The Inflation Reduction Act of 2022, which includes provisions requiring Medicare to negotiate lower drug prices for some of the United States’ most costly drugs, marks the first time in decades that the pharmaceutical industry has lost a major policy battle. So, as expected, drug corporations are attacking the new law. The industry’s latest red herring? That, relative to previous law, the reforms in the Inflation Reduction Act economically disadvantage small-molecule drugs compared to biologics, which will hurt innovation, increase prices, and harm the people who need these medicines.
This claim is completely misleading, and unsupported by the facts. The Inflation Reduction Act actually narrows the advantage for biologics over small molecules.
This may seem like a complicated detail, but getting it straight is critically important for people like me. I live with an incurable blood cancer called multiple myeloma and rely on both small-molecule drugs like pomalidomide and biologics like daratumumab to keep me alive. People like me need both types of drugs today and will continue to need them in the future, and the new drug price law is structured to make sure both will be developed and both will continue to be profitable for drug makers.
That’s why the pharma industry’s complaint is specious — over time, its stances have been completely inconsistent. Biologics were given a huge advantage over small-molecule medicines because the pharmaceutical industry insisted on receiving seven years more market exclusivity for biologics than for small-molecule drugs when the Biologics Price Competition and Innovation Act (which was included in the Affordable Care Act) was being structured. At the time, the pharmaceutical industry did not warn that this advantage for biologics would lead to the development of fewer small-molecule drugs, which it hasn’t. Since 2010, more than 75% of new drugs approved by the FDA have been small molecules.
The Inflation Reduction Act actually contains more generous incentives for small-molecule medicines because it narrows the difference in years of protection from Medicare negotiation between biologics and small molecules to four years. And the negotiation exemption periods for small molecules (nine years) and biologics (13 years) are longer than the existing market exclusivity periods granted by the Food and Drug Administration, which are five years and 12 years, respectively.
Drug companies now assert that both types of drugs should be treated equally for purposes of negotiation — pharma’s chosen solution is, naturally, to increase the exemption period for small molecules to 13 years to match that of biologics.
If small-molecule and biologic drugs should have equal periods of exclusivity, then the right solution is to align both at no more than the nine years given to small molecules. There is no evidence to support exempting biologics from negotiation for 13 years. Brand name biologic drugs typically face less competition than small-molecule drugs, and research shows that research and development costs for the two categories are similar. A prolonged exemption from negotiation leaves people covered by Medicare footing the bill for biologic drugs with launch prices that can exceed $200,000. These prices are harming the health of Medicare enrollees: an estimated 3.5 million seniors had difficulty affording medications in 2019.
To put this into perspective, other high-income countries provide small-molecule and biologic drugs with identical periods of market exclusivity. The only reason the U.S. is not on that list is because the pharma industry spent millions lobbying Congress for a longer monopoly period for biologics.
The misleading complaint — that the Inflation Reduction Act will stifle the development of small molecule drugs — is not supported by facts and is inconsistent relative to the pharmaceutical industry’s long-held positions on the need for advantageous treatment for biologic drugs. As a patient, I find this complaint is offensive. It has nothing to do with the interests of the millions of Americans who rely on medicines to get healthy — or stay alive. The drug industry simply wants 13 years of exemption from negotiated prices for all drugs to make as much profit as possible. Period.
It’s time for the pharmaceutical industry to choose: Do biologics need more market incentives than small molecules, or not? If pharma wants equal incentives for all drugs, Congress should bring biologics in line with small molecules and equalize them both at no more than nine years of exemption from negotiation. Americans need both small-molecule and biologic drugs, and the Inflation Reduction Act strikes a balance to get us both.
David Mitchell is a cancer patient and founder of Patients For Affordable Drugs Now, a national, nonpartisan patient advocacy organization focused on policies to lower drug prices.