Investor perceptions and decision-making under prescription drug pricing reform under the Inflation Reduction Act: qualitative insights

Background: Recent U.S. prescription drug pricing reforms, particularly the Inflation Reduction Act (IRA) of 2022, have raised concerns about potential effects on biopharmaceutical innovation. While prior research has examined investment and R&D trends, less is known about how investors interpret and respond to this policy shift. The aim of this study was to examine how biopharmaceutical investors assess the implications of the pharmaceutical pricing reform for innovation, and how these assessments have turned into changes in their investment decision-making and risk management.

Methods: Research team conducted semi-structured interviews with 16 U.S.-based capital investors actively investing in biotechnology and pharmaceutical startups between July and November 2025. Participants held senior roles, including partners, managing directors, and chief executive officers, with an average of 9.2 years of venture capital (VC) experience. An interview guide was developed based on prior literature and institutional theory, pilot tested and refined prior to data collection. Interviews were audio-recorded, transcribed, and analyzed using a hybrid deductive-inductive thematic approach.

Results: Three main themes emerged. First, investors reported increased financial discipline, characterized by more conservative valuation models incorporating IRA-related pricing risk, higher return thresholds, and greater reliance on milestone-based financing tied to early clinical data. Second, investment priorities shifted toward scalable and flexible opportunities, with a preference for biologics and platform-based companies that allow diversification across indications and adaptability of evolving policy conditions. Third, investors described increasing globalization of early-stage development, including the use of ex-U.S. clinical trials to reduce costs and accelerate timelines, as well as growing engagement with international partners to manage regulatory and market uncertainty.

Conclusions: VC investors view the U.S. drug pricing reforms as a policy shock requiring strategic adaptation rather than a deterrent to innovation. Ongoing evaluation is needed to assess whether these shifts sustain domestic innovation while advancing affordability goals.