The following article by Phil Kerpen is sponsored by American Commitment.
Last year, the catastrophically misnamed Inflation Reduction Act (IRA) was a punching bag on the campaign trail for raiding about $270 billion from Medicare prescription drug spending to fund green energy and electric vehicle giveaways and other Democratic special interest priorities. Less well-known is that the bill also contained a raid-within-a-raid on small molecule drugs subject to price controls four years earlier than biotech drugs. It’s called the “pill penalty” because it diverts research dollars from pills to injectables.
The IRA arbitrarily sets different standards for “small molecule” drugs, which are those that come in pill, capsule, and tablet form. Pill-form drugs can be subjected to government price controls as soon as nine years after FDA approval, while “large molecule” drugs, which are those that come as injections or intravenously, are allowed 13 years of market pricing.
You don’t have to be an economist or business guru to predict the inevitable result: less investment in cutting-edge small molecule drugs as research and development dollars move to biotech drugs that are allowed a long runway to earn a return on investment. It can cost over a billion dollars to develop a new drug and bring it to market, so the prospect of earlier government price controls has a big impact.
Patients suffer because the pill penalty targets some of the most widely used, game-changing, and effective drugs patients receive. Drugs in pill form are used to treat a wide variety of serious medical conditions, including cancer, diabetes, and cardiovascular disease.
Professors at the University of Chicago estimated that the pill penalty would diminish R&D investments by over $230 billion, resulting in the loss of 79 new drugs. “This forgone innovation is expected to lead to 116.0 million life years lost due to the missed opportunities to improve health,” they conclude. They also note that their estimates may be too conservative.
The savings from reduced government drug spending don’t even go to seniors or to shoring up Medicare – they go to electric vehicle manufacturers, health insurance companies in the form of supersized Obamacare subsidies, and other Democratic interest groups.
The whole Inflation Reduction Act should be repealed, but at an absolute minimum, Congress should include Rep. Greg Murphy (R-NC)’s Ensuring Pathways to Innovative Cures (EPIC) Act, which eliminates the pill penalty, in the upcoming reconciliation package. Murphy’s two-page bill would extend the same protections from price controls for large and small molecule drugs.
New research shows overwhelming support for ending the pill penalty among seniors. My organization’s Commitment to Seniors project recently polled 1,600 likely voters over the age of 55, asking them for their opinions on a wide variety of issues, including the pill penalty. We found that 86 percent were concerned about the impact of the pill penalty on pharmaceutical R&D investments, the availability of small molecule medications, and the reduction of new pill and tablet-form drugs that could help patients battling chronic conditions.
More than 75 percent of survey respondents also indicated they were in favor of fixing the pill penalty by giving small molecule drugs the same price control exemption as biologics, and over 80 percent of them would support the EPIC Act to accomplish that.
Full repeal of the Inflation Reduction Act should be Congress’s goal, but if that can’t command enough votes to pass, ending the pill penalty via the EPIC Act is an absolute no-brainer to be included in reconciliation.
Phil Kerpen is the president of American Commitment.
