In oncology, the FDA’s approval is often just the beginning.
The big design flaw is clear: The IRA's price-setting framework has no mechanism to account for the impact of follow-on innovations on a drug’s purpose.
W hen a cancer drug gets FDA approval, most people assume that it has passed the finish line. They believe that the medicine has been proven to work, it’s going on the market, and that’s the end of the research program. But that’s wrong.
In oncology, the FDA’s approval is often just the beginning. Many of the drugs that end up transforming cancer treatment — saving the most lives, helping the most patients — are those that result from R&D that keeps improving the product for years after that first green light. Unfortunately, the Inflation Reduction Act (IRA) is designed in a way that punishes exactly this kind of progress, and it hurts cancer patients enormously.
A drug usually enters the market targeting a narrow set of patients — often those with late-stage, relapsed disease, where the urgency is highest and the regulatory bar is more achievable. Then come years of additional clinical trials that expand the drug’s uses for earlier-stage diseases, new cancer indications (such as for different organs), or new combination regimens when used with other drugs. The most significant developments occur when new drugs are approved to treat early-stage cancers; catching and treating cancer earlier means longer survival, less aggressive treatment, better quality of life, and reduced long-term health-care costs.
Evidence has established these important aspects of the arc of innovation in cancer-drug development. My recent paper at the University of Chicago, published in Health Affairs, analyzed 184 FDA-approved oncology drugs, and we found that nearly 42 percent received at least one follow-on approval — and nearly 60 percent of those follow-on approvals targeted cancers in earlier stages than the original. A separate analysis of multi-indication cancer drugs found that half of them went on to gain approvals for new lines of treatment, and more than 40 percent expanded into new drug combinations.
The road to understanding a medication’s full potential is long: The median time to a drug’s most recent new indication is more than five years after its initial approval.
Take Imbruvica, which first received FDA approval in 2013 for patients with relapsed mantle cell lymphoma in a relatively rare, late-stage setting. Later FDA approvals indicated that, over the following years, it expanded into first-line treatment for chronic lymphocytic leukemia, Waldenström’s macroglobulinemia, marginal zone lymphoma, chronic graft-versus-host disease, and multiple combination regimens. Or take Keytruda, which was approved in 2014 for metastatic melanoma and now can be used for more than 30 indications — including several earlier-stage lung, breast, head and neck, and gynecologic cancers. Each of those expansions required its own clinical trials, which means the developers had to risk capital in the hope the drug’s approval could be expanded to help more patients.
But the problem for patients is that the IRA makes small-molecule drugs (which typically are pills) eligible for Medicare price negotiation just seven years after the initial FDA approval, with negotiated prices kicking in at nine years. For large-molecule biologics (which typically are injectables, negotiation can start at eleven years, with prices taking effect at 13. That window — seven to 13 years after the initial FDA approval — is precisely when further investment is made into successful drugs to investigate their potential alternative uses. Meanwhile, the drugs that work best across the broadest range of patients add the most to Medicare spending and become top targets for price setting. The IRA’s logic, in other words, treats clinical success for many patients as a reason to impose price controls — right when the broad-based revenue success is still being earned and invested back into the R&D that aims to generate a drug’s full potential for further treatments.
The chilling effect on research is already showing up in the data. A peer-reviewed analysis found that following IRA post-approval oncology clinical trials dropped more than 45 percent for small molecules with the shorter window, and 32 percent for biologics with the longer window. A broader study across all therapeutic areas found that industry-sponsored post-approval trials fell roughly 38 percent after the law was enacted, while government-funded trials (used as a control) showed no significant change. Previous research of mine suggested the IRA’s predicted impact would amount to a 12 percent reduction in revenue and 135 fewer drugs over 30 years. Previous research of mine suggested the IRA’s predicted impact would amount to a 12 percent reduction in revenue and 135 fewer drugs over 30 years. In a PhRMA survey, 78 percent of companies said they expected to cancel early-stage molecule projects. This has horrific implications for future cancer patients.
While America’s drug development is slowing down, global R&D is shifting rapidly abroad. In 2024, China surpassed the United States in new clinical trial registrations for the first time, logging roughly 7,100 trials versus about 6,000 in the United States. Over five years, China’s share of global clinical trials has risen by more than half. Recent data show that China-based companies accounted for 39 percent of global oncology clinical trial starts in 2024, up from only 5 percent in 2009. Although the sheer amount of clinical trials is not necessarily an indication of successful drug development, it is highly correlated with share of successful trials.
The big design flaw is clear: The IRA’s price-setting framework has no mechanism to account for the impact of follow-on innovations on a drug’s purpose. The Centers for Medicare & Medicaid Services negotiates a single price for Imbruvica or Keytruda as if each were a single product. But what it’s actually pricing is the cumulative output of a decade or more of clinical trials that each expand the drug’s reach, treat a different group of patients, and often represent a standard of care for a distinct cancer. Negotiate away the economics of that trajectory, and you negotiate away the incentive to pursue it.
This isn’t an argument against drug-price reform. Prescription drug costs are a genuine burden on patients and on the federal budget. But effective reform should target the drugs that cost a lot and don’t deliver much — not the drugs that cost a lot because they deliver a great deal to a great many people. Focus eligibility for negotiations on excessive pricing, not spending, which is the result of volume and price. Then, the government should pause the negotiation clock when a drug earns new post-approval indications, build value measurement into the price-setting methodology, and stop penalizing the research investments that turn a first approval into a transformative therapy.
Many of the cancer drugs that have done the most for patients over the past two decades didn’t get there by standing still after initial success. The IRA, as currently designed, rewards standing still — which punishes the patients who need help.