The Inflation Reduction Act’s Impact on Drug Discovery and Development

Over the last several decades, changes in health policy have successfully altered incentives that have led to greater scientific progress and more new medicines for patients. For example, the Orphan Drug Act successfully spurred investment into rare, genetic diseases, yielding hundreds of new medicines for patients who otherwise had no options.

The significant changes ratified by the Inflation Reduction Act will undoubtedly see ripples across the entire American healthcare system, the impact of which may not be obvious for many years to come.

Some of those changes are undeniably positive and important for patients. The cap on out-of-pocket costs for Medicare patients will provide significant relief for many seniors and narrow the patient access gap that exists today between Medicare patients and those with commercial insurance. Starting in 2025, Medicare patients will not have to spend more than $2,000 of their own money on prescription drugs. The cap ensures more patients will likely keep taking their medicines.

The law also caps the amount of money Medicare patients pay for insulin at $35 per month, a big win for the more than 3 million Medicare patients who take insulin and for Lilly, because the company has been a strong and vocal supporter of this cap. In fact, Lilly made all our insulins available for $35 per month through the Lilly Insulin Value Program years before the Inflation Reduction Act became law.

Despite these important patient financial accessibility advances, other parts of the legislation are likely to have highly detrimental impacts, particularly on the discovery and development of small molecule medicines which play an important role in treating cancer, neurological conditions, and many other diseases. Small molecule medicines are unfairly disadvantaged by the law by allowing Medicare to negotiate prices after just nine years, compared with the 13 years afforded to large molecule, or biologic, treatments.

Small molecule medicines can be as difficult to discover and manufacture as biologics, if not more complex in many cases. The lack of parity between small molecules and biologics is likely to tip the drug development scales in a way that is bad for patient care and will likely have inadvertent healthcare spending consequences as well.

Companies are still adjusting to the new incentives created by this legislation. At Lilly, small-molecule treatments represent 40% of our overall portfolio, and the majority of our oncology pipeline. In fact, many types of cancer, from breast to very rare sub-types, can only be addressed using small molecules. Lilly was in the early clinical stages of developing a treatment (a BCL2 inhibitor) for certain blood cancers that was discontinued after careful assessment of the impact of this law on the program as well as the competitive landscape. This is just one example of how this legislation will impact the development pipeline of companies like Lilly and treatment options available to patients.

Decades of research are culminating in new, life-changing treatments. But we are still on the cusp of the biggest breakthroughs. Tipping the scale away from small molecule drugs means tipping the scale away from critical research in devastating diseases — and, more importantly, patients.

The penalty on small molecule drugs deserves a fix, and creating parity at 13 years can be done without affecting the budget implications of the overall bill. This small, commonsense change to the Inflation Reduction Act could produce significant benefits for patients, now and well into the future.