Kerrigan in the DC Journal: Small Biotechs Need Better Policies

By SBE Council at 13 November, 2024, 8:44 pm

In a recent Op-ed that appeared in the DC Journal, SBE Council president & CEO Karen Kerrigan reviews Vice President Kamala Harris's tie-breaking vote that made the Inflation Reduction Act (IRA) a reality. Beyond the inflationary effects of the IRA, price caps on drugs are harming innovation by undermining the very startups that bring cutting-edge drugs and treatments to marketplace. Kerrigan writes:

As vice president, Harris proudly cast the tie-breaking vote to pass the Inflation Reduction Act - a law crushing startups throughout the biotech industry.

The IRA gave bureaucrats the power to set artificially low prices for common prescription medicines. Indeed, most of these drugs are sold by Big Pharma companies, not small biotechs. However, the law threatens to snuff out the smallest, most innovative biotech firms.

That's because small biotech firms, which often work on creating a single promising drug, are overwhelmingly responsible for the vital early stages of development.

More than half of drugs approved by the FDA between 2011 and 2020 originated at small firms. These companies, often startups, typically have no revenue from product sales. They are wholly dependent on venture investors for funding.

The investment sums required to develop a drug are staggering. About 90 percent of drugs entering clinical trials fail to secure FDA approval. The startups behind these failed drugs often close shop at a loss to investors.

As noted by Kerrigan, financing for small biotech companies fell by 39% from 2022 to 2023. Big bio-pharm firms are cutting their research and development budgets as well:

"Because of the IRA's price controls and indirect effects, pharmaceutical revenues are projected to decrease by more than 30 percent through 2039. So far, 36 research programs and 21 drugs have been discontinued since the IRA became law."

Kerrigan highlights the additional damage, which is often the unintended consequence of "well intended" regulation.

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