A version of this blog originally published as an op-ed in The Center Square in Arizona. We're sharing it here with additional updates pertinent to our national audience.
By Sidney M. Rosen, Esq.
On Thursday, August 15th, the Biden Administration announced new prices for 10 drugs to save patients money at the pharmacy counter. The Associated Press (AP) said that this came “after months of negotiations” with drug manufacturers on 10 of the more expensive drugs used by Medicare recipients. The reductions will range between 38% and 79% and take effect in 2026.
These negotiations were a result of the Inflation Reduction Act (IRA) of 2022. Although the IRA did many good things for patients, such as capping out-of-pocket costs, and lowering insulin prices, it will also have a negative impact on the drug discovery pipeline. That is a tragedy for all patients who are battling lethal and chronic diseases now—and it is a tragedy for all patients who will be faced with disease in the future, which is almost all of us. This negative impact on the drug discovery pipeline is due to the IRA’s effect on new investment, new treatments, and new cures.
Specifically, the IRA created a huge disincentive to fund research in small molecule drugs by treating them differently than biologics. Currently, most drugs on the market are small molecule drugs. Those are drugs that can (usually) be taken orally, as opposed to biologics that are normally injected or infused in a doctor’s office.
Under the IRA, small molecule drugs are subject to price negotiations seven years after approval by the Food and Drug Administration (FDA), with the price control taking effect in the ninth year. Biologics are subject to price negotiations 11 years after FDA approval, with the price control taking effect in the 13th year. That difference of four years can have a profound effect on decisions taken by drug developers and investors, and we are already seeing a negative impact on investment due to this “small molecule penalty.”
Research in both small molecule drugs and biologics is critical to provide the cures that patients hope and expect in the future. Drug development should not be based on an arbitrary distinction between when classes of drugs will be subject to price controls, but rather on what drugs are most likely to be successful in treating and, ultimately, curing disease.
Fortunately, there is a bipartisan bill that will fix the small molecule penalty. H.R. 7174, the Ensuring Pathways to Innovative Cures (EPIC) Act, aligns the price-setting timelines for both small molecule drugs and biologics at 13 years. The bill was introduced by Rep. Greg Murphy, M.D. (R-NC), Rep. Don Davis (D-NC), and Energy and Commerce Health Subcommittee Chairman Brett Guthrie (R-KY). The bill is short, fixes the small molecule penalty—and only fixes the small molecule penalty.
If we want real reform and reductions in drug prices that will benefit all patients (as noted above, the IRA reductions are only on 10 drugs for Medicare recipients), then there are several excellent proposals that all Americans should support. Each of these reforms will increase access and affordability for patients without negatively affecting the drug discovery pipeline.
1) PBM Reform: Today, three Pharmacy Benefit Managers (PBMs)—CVS Caremark, Express Scripts, and OptumRx—control more than 80% of the prescription drug marketplace. PBMs are intermediaries between insurance companies and pharmacies. Although PBMs perform a necessary function, their current outsized power inflates the amounts patients pay and interferes with the physician-patient relationship. There is a clear bipartisan consensus on the need for PBM reform. Congress should act, and act soon.
2) 340B Reform: The 340B program is a federal program that requires drug manufacturers to provide lower-cost drugs (at a 25% to 50% discount) to health care organizations to help low-income and uninsured patients. The organizations, however, are buying the drugs at a discount and selling them for full price, and they are not giving the discounts to the poor patients the program was originally designed to help. The devastating expose in the New York Times, “How a Hospital Chain Used a Poor Neighborhood to Turn Huge Profits,” illustrates what is wrong and what desperately needs to be reformed in the 340B program.
3) Transparency: As with PBM and 340B reform, a key issue is transparency throughout the drug supply chain. Transparency will highlight where the problems are, and where cost-sharing is being off-loaded from insurers, PBMs, and others, to patients. There is an outstanding bipartisan bill, H.R. 5378, authored by the Republican Chair of the House Energy and Commerce Committee, Rep. Cathy McMorris Rogers (R-WA), who is joined by the top Democrat on the committee, Frank Pallone (D-NJ). It overwhelmingly passed the House last December, and the Senate needs to act.
In addition to the immediate, tangible cost-savings from the three areas above (as well as many others that could be mentioned such as better use of generics), drug discovery ultimately lowers costs for all patients and the overall healthcare system. It does this through lessening of symptoms, avoiding expensive procedures or surgery, reducing or eliminating hospitalizations, and by curing disease. Whenever a proposal for prescription drug reform is made, always ask whether it protects the long-term drug discovery pipeline. That should be the standard that both political parties, and all Americans use when evaluating these proposals.
Sidney M. Rosen, Esq., is the Founding Chairman of ICAN, International Cancer Advocacy Network—a 501(c)(3) non-profit organization based in Phoenix that has helped over 18,000 Stage IV cancer patients across the United States and in 72 countries since its founding in 1996. He is also the founding partner of the boutique international real estate law firm of Rosen Ocampo & Fontes, with principal offices in Phoenix and Mexico.