Incubate Survey Finds That Drug Price Controls Create Headwinds for Life Sciences Startups

Washington, DC, Jan. 13, 2025 (GLOBE NEWSWIRE) — Today, Incubate Policy Lab released insights from a survey of life sciences venture capital investors about how the Inflation Reduction Act and other U.S. healthcare policy developments impact their decisions to invest in biotech startups.

The majority of respondents indicated that drug price restrictions make investing in biotech startups less compelling, while efforts to modernize clinical trials would make startups a more compelling investment. The investors surveyed invest in a range of companies developing medicines, from early-stage startups to large, publicly traded companies.

“This survey indicates how venture capital investments may change due to the actions of U.S. policymakers,” said Kirsten Axelsen, senior advisor of Incubate Policy Lab. “VC investment allows early-stage companies to advance promising concepts into expensive clinical studies and, when successful, into new medicines. These survey results will be a vital resource as we continue to educate policymakers about the real-world impacts of the IRA and other consequential reforms.”

Of the investors surveyed:

• 76% believe that the Inflation Reduction Act will decrease investments in life sciences startups.
• 65% believe that state restrictions on drug prices will decrease investments in life sciences startups.
• 87% believe that the Inflation Reduction’s small molecule penalty will negatively impact their decisions to invest in small molecule medicines.
• 56% believe that the Inflation Reduction Act makes rare disease medicines a less compelling investment.
• 50% believe that the Inflation Reduction Act makes cancer therapies a less compelling investment.
• 76% stated that FDA guidance on clinical trial modernization would improve the outlook for investing in startups.

Respondents identified team and founder experience; mergers and acquisitions and exit potential; and technological innovation as the most important factors influencing their decision to invest in a particular startup. Respondents cited clinical trial costs, length of time to market, and regulatory uncertainty as the biggest hurdles to investing in rare disease drugs in light of the Inflation Reduction Act.

“Government policies should not discourage venture capitalists from investing in cutting-edge new therapies with the potential to save lives,” said John Stanford, executive director of Incubate. “Policy should instead focus on enabling the U.S. to maintain its leadership position in drug development and venture investment.”

According to Incubate’s Life Sciences Investment Tracker, 40 research programs and 22 drugs have been discontinued since the passage of the Inflation Reduction Act. A number of legislative proposals, including the bipartisan Ensuring Pathways to Innovative Cures (EPIC) Act, would address the small-molecule penalty and other areas of concern highlighted in the survey.

You can learn more about the results of Incubate Policy Lab’s investor survey here.

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About Incubate

Incubate is a 501(c)(4) organization of venture capital firms representing the patient, corporate, and investment communities. Our primary aim is to educate policymakers on the role of venture capital in bringing promising treatments to patients in need.

CONTACT: Lucia Orlandi
Incubate
8123634434
lucia@keybridge.biz