CROs will see new work in the US because of the roll out of the Inflation Reduction Act (IRA), according to Boston Consulting Group, citing Biologics-focused contractors and those able to expedite time-to-launch as likely beneficiaries.
The management consulting group made the prediction in a research report looking impending changes to the US healthcare market will create opportunities for contractors and, by extension, potential private equity investors.
The authors said “Enacted in August 2022, the IRA will soon have its biggest impact on the health care landscape as implementation of the most significant Centers for Medicare & Medicaid Services (CMS) components start in January 2024.
“Biopharma, payers, and providers will be the most affected industry segments. The CMS changes support a biopharma shift toward biologics and provider-administered medications while increasing the pressure to shorten development timelines to maximize new drug revenue.”
They added “The changes could disrupt the pharma services market, providing growth opportunities for differentiated contract research organizations (CROs) and marketing services firms that can expedite time-to-launch.”
The legislation – particularly its provisions for drug price negotiation - will increase demand for contractors with the skills required to make and trial large molecule drugs and advanced medicines according to the researchers.
“It will boost biologics-focused CROs and contract development and manufacturing organizations (CDMOs). Companies will continue to base their investment decisions on an asset-by-asset analysis, of course.
“But direct negotiation rules now incentivize the development of biologics over small molecules because the latter are subject to price negotiations four years earlier than the former. CROs and CDMOs with biologics capabilities may see increasing demand,” the BCG team say.
Focusing on CROs in particular, the BCG team suggest the IRA will increase demand for differentiated tech-driven contractors and site management organizations (SMOs).
“Direct negotiation rules will put greater emphasis on development timelines and early approval for multiple indications, benefiting CROs and SMOs that can support faster development,” they write, adding that CROs with electronic clinical outcome assessment (eCOA), electronic patient-reported outcome (ePRO), artificial intelligence (AI)-based patient recruitment tech are likely to benefit most.
The BCG team also suggest CROs with experience running smaller scale studies will be in demand, predicting there will be “a need for differentiated CROs and SMOs that can effectively and efficiently run trials on small populations, providing an opportunity for tech-driven players.