Development of New Indications for Small Molecule Drugs at Risk under Inflation Reduction Act’s Drug Price Negotiation Program, Study Finds

For Immediate Release: February 2, 2024

Contact: Michael Pratt, 202-827-2088, 

Washington, D.C. – The Inflation Reduction Act’s (IRA) Medicare Drug Price Negotiation Program (DPNP) may lead to fewer subsequent indications and delay launches for small molecule drugs, according to new research from the National Pharmaceutical Council (NPC) published in the American Journal of Managed Care. The manuscript, “Unintended Consequences of the Inflation Reduction Act: Clinical Development Toward Subsequent Indications,” was co-authored by NPC researchers and pharmacists Julie Patterson, PharmD, PhD, James Motyka, PharmD, and John O’Brien, PharmD, MPH. 

The analysis identified 30 small molecule drugs with subsequent indications among the 50 branded drugs with the highest gross spending by Medicare Part D. Across the 30 drugs studied, indications based on postapproval clinical trials or real-world evidence received after initial U.S. Food and Drug Administration approval arrived 7.5 years on average after a drug was first approved. The majority of those subsequent indications (55.8%) received FDA approval more than 7 years after the initial approval.  

Under the IRA’s drug pricing provisions, small molecule medicines can be selected for price setting as early as seven years after the FDA’s initial approval. 

“By setting the drug’s price before a biopharmaceutical company completes additional research and receives approval for additional indications, the law may disincentive companies to invest in postapproval research,” said John O’Brien, co-author and NPC President and CEO. “This finding adds to the concern about the seven-year clock for small molecule drug that it may reduce additional indications and impact patients’ access to new treatments.” 

In addition, subsequent indications based on preapproval research were often approved shortly after FDA approval of the initial indication: Fifteen (44%) were approved within two years of initial approval, including five within the first year post-approval. On average, these subsequent indications received approval 2.9 years after a drug’s first approval. 

“It is important to understand how policy changes may change the incentives for developers and manufacturers of innovative medicines,” said Julie Patterson, co-author and NPC Senior Director of Research. “A concern with the IRA DPNP’s seven-year clock for small molecule drugs is that it is creating a real incentive to delay launches for indications with lower prevalence until the rest of the preapproval clinical research reads out. Because of the incentives of the DPNP, patients with very rare diseases that may otherwise have been the first launch of the drug may now have to wait for the drug to be available for a second, larger population.” 

The thirty included small molecule drugs gained approval for a total of 76 subsequent indications, and seventy percent of the thirty drugs had at least one additional indication based on postapproval research. The identification of new indications for existing drugs accelerates the development of novel treatments for patients with cancer and rare diseases. In fact, more than half of new approvals for orphan oncology conditions from 2013 to 2017 were subsequent indications. 

“This research found that there are a large number of subsequent indications in popular drugs,” said O’Brien. “There is a lot riding on how the DPNP gets implemented in determining just how much it disincentivizes additional research or earlier launches in rare populations.” 

Research into new indications not only provides patients with expanded treatment options but also promotes accessibility of those treatments by facilitating payer reimbursement. In the U.S., off-label prescribing is permitted and may be reimbursed by payers. However, patients often face additional barriers to accessing drugs for evidence-based off-label use, including prior authorization denials.

Related Reading: How The IRA Could Delay Pharmaceutical Launches, Reduce Indications, And Chill Evidence Generation, Health Affairs Forefront (November 3, 2023)

About the National Pharmaceutical Council 

The National Pharmaceutical Council (NPC) is a health policy research organization dedicated to the advancement of good evidence and science, and to fostering an environment in the United States that supports medical innovation. Founded in 1953 and supported by the nation's major research-based pharmaceutical companies, NPC focuses on research development, information dissemination and education on the critical issues of evidence, innovation and the value of medicines for patients. For more information, visit and follow NPC on LinkedIn