Small-molecule drugs, which typically come in pill or tablet form, have long been the backbone of modern medicine, treating everything from high blood pressure to cancer. But a key provision in the Inflation Reduction Act (IRA) is now putting future innovations in small-molecule therapies at risk. According to a new report by the Information Technology and Innovation Foundation (ITIF), the IRA’s “pill penalty” could drastically reduce investment in new treatment options.
Under the IRA, small-molecule pills and tablets face price-setting by the federal government after just 9 years on the market, while biologic drugs—which are often injections or infusions administered in healthcare settings—get 13 years. This imbalance discourages pharmaceutical companies from investing in the development of small molecules pills and tablets, despite their crucial role in addressing conditions like neurological disorders, cardiovascular disease and infectious diseases. The ITIF report warns that if not eliminated, the “pill penalty” will diminish innovation, leading to fewer breakthroughs and reduced access to cost-effective treatments.
Small molecule drugs account for more than 90% of all prescriptions in the U.S. and about three-fourths of novel drugs approved by the FDA. ITIF’s report also notes that while small molecule medicines generally are less expensive to manufacture and require less R&D investment, companies do not earn as much from them as they do from biologics, and they therefore must be on the market for a comparable time to earn appropriate returns. The “pill penalty” significantly shortens the window of these drugs’ market exclusivity, shifting funding away from developing new ones.
Number of New Molecular Entities Approved by U.S. FDA, 2013-2023
The bipartisan Ensuring Pathways to Innovative Cures (EPIC) Act, which was re-introduced in Congress earlier this week, aims to fix this imbalance by extending small molecules medicines’ exclusivity to match the 13 years granted to biologics. As ITIF highlights, this adjustment would restore the incentive structure needed to ensure small-molecule development in pills and tablets remains a viable investment for pharmaceutical companies. Without this action, America’s leadership in life sciences—and patients’ access to cutting-edge treatments—could be at risk.
We Work For Health stands in support of policies like the EPIC Act as we urge lawmakers to pass this important legislation in this Congress. Patients can’t afford to lose the innovation pipeline that has saved countless lives, and Congress must act to restore it.
The full report, “The Inflation Reduction Act Is Negotiating the United States Out of Drug Innovation,” can be found on ITIF’s website.
To learn more about the “pill penalty” and how the EPIC Act would help, check out We Work For Health’s fact sheet.