There are times when government interventions create unanticipated negative consequences. Such is the case with what has become known as the “pill penalty” that resulted from the Biden administration’s Inflation Reduction Act (IRA).
The IRA imposed a system of price controls on certain medications commonly used by millions of American seniors through Medicare Part D through the Medicare Drug Price Negotiation Program. This program is hardly negotiation, but rather a set of targeted price controls.
Congress, in legislating a price control scheme, created a disruptive division between types of drugs. The details are complicated, but the result is different treatment for two major types of drugs that has created growing market distortions and disparities.
Most common prescriptions come in pill or capsule form. Generally, pills are less costly and easier for patients to take. That means they are more likely to be used consistently, a key factor in managing chronic diseases like diabetes. Medicines in pill or capsule form are called “small molecule” drugs.
“Large molecule” drugs, or “biologics,” often cost more. Many are administered by health workers in a clinical setting through infusions, or patients can self-administer injections. All these forms of administration are far less convenient for patients to take. Also, these drugs are often indicated for rare diseases or those that are more difficult to treat.
The problem is that Congress subjected small molecule drugs to price controls four years sooner than large molecule drugs. That inequality is known as the “pill penalty” and has led to a disparity in investment for research and development between the two drug classes.
The pill penalty is already having a profound effect throughout the biomedical industry, including here in Utah. Investment in pill-form, “small molecule” research and development (R&D) has dropped as much as 70%, as investment dollars shift to the more profitable “large molecule” sector, or “biologics.” Since the passage of the IRA, dozens of research projects on the pill side have been scuttled as capital naturally migrates over to more profitable products.
Not only will fewer “small molecule” medicines be produced because of ill-conceived government action, those that exist now may not ever be fully developed. Over half of small molecule drugs that have been approved in decades past have later been cleared by the FDA for additional uses, such as treating other maladies or for pediatric use. Post-approval research is key for developing new uses and/or improving formulations. Without further research and testing, those additional benefits will be lost.
The good news is that Congress can help reverse these unforeseen negative consequences with a proposed bill that recently won the support of the White House. In an executive order, President Trump has called upon Congress to fix the pill penalty. It is vital to codify the proposed changes with congressional action. The Ensuring Pathways to Innovative Cures (EPIC) Act is now moving through Congress, hopefully on a bipartisan basis. The EPIC Act will do away with the pill penalty and put both small and large molecule medicines back on a level playing field.
The fix is easy enough — others can debate the wisdom of government price controls, but if we must have them, it only makes sense to treat small and large molecule drugs equally. That will fix the bias against typically lower cost pill-form medicines and restore investment dollars to their development.
We at Bio-Utah are grateful to Sen. John Curtis for becoming a co-sponsor of the EPIC Act. We also invite other members of Utah’s federal delegation to join Sen. Curtis in supporting the EPIC Act, including as co-sponsors if possible. The problems that emerged from the IRA have created unintended harms for the pharmaceutical industry. The EPIC Act is a great way to resolve one of those harms.