North Carolina’s biotech industry is one of the five largest in the nation. Around 800 North Carolina companies are working to develop therapies for a broad range of diseases. These companies function as a crucial economic engine, sustaining tens of thousands of jobs.
Like other biotech hubs, North Carolina is coming to terms with the new drug-pricing policies introduced in 2022’s Inflation Reduction Act. To lower Medicare costs, the IRA allows Medicare to set prices on certain medicines. But the law doesn’t treat all medications equally.
What has many industry representatives and investors scratching their heads is a provision that inadvertently tilts development in favor of a particular class of medications at the expense of equally promising treatments in another class. Congress should let medical science — rather than unintended preferential policy — guide drug development.
Small-molecule drugs — those that patients take orally, like pills — receive a nine-year exemption period after they enter the marketplace before they’re subject to price-setting. By contrast, biologics — drugs that are injected or infused — have a 13-year grace period.
There’s no medical reason behind giving small-molecule drugs a shorter reprieve from price controls.
Already, some companies are pulling small molecules out of clinical trials, knowing the odds of making a return on their investments are scant. Bringing a new medicine to market costs between $1 and $3 billion. For those that manage to receive FDA approval, years 10 through 13 of sales often account for half of revenue — a crucial window the IRA eliminates for small molecules.
For companies that have staked their financial futures on small molecules, this policy could mean bankruptcy.
Downstream of that, patients will receive fewer new treatments for cancer, heart disease, and neurological disorders like Alzheimer’s. Due to their lower molecular weight, small molecule drugs can easily permeate cells to reach therapeutic targets anywhere in the body. They can cross a microscopic barrier surrounding blood vessels in the brain — a characteristic critical to treatments for everything from brain cancer to depression.
It’s much easier for patients to take a pill than get an injection. Small molecule drugs are also far less expensive to administer. On average, a daily dose of a biologic costs 22 times more than a daily dose of a small molecule.
Rather than fixing this problem by changing the exemption period to 13 years for all new medications, some members of Congress have introduced legislation to shorten the exemption period for all drugs under Medicare to just five years. No one would invest in new drug development under such conditions.
A recent analysis found that shortening the time period before price controls to five years would wipe out more than 69,000 jobs in our state over the next decade and cost over $20 billion in lost economic activity. That’s to say nothing of the lives lost to diseases for which we otherwise would be developing cures.
Lawmakers urgently need to preserve small-molecule drug development. Congress can do so by granting all newly approved drugs a 13-year exemption from price controls.
Laura Gunter is president of the North Carolina Life Sciences Organization. John Stanford is the executive director of Incubate, a Washington-based coalition of life science venture capitalists. This piece ran originally in the Triangle Business Journal, Raleigh.
