One Law, Multiple Yardsticks: The Inflation Reduction Act Clause in SEC-filed Biopharma Contracts

In my earlier LinkedIn series article Royalty Stacking, I noted that “biopharma alliances may provide royalty offsets due to competition (generics, biosimilars, market share) or government action (compulsory license).” The Inflation Reduction Act (IRA), signed in 2022, added a new government action to offset: Medicare’s negotiation of a maximum fair price for drugs it selects. Shortly thereafter, biopharma licensors and commercialization partners began writing that IRA offset clause into their agreements, and recent alliance contracts show how differently they do it.

To see how, we read all the agreements filed with the U.S. Securities and Exchange Commission (SEC), found by our search of those filings, whose text ties a payment or other contractual term to the Act’s drug-price provisions, or defines one for that purpose. That gave 65 contracts carrying 62 distinct clause texts, because three pairs of records share the same clause. The earliest instrument carrying the text is dated 2023, and 62 of the 65 are dated after the first list of drugs selected for negotiation was published in 2023. Each contract was coded twice, by readers working independently from the filed text, and every code rests on quoted words; nothing hidden behind a redaction is inferred.

In these filings, a single law is met with multiple yardsticks. Of the 65 contracts, 49 cut a royalty rate and 7 adjust the sales base on which the royalty is computed; 57 carry a visible economic consequence of some kind. Among those 57, the size of the cut is a redacted flat amount in 24, wholly redacted in 10, a deduction from the royalty base in 6, a formula tied to the price change in 6, tiered by the decline in sales in 5, and left to negotiation in 1. The size of the royalty cut is hidden in 49 of the 57, and the formula that sets it is fully legible in just 5 contracts.

Dianthus’s 2025 license from Nanjing Leads Biolabs shows the price-linked form of the IRA offset clause in full. If the product is selected and Dianthus is “ultimately subject to” a maximum fair price, the royalty rate “will be reduced by a percentage equal to the percentage decrease between (a) the Medicare Price per unit of such Licensed Product in the United States, for such Licensed Product, and (b) the then-effective Maximum Fair Price applicable to such Licensed Product.” Even here, however, the floor beneath the cut is redacted.

Most of the IRA offset clauses start at selection for negotiation by Medicare: 48 contracts name the product’s designation as a selected drug as the earliest step, and 5 reach back to its eligibility for negotiation. Whether the royalty cut then stacks with the license’s other royalty offsets depends on the royalty floor. Among the 57, a visible floor caps the IRA offset in 30, whether the floor reaches it is hidden in 18, the floor’s list of offsets leaves it out in 4, and in 2 the clause’s own numbering puts it both inside and outside that list.

Novo Nordisk’s 2025 collaboration with Septerna takes the IRA offset clause out of the floor in so many words: “The foregoing provision will not be subject to the royalty reduction floor set forth in Section 9.5.5 (Payment Floor).”

Interestingly, it’s within the contract’s definitions that the offset clause is widening. In 27 of the 65 contracts, the IRA clause or the definitions it uses reach beyond the Act: to analogous laws in 19, to successor laws in 13, and to most-favored-nation or reference pricing in 5. That share is highest in the newest instruments, 8 of the 11 agreements dated 2026 against 19 of the 54 dated 2023–2025, and 4 of the 5 that name reference pricing are 2026 instruments. With a median of about three months between signing and SEC-filing, 2026 is still undercounted, and these are small numbers. Novo’s definition of the maximum fair price already reaches “any future Applicable Law in the United States that sets or imposes a cap on the price for a drug product”, and Astellas’s 2026 collaboration with Vir defines the Act as “including as amended by the One Big Beautiful Bill Act.”

Whose royalties the clause cuts is, as far as the visible words go, not in doubt. In each of the 56 contracts with an economic consequence whose bearer is visible, the text reduces or conditions what the receiving party gets, and none moves the IRA offset amount onto the commercialization partner or splits it. Five contracts give the commercialization partner stated control over the Medicare negotiation itself, and 60 say nothing about who controls the negotiation process.

Who formulated each contract’s IRA offset clause is hard to interpret from the text. A large pharmaceutical group is the commercialization partner in 34 of the 65 contracts and the originator in 6, and 9 originators are based in mainland China. Clauses that share a large-pharma commercialization partner are barely more alike than any other pair, so in these filings the pharma commercialization partner does not visibly carry a house version from deal to deal.

Overall, for a business development and licensing (BD&L) professional, the practical lesson is that the IRA offset clause is a royalty-stacking clause with a government trigger. The terms worth reading first are its yardstick, its place in the royalty floor list and the contract definitions it borrows, because those are where these SEC-filed versions differ and where the drafting has moved. A seamstress measures cloth for the garment being sewn, but also in recognition of what might be done with the remainder. In these SEC filings, the offset clause written for this statute is increasingly being drafted to encompass the next government trigger as well.