Article Summary –
In the US, the 2022 Inflation Reduction Act penalizes research on certain categories of drugs, potentially leading to negative consequences for patients. The Act sets different grace periods before new drugs become eligible for government price-setting, with biologics receiving a grace period of 13 years and small-molecule drugs having a nine-year period. The pharmaceutical industry has reacted by shifting research funds towards biologics, leading to potentially higher drug costs for patients, a reduction in the availability of affordable treatments, and an increase in healthcare spending.
New Jersey: The World’s Medicine Chest, Threatened by 2022 Inflation Reduction Act
New Jersey, home to 14 of the world’s largest biopharmaceutical companies and 12 leading medical technology firms, faces a challenge from the 2022 Inflation Reduction Act. This Act penalizes broad categories of drug research, potentially affecting patients adversely. A legislative fix, however, could solve the problem with the support of legislators like Democratic Rep. Josh Gottheimer.
Discrimination between Small Molecule Drugs and Biologics
The IRA provides different treatments for two types of medicines. Small-molecule drugs, chemically derived and often found in neighborhood pharmacies, make up over 90% of today’s medications. Biologics, created from organic material and administered typically in hospitals or clinics, are the other type. Both are crucial to our health, but the IRA discriminates between them.
For the first time, the IRA permits the government to set prices on certain drugs covered by Medicare, granting a grace period for new drugs before price-setting comes into effect. However, the grace period is 13 years for biologics and only nine years for small-molecule drugs, a discrepancy with significant implications.
The Impact of the Four-Year Penalty
This four-year penalty affects pharmaceutical companies significantly. Between 50% and 60% of a drug’s commercial value is earned during that four-year window. Considering developing an individual drug costs $3 billion on average, any loss of such magnitude is challenging to absorb.
In response, pharmaceutical companies have started shifting research and development funds from small-molecule drugs to biologics. This shift creates a problem as biologics cost on average 22 times more than small-molecule drugs, adding extra burdens to patients. Furthermore, it significantly affects the availability of affordable treatments. A University of Chicago study found that the four-year penalty would lead to 188 fewer small-molecule medicines over 20 years, which equals to around 116 million life-years lost.
The EPIC Act: A Potential Solution
A solution is proposed in a bipartisan piece of legislation before Congress — the Ensuring Pathways for Innovative Cures or EPIC Act. This Act could end the unintended consequences of the IRA by giving both biologics and small-molecule drugs the same 13-year exemption. Support for the EPIC Act is critical for the future of healthcare, as it could ensure continued access to cutting-edge and affordable medications.
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