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Democrats' new drug pricing law will likely deliver a financial blow to one of the fastest-growing and most lucrative segments of the pharmaceutical industry: cancer drugs.

Why it matters: The drug industry argues that the new law will keep oncology treatments from reaching some patients who need them. But experts say the current system lets companies profit from developing drugs that yield only incremental advances and that cancer drugs will still be valuable enough for companies to pursue.

The big picture: The dispute over how Medicare drug price negotiations affect cancer care is a microcosm of a larger debate, in which the pharmaceutical industry argues that price controls will reduce their incentive to bring new drugs to market.

What theyre saying: Research on cancer drugs after initial approval "will be gutted by this bill," Stephen Ubl, CEO of the industry trade group Pharmaceutical Research and Manufacturers of America, wrote in an Aug. 4 letter to Congress.

How it works: Cancer drugs are usually launched to target one type of cancer. Companies then do additional research once the drug is on the market to see if it is also effective against other forms of cancer, which can earn approvals for other "indications."

State of play: Under the new law, beginning in 2026, certain older drugs without generic competition will be subject for Medicare negotiations. That means there will be a limited amount of time during which a drug company has monopoly pricing power, even if a competitor hasnt yet materialized.

The other side: Some experts dismiss the industry's concerns as fear mongering, countering that expanding the market for a particular oncology drug will still be more than profitable enough to justify R&D costs.

By the numbers: Nearly half of the drugs in the FDA pipeline were cancer drugs as of January 2021, according to a University of Chicago white paper. The authors argue that means oncology drugs will be significantly impacted by the new law and fewer will come to market.

The intrigue: Research suggests that not all cancer drugs nor all approved indications offer the same value to patients.

The bottom line: Capping the price of a new drug after a certain amount of time certainly does decrease the incentive of a manufacturer to pursue different indications, because functionally they have significantly less revenue per unit, said Avalere Health's Massey Whorley.

Go deeper: The search for next-generation cancer treatments

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New drug pricing law puts cancer drugs in the spotlight - Axios