Inflation reduction act impact on pharmaceutical investment: insights from investor interviews

There is limited direct measurement of whether the Inflation Reduction Act (IRA) is beginning to influence investment strategy and decisions.

Using a standardized guide, we interviewed life science investors from a range of stages, investment sizes, and fund types to explore how incentives under the IRA have impacted investment decisions.

We interviewed 31 active investors. Over 90% had discussed the law within their firm. While 71% reported a lack of firm-wide consensus as to the IRA's precise potential impacts, 87% reported that the IRA was making it more challenging to bring innovative new medicines to market. All but one investor reported they were more likely to consider a larger launch indication for products they invest in, and 77% reported the IRA influenced small molecule investing.

Early signals of IRA impact on investor strategy include favoring a larger population launch and reduced small molecule investing. Noting stated preference and other study limitations, investors signaled continued interest in certain high Medicare utilization drugs. Buy-side investment impacts remain understudied.