This Fix to the IRA Will Help Seniors

President Biden's signature legislative accomplishment, the Inflation Reduction Act, included a number of provisions good for the health and well-being of older adults, starting with the new $2,000 cap on out-of-pocket expenses for prescription drugs under Medicare. But as with any legislation of this scope and magnitude, policy errors that created unanticipated consequences snuck in.

A notable misstep was the IRA's unequal treatment of small-molecule drugs and large-molecule biologics. This policy mistake is already distorting new drug development in ways that will result in less value for the aging population. Fortunately, a bipartisan group of lawmakers just introduced legislation to fix it.

Most known medicines today are small-molecule drugs, which come in the form of pills, capsules, or tablets that your local pharmacy usually fills for pick-up or delivery. In most cases, you can take a small molecule treatment at home with a glass of water. Large-molecule biologic medications are usually infused through an IV line that is put into a vein, or as a shot or injection. Because most biologics require administration by a clinician at a doctor's office or in a hospital outpatient setting, patients must schedule appointments to receive their medication and have transportation to get there. Once there, it can take anywhere from several minutes to hours to receive a biologic injection or infusion, depending on the medication.

In most cases, if you have the choice of taking an equally effective small-molecule treatment or a biologic, you'd choose the small molecule. The convenience for most older adults, especially individuals that have limited mobility, is clear. In addition to their accessibility, small molecule medicines have legitimate scientific advantages for treating certain conditions. For example, they more easily cross the "blood-brain barrier," giving researchers hope for certain neurological conditions, such as Alzheimer's disease and other dementias. Small-molecule therapies are also showing potential in the treatment of chronic conditions like psoriasis and diabetes.

Biologics have an important role in effectively treating many diseases, and there's no question that both small molecules and biologics have a vital role to play in the future of medicine. The question of what kind of treatments to pursue should depend on the science, not artificial incentive payment structures that favor one over the other. Yet, that's what a provision of the IRA put in place.

A key element of the IRA is its authorization of federal officials to negotiate with drug makers for lower prices, thus reducing costs for the Medicare program. As part of this program, lawmakers also laudably attempted to preserve incentives for new drug development, which is an investment-heavy undertaking.

On average, it takes more than $2 billion in investment per FDA approval of a new drug, once you factor in that over 90% of candidates entering clinical trials ultimately fail. Successful new drugs have to realize a return on investment in the period before generic competitors enter the market and competition brings prices down -- or, now, before Medicare demands a significantly lower price. Recognizing this dynamic, lawmakers gave newly approved medications an exemption period before price negotiations kick in.

So far, so good. But the problem is that under the IRA, biologics receive a 13-year exemption period, whereas small-molecule drugs get only nine years. The impact of this difference is critical. In its first 13 years after approval, about half of total sales from a new drug accrue in years 10-13. By allowing one set of treatments a longer exemption period than the other, Congress has effectively steered the future of pharmaceutical development toward biologics. This builds upon pre-existing payment policies for biologics -- an add-on payment of 6% of the sales price of physician-administered drugs to providers -- in the Medicare program.

Drug company executives and investors have already indicated that the shorter 9-year exemption period is changing their decision-making on drug development. Already, investment is shifting toward biologics and away from small molecules, leaving potential avenues of treatment unfunded.

This unintended consequence carries an element of irony as well, because small molecule drugs are in most cases less expensive for patients and more easily genericized than biologics, leading to greater adoption and lower long-term costs. To the extent biologics become more dominant due to the Inflation Reduction Act, they will lead to lower adherence but still higher Medicare costs overall.  

Thankfully, Representatives Greg Murphy (R-NC), Don Davis (D-NC), and Brett Guthrie (R-KY) have introduced the Ensuring Pathways to Innovative Cures (EPIC) Act to address this problem. Their legislation would provide a straightforward amendment to allow small-molecule treatments the same 13-year exemption period as biologics, a needed fix to level the playing field while maintaining the IRA's goal of ensuring adequate incentives for new drug development.

With the passage of the EPIC Act, a structural disincentive to pursue small molecule treatments would be addressed and the Inflation Reduction Act would be fixed to support, rather than distort, scientific innovation. That would be great news for older adults.
 
Michael Ward is vice president of public policy and government affairs at the Alliance for Aging Research, a nonprofit.