Biologics have a major advantage over small molecule drugs under the Inflation Reduction Act’s provisions, according to stakeholders attending this week’s J.P. Morgan conference.
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The potential impact of the Inflation Reduction Act’s drug pricing provisions on small molecule drugs was on the minds of industry stakeholders in San Francisco this week for the J.P. Morgan Healthcare Conference.
At the crux of the matter is a disparity in which biologics are spared from price negotiations under the Inflation Reduction Act (IRA) for 13 years following approval, while the grace period for small molecules is only nine years.
Incubate, a lobbying group for venture capital firms in the life sciences, contends there is an urgent need for 13-year parity when it comes to small molecule drugs and biologics.
“Nine years of exclusion from price negotiations for small molecule products and 13 years for biologics—that’s a big difference when you consider that 50% of all drug revenues come in years 10 to 13 and you’re taking that off the table,” John Stanford, Incubate’s executive director, said at the group’s policy panel in San Francisco on Sunday.
It’s a concern shared by Gaurav Gupta, managing partner of J.P. Morgan Life Sciences Private Capital, who said the loss of four years of exclusivity for small molecules has “very real” consequences from an investment standpoint.
“The impetus for what has led to the development of many of these exciting medicines that we’ve seen is that someone has taken that risk to have it pay out down the line,” Gupta said at the panel. The IRA provisions, he added, are “taking, for certain types of medicines, a significant amount of revenue potentially off the table.”
An analysis from the Partnership for Health Analytic Research (PHAR), in collaboration with the Pharmaceutical Research and Manufacturers of America (PhRMA), highlighted the fact that the majority of cancer medicines approved by the FDA are small molecules and projected that the IRA’s price setting provisions will have “an acute impact” on the research and development (R&D) of cancer drugs.
J.P. Morgan’s Gupta said it is “head-scratching” that lawmakers who drafted and passed the IRA into law would “bias the modality by which we target certain disease,” adding that the provisions are particularly detrimental because they affect patients.
“There will be people and companies who just choose to back away from small molecule programs” including radiopharmaceuticals, Gupta said. “Cancer patients may end up being disproportionately affected.”
In September 2023, credit rating agency Fitch Ratings released an analysis showing that the Medicare Drug Price Negotiation Program will likely deter investments in small molecule drugs.
“Companies may focus more on complex biologic products that benefit from longer periods before price negotiation is required, with less attention and investment for small molecule drugs, as they tend to lose the vast majority of their sales in the 12 months following patent expiration,” according to Fitch Ratings, which warned that “this may affect pharmaceutical companies’ product diversification and growth prospects.”
PhRMA has similarly made the case that biopharma companies are rethinking their R&D investments, “with the government essentially picking winners and losers” by stifling the development of certain types of drugs for specific patient populations.
Kirsten Axelsen, a senior policy advisor at DLA Piper, also expressed concerns about the IRA’s targeting of small molecules, which she said will have potentially dire consequences.
“Are we going to see switch strategies towards the end of lifecycles? Are we going to see indications split into different products? There’s going to be a lot of inefficient R&D as a result of this law,” Axelsen told the panel.
Greg Slabodkin is the News Editor at BioSpace. You can reach him at greg.slabodkin@biospace.com. Follow him on LinkedIn.
