EPIC Act grants exemption to biologics, small-molecule drugs
TL/DR –
New Jersey, home to many biopharmaceutical and medical technology companies, is vulnerable to a provision in the 2022 Inflation Reduction Act (IRA) that penalizes research on a specific category of drugs, the small-molecule drugs. The legislation allows government to set prices on certain drugs covered by Medicare and provides a grace period before new drugs are eligible for price-setting, giving drug makers a chance to recoup investments; however this grace period is 13 years for biologics and only nine years for small-molecule drugs. This discrepancy has led pharmaceutical companies to shift research and development funds away from small-molecule drugs to biologics, potentially leading to less availability of affordable treatments, increased health care spending, and economic implications for states like New Jersey.
New Jersey: The Medicine Chest to the World
New Jersey, often referred to as the “medicine chest to the world”, houses 14 of the world’s largest biopharmaceutical companies and 12 leading medical technology firms. This makes New Jersey particularly sensitive to the 2022 Inflation Reduction Act, which could potentially disrupt research on a broad category of drugs, impacting patients. A proposed legislative fix, which could address this issue, may require the backing of New Jersey legislators like Democratic Rep. Josh Gottheimer.
Understanding the Impact on the Pharmaceutical Industry
The Inflation Reduction Act contains a provision that differently impacts two types of medicines: small molecule drugs and biologics. Small-molecule drugs, chemically derived and usually found on neighborhood pharmacy shelves, form over 90% of medicines available today. Biologics, created from organic material and typically administered in a hospital or clinic, represent a smaller but critically important medical category.
The Current Disparity and its Consequences
The IRA allows the government to set prices on certain Medicare-covered drugs, granting a grace period before new drugs become eligible for price-setting. However, the grace period is 13 years for biologics and only nine for small-molecule drugs. This four-year gap, considering that half a drug’s commercial value is earned in this period, poses a challenge for pharmaceutical firms. This has led companies to shift research and development funds away from small-molecule drugs to biologics, which promise a more secure financial future.
Why this Matters
This shift of investment is problematic as it pushes research dollars towards more expensive drugs. On average, biologics cost 22 times more than small-molecule drugs, which can cause a financial strain for patients. Moreover, the withdrawal of investment from small-molecule research could lead to reduced availability of affordable treatments, potentially causing millions of life-years lost.
The Way Forward: The EPIC Act
A bipartisan proposal, the Ensuring Pathways for Innovative Cures, or EPIC, Act, introduces a much-needed change by proposing a single 13-year exemption for both small-molecule drugs and biologics. With this act, we can expect a more balanced approach in pharmaceutical research and development, which could ultimately benefit patients and the economy.
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