The Centers for Medicare & Medicaid Services will begin holding closed-door meetings this week with patients who use the 15 drugs it selected for the second round of Medicare price negotiations — a list that includes the popular weight-loss treatment Wegovy.
CMS will use these discussions to inform the lower prices it will ultimately set for the medicines in question. What CMS won’t address, though, is the growing list of life-changing drugs that will never be developed as a result of government price-setting.
It’s been less than three years since the Inflation Reduction Act authorized the price negotiation program. Already, several biotech companies have cited the law as a reason for ending research programs and treatments for cancer, psychiatric disorders and other serious conditions. Nearly 50 research programs and 24 drugs have been discontinued since the law was enacted.
Without legislative reform, the number of discontinued treatments will only grow — and so will the number of people whose lives could have been saved by those foregone medicines.
One provision particularly stands out — the law’s “pill penalty.â€
The IRA doesn’t treat all medicines equally. Chemically synthesized “small molecule†compounds, which typically come in pill or tablet form, can face price-setting just nine years after the FDA approves the medicines.
By contrast, large molecule biologic drugs, which are grown from living cell lines and typically administered via injection or infusion at hospitals or doctors’ offices, don’t face price-setting until they’ve been on the market at least 13 years.
As a result of this four-year disparity, biotech companies and investors are turning away from small-molecule research.
Earlier this year, the CEO of Novartis warned that companies are deprioritizing small molecule therapies for the elderly as a result of the IRA. Eli Lilly’s CEO likewise confirmed that “venture capital and large pharma have allocated capital away from small molecule chemistry projects.†Pfizer announced last year that it would steer its oncology portfolio away from small molecules due to the IRA.
We’ve seen staggering material losses. Investments in small molecule treatments have dropped by 70% since the IRA was introduced. A Stifel analysis shows that U.S. biotechs specializing in rare diseases — for which small molecule drugs are a key focus — lost an average of $1 billion in value over the last four years.
Bristol Myers Squibb — the maker of blood thinner Eliquis, one of the first drugs selected for Medicare price negotiations — recently announced plans to trim spending by $3.5 billion over the next two years. The effort will lay off at least 2,000 employees, leading to cuts at cancer research facilities.
These warnings and losses align with what my venture capital organization is hearing. Incubate’s recent survey found that 87% of life science investors are less interested in funding small molecule research and development.
That’s a looming disaster not just for patients but also for taxpayers. Small molecule drugs account for the majority of all medicines. All 15 drugs that CMS just selected for price-setting are small molecules. These medicines are typically easier for patients to take, and they are generally more cost-effective than biologics.
Lawmakers can restore the balance between small molecule drugs and biologics. The Ensuring Pathways to Innovative Cures Act would give small molecule drugs the same 13-year reprieve from price-setting that biologics receive. If it were currently the law of the land, eight of the 15 recently selected medicines wouldn’t have been eligible.
The EPIC Act would encourage companies to make research investments based on a drug’s scientific promise rather than its molecular weight.
The lawmakers who created the Medicare drug price negotiation program had good intentions. However, the price-setting is causing more dire consequences than many critics predicted. In their quest for lower drug prices, policymakers ensure that many experimental treatments are never developed — meaning they’ll never be available at any cost.
John Stanford is the executive director of Incubate, a coalition of life sciences venture capitalists. He wrote this for .
