most expansions: emtricitabine had 30 and tenofovir disoproxil fumarate had 23.

As far as new indications among the 446 NASs with post-initial approval expansions, 291 had one new indication, 129 had two to four, 24 had another five to 10 indications, and two had more than 11 additional indications.

“We can really see that the full scope of scientific knowledge is not readily available at the time of initial approval for drugs,” observed Bhamani. “And it's very important to note that some of these expansions might be at risk under the IRA and this price negotiations program.”

Respiratory Agents Had Most Frequent Expansions

When broken down by therapeutic area, immunology/allergy, cardiovascular and respiratory drugs had the most frequent expansions. The first two categories had a 67% expansion rate, with respiratory agents having a 69% rate. NASs in all of the areas except dermatology had an average of at least two post-initial approval expansions.

When researchers examined the timing of those expansions after a NAS’s initial approval, they discovered that biologics on the market at least 13 years had achieved only 31% of them within the first year of approval and 67% of them nine years after approval, which is “the potential year that the IRA might impact clinical development for these expansions,” explained Bhamani. Small molecules that were on the market at least nine years had about 35% of their lifetime approvals within the first year of approval and 66% by five years, also the potential point of IRA impact on development for those drugs.

“If the IRA policy had been in place and if development programs were carried out as they were between 2000–2023, 15% of potential expansions for small molecule and biologic NASs may not have been achieved as they were secured after 9 and 13 years, respectively,” wrote researchers in the report.

“It's very common for NASs to be approved for multiple indications throughout the course of their lifetime,” remarked Bhamani, adding that “many of these different indications, disease areas may be at risk if some of these are especially approved much further on into the drug lifetime with this price negotiations program.”

Researchers also broke down the types of expansions and found that 75% of all post-initial expansions — 87% of biologics and 69% of small molecules — were for new patient populations and new indications. “So this really highlights that many of these expansions are reaching new types of patients and new disease areas, which really is important for some of the continued innovation for these products over time,” Bhamani said.

Also among the areas studied was whether the FDA gave expansions a designation for drugs that treat serious and rare conditions and fill an unmet need in order to expedite the development and review process. The 446 NASs receiving an expansion after their initial approval had 1,458 total, and two-thirds of those received FDA designations. Of those, 29% had orphan drug designation, which is granted to drugs for rare conditions affecting fewer than 200,000 people in the U.S. Next most common was priority review, which was given to 16% of the expansions, followed by 9% with breakthrough therapy designation, 7% with accelerated approval and 6% with fast track designation.

Most Pediatric Approvals Came After Initial Approval

In addition, 538 approvals for the NASs were for pediatric patients — those less than 12 — but only 27% came from the initial FDA approval. “Intuitively, this kind of makes sense, as many initial clinical trials for drugs are evaluated on adults. And once the safety and efficacy of these products has been determined, then many of these other expansions go into play for pediatric patients as well,” Bhamani explained.

Twenty-four percent of the pediatric expansions were approved more than 10 years after the first FDA approval. If a drug’s price was negotiated, said Bhamani, that potentially puts it “at risk for approval and research.”

When taking a more recent view of the data, researchers found that from 2015 through 2024, the FDA gave initial approval to 509 NASs and another 1,092 expansions, or more than two per drug. Of those, small molecules had 301 initial approvals and 678 expansions, while large molecules had 208 approvals and 414 expansions.

The report also broke down those expansions by the year they occurred, and Bhamani pointed out that “at any given year for small molecules or biologics, almost 50% of these expansions are for products that were initially approved more than six years prior. So the importance of these late-stage expansions, especially as they may be at risk under the IRA, is very key to call out here.”

Ultimately, said the report’s researchers, “While the aim of this provision in the IRA is to reduce spending, an increasing amount of research has highlighted potential unintended consequences and impacts of this act.”

“It is crucial to monitor how clinical trial activities progress, including any announcements about trial discontinuations or manufacturers exiting specific therapeutic areas for commercial reasons,” concludes the report. “Additionally, initial signals suggest that there may already be changes in R&D decision-making with reduction in the number and trend of post-approval clinical trial initiation post-IRA already being highlighted. CMS and other policy stakeholders should continue to track these early signals and consider adjustment to the current process, if needed. Ensuring that any potential adverse consequences are addressed early will be important to restrict any loss of innovation.”