How Elastic Is Biopharmaceutical Innovation With Respect to Expected Reward? What Is Missing From Existing Literature on Elasticity of Innovation?

ISSUE: The impact on biopharmaceutical R&D from reduced expected reward size has been a recurring theme in the ongoing debates on the Inflation Reduction Act (IRA) in the US. There is currently no consensus from the HEOR community on the scale and magnitude of the elasticity of innovation to expected reward. Existing empirical evidence differed in their methods, data sources, and estimates. A more thorough understanding of the scale of elasticity of innovation is essential to inform policy making, ensuring the balance between affordability and innovation. The purpose of this session is to review the strengths and weaknesses of existing evidence, identify areas for further research, and discuss the implications of the findings on policy making and social welfare.

OVERVIEW: Gunnar Esiason will first describe the importance of pharmaceutical innovation for patients based on his lived experience with cystic fibrosis, and underscore the need to understand the true scale of the elasticity of innovation (10 minutes). Peter Kolchinsky will demonstrate the impacts of proposed policy changes from IRA using net present value modeling, and show how regulatory changes can impact R&D decisions from an investor perspective (10 minutes). Amanda Cole will present a select set of existing empirical estimates from the literature, and discuss the strengths and limitations of each approach (10 minutes). Darius Lakdawalla will highlight areas that should be prioritized for further research, and the implications for more informed policy making and welfare of current and future patients. The session will end with Q&A with the audience (20 minutes). Polling questions will be used throughout to identify consensus on the range of empirical estimates of innovation and priorities of areas for further research. This session will be relevant for a wide range of stakeholders including patients, employers, payors, modelers, policymakers, and value assessors.