Brand strategies of the last two decades have matured and are facing diminishing returns as market dynamics evolve. Relying on legacy playbooks is increasingly leading to missed forecasts and a growing disconnect from today’s realities. One of the most significant forces reshaping the landscape is the Inflation Reduction Act (IRA) of 2022, whose far-reaching implications are just beginning to unfold.

The life sciences sector is now three years beyond the IRA’s passage. The legislation introduced significant regulatory changes, including new frameworks for drug payment responsibilities, reduced patient out-of-pocket (OOP) expenses, and centralized pricing negotiations under the maximum fair price (MFP) mechanism for selected pharmaceuticals.

Importantly, these changes are taking place alongside other evolving market dynamics that collectively impact brand performance and manufacturer economics, as illustrated in Figure 1 below.

Recent pharmaceutical product launches have not matched historical adoption rates. Between 2015 and 2019, 20% of new drugs reached $100 million in US sales within their first year on the market; this figure dropped to just 10% for launches between 2020 and 2024. Many new drug launches are not just slower but also follow a lower trajectory.

In 2024, gross-to-net discounts in the US pharma market surpassed $500 billion. These growing discounts coincide with increasing demand for greater transparency and public scrutiny of industry practices.

In addition to the IRA, the policy and regulatory environment is undergoing significant changes. Developments include initiatives such as most-favored nation (MFN) pricing, sector-specific tariffs, ongoing Medicaid reforms passed under the One Big Beautiful Bill, new rebate model guidance on 340B, and notable shifts in leadership structure within regulatory agencies.

Patients are becoming more knowledgeable about therapeutic options and support programs to assist them in their treatment journey. Rising consumerism combines with modern technology to lower the barrier to patient education, creating new expectations.

Taken together, these converging trends are reshaping the pharmaceutical landscape. Recognizing that the economic window for brands is narrowing, companies are adopting new operational practices and strategic approaches poised to reshape the sector over the coming decade. New rules for success throughout a brand’s lifecycle are emerging as we enter a brave new world.

Maximizing economic value through R&D strategy

A cornerstone provision of the IRA, the MFP negotiation process, reduces a product’s commercial lifespan by establishing a Medicare price-setting event at nine years for small molecule drugs and 13 years for large molecules. This effectively creates a new loss-of-exclusivity milestone within the Medicare channel, independent of patent expiration. A recent study of late lifecycle products demonstrated that, on average, 50% of gross and net revenue is gained in years nine to 13. With up to 100 top-performing drugs slated for negotiation between 2026 and 2030, and little to prevent net price spillover into the employer markets, the industry is only beginning to assess the full ramifications of the IRA. In short, this means that companies have less time to maximize revenue, making early strategies even more critical.

Historically, manufacturers of multi-indication drugs have sought to sequentially expand indications throughout a product’s lifetime. However, given the compressed commercial timeline under the IRA, companies must now accelerate value realization earlier in the product lifecycle. Manufacturers are now pursuing indication stacking strategies, simultaneously pursuing multiple indications rather than the traditional sequential approach. Increased investment in R&D necessitates prioritization regarding which indications to investigate, the timing of those investigations, and how to allocate funding. For smaller or emerging biopharma firms with limited financial resources, running multiple concurrent clinical trials may prove infeasible due to capital constraints increasing the need for partnerships.

In light of the recent Congressional Budget Office report highlighting the impact of lower National Institutes of Health funding and a reduced federal workforce, one long-term consequence of the IRA may be a reduction in asset development, as the risks associated with failure increase and the intensity of required investment rises.

Importantly, recent changes to the orphan drug exclusions of the IRA now expand to cover additional orphan indications. The countdown on the MFP clock does not begin until the first non-orphan indication launches, an important win for innovation and patients with serious, life-threatening diseases. This shift creates new strategic opportunities for manufacturers.

The impact of patient behavior on drug utilization

One of the earliest impacts of the IRA was the reduction in OOP cost-sharing for standard eligible Medicare patients in the catastrophic phase of coverage in 2024. This created a 2024 OOP maximum of $3,300, which was further reduced to $2,000 as part of the IRA benefit redesign in January 2025. The resulting impact on branded utilization, particularly in specialty classes, has been significant, as seen in Figure 2.

Following the reduction in OOP maximums, there was a surge in the proportion of standard eligible Medicare Part D patients with $0 cost exposure. For example, in June of 2023, only one in 20 oncology prescriptions had $0 cost exposure. Just two years later, following the policy changes, that number jumped to nine out of 10 oncology Rx. Coinciding with the reduction in OOP cost exposure in 2024, there was a +50% surge in year-over-year oncology prescriptions in the Medicare channel. Dozens of cancer products saw increases in utilization, benefiting thousands of patients, and creating a surge of billions of dollars for manufacturer gross revenues.

For the same reason that manufacturers utilize copay cards to offset patient costs for commercially insured or cash-paying patients, the shifting Medicare Part D OOP dynamics create important new strategies for pharma manufacturers. Changes in patient behavior create greater per-patient value. Not only are fewer new patients abandoning treatment due to cost, but more are staying on therapy longer as OOP costs decline, improving adherence. This creates new avenues for manufacturers to consider when trying to build patient loyalty. Although enrollment is light in 2025, it is also important to follow the Medicare Prescription Payment Plan utilization, as that is another avenue for distributing patient costs.

The implications extend well beyond patient behavior, as they also change net present value asset calculations, patient support design, and formulary contracting decision points. Consider that 90% of oncology patients experienced $0 OOP costs midway through 2025. Does preferred access with lower copays deliver different value than non-preferred access with higher cost sharing?

System pressures are increasing

There is no such thing as a free lunch. Although increased drug utilization can benefit both patients and manufacturers, it presents escalating cost challenges for insurers. As patients’ OOP costs fell, insurers and manufacturers paid more. Under the new Medicare Part D design, payers must cover 60% of patient costs after the $2,000 OOP limit. While benefit redesigns shifted who pays, they did not fundamentally reduce system costs due to the surging demand.

Consider a specialty drug priced just over $22,000 a month, as demonstrated in Figure 3 below. Under the new benefit design, the plan’s responsibility for a perfectly adherent patient triples, from $55,000 in 2024 to $160,000 in 2025. Combined with the surge in specialty utilization, the overall exposure quickly multiplies, resulting in tens of billions of industrywide dollars in liability shifts.

The ramifications for Medicare plans, manufacturers, and patients are forcing the market to adapt. Cost pressures are causing more complex payer negotiations with manufacturers to extract higher net price concessions, resulting in a greater number of formulary exclusions. At the same time, there are payer shifts in the Medicare Advantage market prompting patients to change plans. For patients, that means fewer options over the long term. For manufacturers, it means greater net price concessions and more challenges bringing new products to market.

Key learnings

The industry is still learning how the IRA will impact future products. So far, outcomes have been mixed due to both new market constraints and lower patient costs. The IRA coincides with other shifting dynamics, so successful brands will need to understand how these factors interact. As patient expectations shift and policies such as MFN evolve, today’s advantages may become tomorrow’s challenges, making adaptability and preparation essential in a complex landscape.

Luke Greenwalt is VP, US Thought Leadership & Innovation, at IQVIA