EPIC Act Will Correct Dangerous Market Distortions Passed Under Biden

 by James Brighenti

The Inflation Reduction Act (IRA) gave the Health and Human Services Secretary the authority to “negotiate” the prices of prescription drugs for Medicare. This really means the Secretary has the power to determine the price that they believe is acceptable and impose a steep tax of up to 95% on companies who charge more. The IRA incurs shortages, cost increases, and a small molecule “pill penalty,” which disincentivizes the creation and sale of small molecule drugs. The Ensuring Pathways to Innovative Cures (EPIC) Act, led by Senator Thom Tillis (R-N.C.) and Rep. Greg Murphy (R-N.C.),  aims to fix the pill penalty the IRA created.

Small molecule drugs make up 86% of all U.S. prescriptions and are generally less expensive to manufacture in comparison to other types of drugs. In addition, the simple nature of these drugs allows them to cross the blood-brain barrier, making them essential in treating everyday ailments like allergies to more serious conditions and even some cancers. 

The IRA allows the HHS to impose price controls on small molecule drugs after 9 years and biologics (more complicated, large molecule drugs) after 13 years. This is what is known as the “pill penalty.”

While the IRA disincentivizes innovation across the board, the pill penalty amplifies these barriers for small molecule drugs. A study conducted by Hanke Zheng, Julie A. Patterson, and Johnathan D. Campbell found that after the IRA’s passage, the average number of post-approval industry-funded trials for small molecule drugs decreased by 47.3% and 32.9% for large molecule drugs. The nearly 50% decline in small molecule trials is not research and development naturally slowing down; instead, it is a market response to the shorter timeline before price controls kick in. The IRA pulls away resources from drugs that are vital for both everyday ailments and the treatment of major diseases.

Companies like Pfizer have already moved away from small molecule development due to how the IRA treats small molecules differently from large molecules. Because of this shift, the company’s mix of small molecule drugs in its cancer portfolio is expected to fall from 94% as of 2023 to 35% by 2030. Small molecule drugs are typically pills, while many large molecule drugs require infusion or injection. A shift away from small molecules means future treatments may skew toward options that are more invasive, expensive, and less convenient for patients, especially for those who already have trouble getting access to treatment.

The IRA’s price controls are not an economic benefit but instead are a market distortion. The continued development of both large and small molecule drugs is vital for the health of the American people. To plug the holes that the IRA has punched, ATR urges lawmakers to support the EPIC Act.

https://atr.org/the-epic-act-will-correct-dangerous-market-distortions-passed-under-biden/