Washington has devised a strange way to encourage medical innovation: Punish researchers for developing medicines that are easier for patients to take.
That is the practical effect of the Inflation Reduction Act’s so-called “Pill Penalty.” Under the law, small-molecule medicines—commonly taken as pills or tablets—become subject to Medicare’s government price-setting program four years earlier than large-molecule biologic drugs. Small-molecule medicines receive only nine years before price controls can take effect, while biologics receive 13.
There is no scientific justification for this distinction. A medicine does not become less innovative, less valuable or less deserving of continued research simply because a patient can swallow it instead of receiving it through an injection or infusion. Yet Washington has created a powerful financial incentive to direct investment away from pills—even when a pill would be the best treatment for patients.
Congress can correct that mistake by passing the bipartisan Ensuring Pathways to Innovative Cures Act, or EPIC Act. Introduced in the House by Representatives Greg Murphy, Don Davis and Richard Hudson, with companion legislation in the Senate, the EPIC Act would give small-molecule medicines the same 13-year period that biologics receive before becoming eligible for government price setting.
This is not a giveaway to pharmaceutical companies. It is a necessary correction to a government-created distortion of the market.
Developing a new medicine is an extraordinarily risky undertaking. Researchers may spend years investigating thousands of compounds before finding one promising candidate. That candidate must then survive extensive laboratory work, clinical trials and regulatory review. Most potential medicines fail somewhere along the way. The revenue from the relatively small number that succeed must support not only their own development but the continuing search for the next generation of treatments.
The Pill Penalty changes those calculations long before a medicine reaches the pharmacy. Investors and researchers must decide today which scientific programs may remain viable a decade from now. By depriving small-molecule medicines of four years available to biologics, the law makes many prospective treatments significantly less attractive for investment. Some programs will be scaled back. Others will be abandoned. Still others will never begin.
Patients will ultimately pay the price—not merely in dollars, but in cures and treatments that never reach them.
Small-molecule medicines are especially valuable because they can often reach targets inside cells that larger biologic molecules cannot. They have played essential roles in treating cancer, neurological disorders, infectious diseases and many other serious conditions. Pills can also be taken at home, without an infusion center, specialized equipment or hours spent traveling and waiting for treatment.
That convenience matters enormously to seniors, rural patients, working families and people with limited mobility. A policy supposedly intended to reduce healthcare costs should not encourage the development of treatments that may be more difficult and expensive to administer.
The Pill Penalty also misunderstands how medical progress occurs. FDA approval is frequently not the end of research on a medicine. Researchers continue studying whether it can treat additional diseases, help different patient populations, work in combination with other therapies or intervene at earlier stages of an illness. Those follow-on studies take time and money. Shortening the viable research window discourages precisely the additional clinical investigation that can transform one promising medicine into several lifesaving treatments.
America became the world’s leader in biomedical innovation because its policies generally rewarded invention, protected intellectual property and allowed scientists and entrepreneurs to take risks. That ecosystem does not operate on command. It depends upon confidence that government will not arbitrarily rewrite the economics of innovation after researchers have committed years and billions of dollars to developing a treatment.
Government price setting was already the wrong prescription for lowering healthcare costs. Creating an arbitrary preference for one type of medicine over another compounds the error. Science—not federal accounting rules—should determine whether researchers pursue a pill, an injection or some entirely new form of treatment.
The Coalition Against Socialized Medicine would prefer that Congress repeal the Inflation Reduction Act’s drug price controls altogether. But lawmakers should not allow the perfect to become the enemy of urgently needed progress. The EPIC Act is a targeted, bipartisan reform that would remove one of the law’s most damaging distortions and restore equal treatment between small-molecule medicines and biologics.
Every medical breakthrough begins as an uncertain idea. Public policy should give that idea room to become a treatment—not quietly ensure that it dies in a laboratory or investment committee.
Congress should pass the EPIC Act and end the Pill Penalty before today’s misguided price controls become tomorrow’s missing cures.
Andrew Langer is Executive Director of the Coalition Against Socialized Medicine
