Opinion: Federal provision could impede pharmaceutical development
Originally in print on Sunday, April 30th and published here by the Virginian-Pilot Newspaper.
Another federal rule that guarantees to distort the market
By Justin Vélez-Hagan, Ph.D.
Guest Columnist
As a result of President Joe Biden’s marquee Inflation Reduction Act, for the first time the government has the power to tell drugmakers how much they are allowed to charge for their products.
It’s a policy change intended to make it easier for patients to afford needed medications. But ironically, the law will likely make it more difficult to get treatments to the patients who need them most.
At issue is a difference in how the law treats complex “biologics” — medications typically administered in a clinical setting — versus “small molecule” drugs, which patients typically take at home in the form of a pill or tablet.
The law exempts small molecule drugs from government price controls for just nine years, compared to a 13-year exemption period for biologics. Unfortunately, however, the law’s favoritism toward biologics is forcing drugmakers to rethink the research projects they can justify pursuing — and which ones to put on ice.
The inherent risk and upfront cost of drug development is huge. Nine out of 10 drugs entering clinical trials never make it through to approval, a process that can require more than a decade. Taking the inevitable failures into account, the average cost per new approval is more than $2 billion. To justify investment and risk on that scale, developers need to know that if their candidate is successful, they can recoup their costs and make a return.
A four-year difference may not seem like much, but the differing timelines for when price controls can take effect is already forcing drug companies to make some tough choices. Major firms such as AstraZeneca and Merck have signaled that they plan to curtail the development of small molecule oncology drugs.
Lawmakers should be taking note. Simply put, so long as biologics receive preferential treatment, that’s where drug companies will focus their efforts.
From a patient perspective, this is a serious concern. Science should be the decisive factor when considering the most promising research lines to pursue — without interference from incentives that inevitably distort investments.
The federal Inflation Reduction Act exempts different classes of drugs — complex “biologics” typically administered in a clinical setting and “small molecule” drugs — for different lengths of time, which could affect the research pharmaceutical companies conduct.
As a result of President Joe Biden’s marquee Inflation Reduction Act, for the first time the government has the power to tell drugmakers how much they are allowed to charge for their products.
It’s a policy change intended to make it easier for patients to afford needed medications. But ironically, the law will likely make it more difficult to get treatments to the patients who need them most.
At issue is a difference in how the law treats complex “biologics” — medications typically administered in a clinical setting — versus “small molecule” drugs, which patients typically take at home in the form of a pill or tablet.
The law exempts small molecule drugs from government price controls for just nine years, compared to a 13-year exemption period for biologics. Unfortunately, however, the law’s favoritism toward biologics is forcing drugmakers to rethink the research projects they can justify pursuing — and which ones to put on ice.
The inherent risk and upfront cost of drug development is huge. Nine out of 10 drugs entering clinical trials never make it through to approval, a process that can require more than a decade. Taking the inevitable failures into account, the average cost per new approval is more than $2 billion. To justify investment and risk on that scale, developers need to know that if their candidate is successful, they can recoup their costs and make a return.
A four-year difference may not seem like much, but the differing timelines for when price controls can take effect is already forcing drug companies to make some tough choices. Major firms such as AstraZeneca and Merck have signaled that they plan to curtail the development of small molecule oncology drugs.
Lawmakers should be taking note. Simply put, so long as biologics receive preferential treatment, that’s where drug companies will focus their efforts.
From a patient perspective, this is a serious concern. Science should be the decisive factor when considering the most promising research lines to pursue — without interference from incentives that inevitably distort investments.
Further, small molecule drugs, which account for 9 in 10 medications on the market today, have certain advantages over biologics. They are easier to administer, can be taken at home, and are usually available at the local pharmacy.
Biologics, on the other hand, typically require patients to travel to a clinic or hospital to receive treatment. That places a disproportionate burden on minority and low-income patients, as well as those living in rural areas.
It’s not just patients who will suffer. The IRA-induced industry shift away from small molecule drugs will have a devastating impact in areas where the economy depends on manufacturing them — read: Puerto Rico. Drug manufacturing accounts for fully 30% of the island’s GDP and supports more than 78,000 jobs.
The territory’s pharmaceutical manufacturing boom began in the 1950s and has proceeded apace in the decades since. Having suffered economically through multiple recessions and natural disasters in the last two decades, new drug pricing policies will further impede the island’s ability to recover and prosper.
The solution is to extend the exemption period for small molecule drugs to match the 13-year window for biologics. Doing so will ensure that prices come down uniformly, as they should, without distorting the drug development pipeline or gutting research. Right now, a majority of drugs in development belong to the small molecule class. We mustn’t undermine that research.
Yes, it’s laudable that lawmakers are trying to make it easier for patients to get the treatments they need. But penalizing one class of medicines to the extent of making them uneconomical to develop simply isn’t the answer.
Justin Vélez-Hagan, Ph.D., is an economist and founder of the National Puerto Rican Chamber of Commerce, a nationwide organization. He serves on the Commonwealth of Virginia’s joint advisory board of economists and is a resident of Alexandria.