Matthew Espenshade: IRA's unfair drug pricing must be stopped

How many of us know what goes into the development of the medications we take? We take a medicine and hope it will work, that we’ll feel better shortly or we’ll be able to keep certain diseases in check. Very few of us have any concept of the years of research, trial-and-error attempts to get it right and ultimate testing and review both by the company and then the U.S. Food and Drug Administration that goes into each medicine available on the market.

It takes a tremendous amount of time, work and money to get a medicinal product to the public. It usually takes more than a decade for a drug company to recoup the amount of money it puts into the development of new medicines. It is a huge economical decision to choose which type of product on which to focus their efforts.

Unfortunately, the federal government has placed additional roadblocks to the development of certain types of drugs, which could hinder our ability to formulate new and more advanced treatment methods for a variety of illnesses.

The problem centers around the federal Inflation Reduction Act (IRA), which was signed into law in 2022. Tucked away in its language is a section that creates a price differential between small molecule and biologic drugs that is set to go into effect in January 2026.

Small molecules are drugs made through chemical synthesis, such as aspirin or the anesthetic drug procaine, whereas biologics are made from living organisms or cells. Examples of biologics include vaccines, hormones or allergenics. There is important research being done and new discoveries being made for both types of drugs. Both are critically important to our country’s health. Unfortunately, the IRA essentially prioritizes biologics over small molecules. The government is disincentivizing investment into small molecule drugs under the IRA.

Prior to the enactment of the act, both small molecules and biologics had on average 14 years for drug manufacturers to recoup the cost of developing the drug before government price settings are put in place. The IRA changes the drug manufacturing landscape by treating the two unequally. Under the law, small molecules are eligible for price negotiations after nine years of being on the market, while biologics are given a 13-year grace period. Obviously, under this new pricing structure, it makes more sense from a fiscal and business perspective to focus on the development of biologics.

This may seem like inside baseball — something that won’t impact the average American. But that is far from the truth. Small molecules are among the most widely available, common and convenient treatment option for patients. Small molecules make up more than 90% of prescriptions on the market today.

But the IRA is putting the future of small molecules at risk, which in turn could lead to fewer treatment options and higher health care costs for patients. In fact, since the IRA was introduced in 2021, small molecule funding has dropped by 70%. Recent data show that from January to August of 2024, biologics funding was 10 times larger than that for small molecules.

The ramifications of this continued unfair treatment of small molecules will be far reaching. It will stifle future innovation and development of life-changing medications. The United States has been leading the way when it comes to cutting-edge treatment options. But that will all change if the federal government continues to prioritize the development of biologics over small molecules.

It’s imperative to the stability of our country’s health care that the Trump administration work with Congress to fix the unfair price treatment that small molecules are facing. Future health care breakthroughs are at risk. The time to act is now.