A Simple Tweak Could Improve the Inflation Reduction Act
By Joe Crowley
It's been nine months since President Biden signed the Inflation Reduction Act into law. And the landmark legislation is about to bear fruit.
The IRA gives Medicare officials the authority to negotiate the price of certain commonly used prescription drugs -- a goal that had previously eluded Democrats for two decades. At this very moment, the Biden administration is hiring negotiators. This fall, they'll select 10 drugs for the price negotiation program, a number that will climb with each passing year.
However, as currently written, the drug negotiation provisions suffer from a seemingly small flaw -- but one that could have an outsized impact on people living with cancer or rare diseases. Fortunately, lawmakers can easily correct that shortcoming so that the IRA delivers its full benefits to patients and taxpayers alike.
Drug development is a risky business. Fewer than 10% of compounds entering clinical trials ultimately win approval. Taking into account the expense of developing not only the success stories but also the inevitable failures, it costs an average of nearly $2.6 billion pre-approval for each new medication.
Lawmakers recognized this basic reality -- and wrote the IRA so that Medicare cannot negotiate the price of drugs until they've been on the market a set time. That helps give biotech companies the chance to earn a return on their investment and fund future research.
The law exempts "biologic" drugs -- which are composed of large molecules grown from living cells -- from price negotiations for 13 years after FDA approval. But the IRA only exempts small-molecule medications for nine years.
This creates an incentive for biotech companies to shift their clinical drug development focus toward biologics and away from new small-molecule compounds.
Potential biologic treatments, in short, get a bump in value relative to small-molecule treatments due to the longer excluded period in the IRA -- or more precisely, small-molecule compounds suffer discriminatory treatment, a sort of small-molecule tax.
There's no medical or scientific rationale for this penalty. In fact, small molecule drugs can often provide more convenient treatment options for patients, as they tend to be pills that patients can take in the comfort of their own homes. Biologics, on the other hand, are generally administered intravenously -- so patients must travel to a hospital or clinic for their treatment. Small molecule drugs, given their size, have the ability to cross cell membranes to treat diseases like cancer in ways that most large molecules cannot.
In the early stages of development, that's largely the job of venture capitalists investing in biotech startups. And under the IRA, those startups have a huge incentive to concentrate on biologics -- at the expense of small molecule drugs.
Congress can address this problem by giving all medicines a 13-year reprieve from negotiations, regardless of their molecular weight. It's an easy, relatively low-cost fix that can readily be incorporated into any legislation heading to the president's desk. But it'll make a world of difference for patients.
Joe Crowley represented New York's 7th and 14th Congressional Districts from 1999 to 2019. This piece originally ran in the Albany Times Union.
