Biopharma’s IRA readiness: From What? To Now what?
By Brian Corvino, managing director, and Kevin Dondarski, principal, Deloitte Consulting, LLP
The ultimate goal of the US Inflation Reduction Act (IRA) of 2022 is to lower healthcare costs for American citizens through price negotiations and higher inflationary cap prices. However, the significant changes it will enact on Medicare prescription drug pricing will have far-reaching effects on the global biopharma industry and its stakeholders. With major anticipated impacts across the entirety of the biopharma value chain, the global impacts of this regulation will continue to be explored in our upcoming publications such as the 2023 Measuring the return on pharmaceutical innovation report. In this week’s blog, which first appeared as a US Center for Health Solutions Health Forward blog, Brian Corvino and Kevin Dondarski explore how biopharma companies could use the IRA as a catalyst for positive change during the initial period of uncertainty.
In the 10 months since the IRA was enacted, the biopharmaceutical sector has rapidly mobilised to understand and evaluate the legislation and implications.1 There are three broad areas that company leaders should consider:
- What? What are the knowns and known unknowns?
- So what? What functions, pipeline assets, and in-line products are likely to be impacted? What are the potential implications to the business strategically and operationally—both directly and indirectly?
- Now what? How should the company mobilise to act?
The law’s impact on biopharmaceutical manufacturers is likely to be substantial and broad-based. Its effect could impact most organisational functions and core business processes, including, but not limited to:
- Capital allocation for research and development (R&D), and business development and licensing (BDL&A)
- Clinical and integrated evidence development
- Value and evidence/health economics and outcomes research
- Market access marketing, pricing, and contracting operations
- Customer-facing teams and strategic account management
- Patient services operations
- Government policy and advocacy
- Legal and regulatory
- Finance and accounting
Many decisions will likely need to be made with incomplete or emerging information. Given the tight timeline, biopharmaceutical companies will likely need to be agile in their preparations. Key decisions made over the months ahead could lay the groundwork for future precedent.
While uncertainties remain, the biopharmaceutical sector has largely pivoted focus to planning and mobilising to ensure readiness to act. Company leaders may be evaluating the following key questions.
- How do we best organise ourselves, across functions, to effectively and efficiently comply and take action?
- How do we mobilise our organisation and business partners? What new resources and capabilities are needed?
- How do we execute on our action plans we have developed?
IRA could require a company-wide reset
The IRA is likely to be a catalyst for change, rather than a one-time event. The law will likely require company executives to assess the need for adjustments across enterprise operations—from discovery to development to commercialisation.
The biopharmaceutical sector is generally in the process of pivoting from the understanding phase of the IRA (What/So what?) to the action (Now what?) phase. During this period of uncertainty, we have outlined the following recommendations for consideration:
- Plan and prepare early for multiple scenarios: While many uncertainties remain, there are a number of known unknowns that allow for scenarios to be established and plans to be developed. The initial phases of the IRA implementation may require rapid execution within accelerated timelines, particularly for manufacturers that might face direct (or indirect) product selection in the first round of price negotiations. Establishing agreed upon scenarios to inform early preparations could give manufacturers more time to address the myriad decisions and actions that might be necessary but also precedent setting.
- Establish a temporary cross functional enterprise team for organisational readiness: Successfully complying with and addressing the requirements of the IRA could require unprecedented cross-functional stakeholder coordination and agility. Internal and external stakeholders will likely be required to work together in completely new ways. This may include re-allocating resources (financial and people), establishing new cross-functional governance and clear roles and responsibilities, and adjusting core business processes and technology systems—all in an agile manner. Organisations that establish an enterprise-level program during the initial phases of implementation tend to be well equipped to rapidly consolidate and disseminate learnings, and effectively execute adjustments and actions that might be required.
- Enable a scaled functional understanding and application: It will likely be important for all impacted functions, and stakeholders within those functions, to have a baseline understanding of the relevant components of the IRA. Each business process will likely need organisationally aligned adjustments. Moreover, enterprise teams will likely be required to train the trainers by establishing critical points of contact within core functions. This can allow for scaled day-to-day business-process execution.
Conclusion
For biopharmaceutical manufacturers, the IRA could be the biggest regulatory change since the enactment of the Medicare Prescription Drug, Improvement, and Modernisation Act (Medicare Part D) two decades ago.2 We have been working closely with our pharmaceutical company clients and we know first-hand that they are working around the clock to prepare themselves for the new law. The pharmaceutical sector has entered what we refer to as the “now what” phase where they will likely develop strategies to reorganise, mobilise, and execute their action plans. The next step will be to determine how to scale and how to adjust.
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1 Inflation Reduction Act tamps down on prescription drug price increases above inflation
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