Pharmaceutical industry experts say that the Medicare Drug Price Negotiation Program created by the Inflation Reduction Act will contribute to the growing shortages of common small molecule medications, such as aspirin and antibiotics.
Last week, the Centers for Medicare & Medicaid Services announced the 10 medications that it would be choosing for its maximum fair price negotiation process with pharmaceutical companies for Part D Medicare coverage, which will take effect in 2026.
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President Joe Biden's crowning medical achievement to date under his domestic legislation bill grants the secretary of health and human services the authority to negotiate prices of the medications that produce the greatest cost for the medicare program, an authority backed up with the ability to enforce a penalty of up to 95% of profits on a drug if the maker is noncompliant with the government's price.
Although the Biden administration touts the negotiations as a savings for Medicare, experts have cautioned that price control settings will diminish incentives for investment in pharmaceuticals due to artificially limited profits. A University of Chicago study, for example, estimated that price controls would lower research and development investment by $663 billion through 2039, possibly leading as many as 135 new drugs not to come to market.
But pharmaceutical industry experts contend the impact of lost research and development spending will primarily affect small molecule medications.
Small molecule drugs are typically pills that can be administered by patients at home, such as aspirin, most allergy medications, and antibiotics. These chemical compound medications are relatively easy to produce and have the potential to treat target areas more directly at the cellular level because of their smaller chemical makeup.
Biologics, also called large molecule drugs, are derived from living cells, making them more complex to manufacture than small molecules. Biologics are also often more costly in time and money to patients and the healthcare system as a whole because they are usually administered by injection or IV infusion at a healthcare facility.
The Inflation Reduction Act enables the CMS to select biologic drugs without competitors for price controls after 13 years on the market but only allows small molecules nine years on the market before eligibility for the negotiation program, potentially disincentivizing small molecule investment.
"What the [Inflation Reduction Act] does is it says we're going to value pills less than biologics because the price controls don't take effect until ... further down the road," Joel White of the Council for Affordable Health Coverage told the Washington Examiner. "What that's doing right now in the market is it's driving investment decisions away from pills [because] we've got this incentive to get everything into the biologic space [to get] four more years of price exclusivity."
John Stanford of Incubate, an organization representing medical venture capital firms, told the Washington Examiner that the policy will not only affect investment for new drugs coming to the market but also the supply of existing medications.
"Biologics [generally] get produced in much smaller quantities because they ... are more complex. So, we're going to have more energy and resources going to manufacture more complex things," Stanford said. "That means we're going to have fewer giant manufacturing facilities that could mass produce medicine in a moment of need."
Stanford explained that the emphasis on biologics will negatively affect market resiliency to changes in supply and demand under emergency circumstances, ranging from natural disasters demolishing a manufacturing facility to global health scares.
"Let's say we get hit with a terrible shortage for, I don't know, something like a pandemic," Stanford said. "We're going to have fewer investments in sites that can make [millions of pills], and we're going to have more sites that can make a handful of biologics at a time."
Although a variety of essential drugs are currently in short supply, White said that small molecule cancer treatment drugs are particularly scarce, and shortages will likely be made worse under the Inflation Reduction Act's incentive structure.
New innovative therapies for cancer often rely on small molecule cytotoxic materials as their "backbone" or primary foundation. While much of the shortage for these chemicals, mostly produced outside of the United States, is attributable to the COVID-19 pandemic supply chain disruptions, White and Stanford argue that the Inflation Reduction Act may disincentivize investment in current production of small molecule solutions for cancer that drive these advances.
White told the Washington Examiner that his conversations with lawmakers suggested that the price exclusivity differential between biologics and small molecules was a "fundamental misunderstanding of the market" on the part of politicians crafting the legislation.
Although curative therapies for cancer or other chronic illnesses may ultimately come from biologics, White said, innovation in treatments has been thus far focused on making existing medications into pill form to make administration of the drugs easier and more accessible.
"Everything in the pharma world has been trying to figure out 'How do we get insulin into a long-acting pill so [diabetics don't need] the injections? How do we get cancer cures into a pill [to] make it more widely available?'" White said. "The marketplace, obviously, is putting more money in those products that have price controls less," deemphasizing small molecule innovation.
The CMS told the Washington Examiner that there is no evidence that the price exclusivity differential between biologics and small molecules will exacerbate existing shortages or create new ones.
Last week, Biden said that "MAGA Republicans" are aiming to eliminate the drug price negotiation program in its entirety, but Stanford told the Washington Examiner that is not his objective as he talks with lawmakers to encourage both small molecules and biologics to have 13 years of price exclusivity.
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"We recognize that this new price control program is the law of the land and that ending the small molecule penalty would still leave that very much in force," Stanford said. "The monumental moment that is, price controls in Medicare would remain unaffected."
The White House did not respond to the Washington Examiner's request for comment.