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The Pill Penalty, Patients and Policymakers

The Centers for Medicare and Medicaid Services is continuing implementation of the Inflation Reduction Act (IRA) by holding “listening sessions” to gather perspectives on the first 10 drugs subject to price setting. While these sessions are hugely important – and we sincerely hope CMS pays close attention to concerns raised by the patients participating – we also urge lawmakers to consider an immediate action Congress can take to address the unintended consequences created by IRA.

One such action is fixing the IRA’s small molecule “pill penalty.”

Beyond the unprecedented price-setting program, the “pill penalty” is positioned to cause long-lasting harms on pharmaceutical innovation, prescription drug development and patient treatment options.

What is the pill penalty?

Under the IRA, biologics have 13 years before the federal government can impose price setting, but small molecule drugs only have a nine-year grace period. Most common, practical medications are small molecule pills. Think Aspirin, ibuprofen, antihistamines and other pills that patients can take at home and administer themselves. Biologics, meanwhile, are typically more complicated, expensive and often administered in a health care setting.

This timing disparity will discourage research dollars and cause a harmful reduction in innovation investment in small molecule drugs, which fulfill critical unmet medical needs. Further, this discrepancy will negatively impact patient access, particularly for those in rural or more underserved communities due to the nature of small molecule – typically a pill – versus large molecule treatment options – typically administered through an injection.

Before the IRA, all new prescription drugs followed the same timeline of 14-plus years of market exclusivity before the patent gave way to generics. This ecosystem worked well, allowing all manufacturers equal time to recoup returns on novel discoveries that required years of dedication and billions in investment. In turn, companies can reinvest their income to new research and expansion initiatives once generics or biosimilars enter the market to supplement supply.

What does this mean for patients?

The IRA has strongly disincentivized investors, researchers and manufacturers from moving forward with small molecule research – even though those treatment options often significantly improve quality of life for patients. Additionally, small molecule treatments are often most important for patients living in rural communities or with more limited access to care. Put another way, the “pill penalty” may exacerbate health equity issues and decrease treatment options.

For example, in the first CMS patient listening session, several patient advocates talked about the looming difficulties that will be exacerbated by the IRA implementation. They raised concerns that include having to adjust treatment course, rural disparities and access to pharmacies as well as the challenges of finding care centers to administer treatment.

What’s next?

Policymakers have an opportunity to address this unintended consequence and help ensure patients have access to the medications they need by fixing the “pill penalty.” We hope they will do so and reverse other troubling trends and unintended consequences created by the IRA that impact medical innovation.


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