The Inflation Reduction Act remains a topic of discussion under the new Trump administration, with potential reforms on the horizon. One key area under scrutiny is part of the Medicare drug price negotiation program that currently puts small molecule drugs at a disadvantage compared to biologics.
At present, small molecule drugs become eligible for negotiation nine years after approval, while biologics have a 13-year window before they are subject to the program. Critics of this rule, including industry lobby PhRMA, have labeled it the small molecule “penalty,” arguing that it hampers the development of these medications.
Recently, Congress reintroduced a bill called the Ensuring Pathways to Innovative Cures (EPIC) Act, aimed at equalizing the eligibility period between small molecule drugs and biologics. This bill, which failed to reach a floor vote last year, is gaining momentum under the current Republican majority.
The impact of the Inflation Reduction Act on investments is already being felt, with Medicare set to start paying negotiated prices for the first 10 drugs in the program next year. The selection of drugs and their prices has deterred investment in small molecules, leading to the discontinuation of several research programs and drugs.
While some companies attribute their cutbacks to the IRA, other factors like funding challenges and lack of investor interest also play a role. For instance, Boston-based Kojin Therapeutics cited insufficient funding as the reason for winding down its small molecule R&D operations.
Even larger biotechs and pharmaceutical companies are not immune to the financial pressures. Galapagos announced the discontinuation of its small molecule programs and a restructuring plan, while Pfizer, Bristol Myers Squibb, and Roche have also cut back on their small molecule research.
Despite concerns about the long-term impact of the IRA, Big Pharma executives have downplayed the immediate financial effects in their earnings reports. However, as more drugs are added to the negotiation program, the financial implications could become more significant for these companies.
As the program moves forward with negotiations for the next round of drugs, the Trump administration appears inclined to retain the program to achieve its goal of lowering drug prices. The push for reforms in this area reflects the ongoing debate about balancing innovation and access to affordable medications in the healthcare industry.
