Somerset Times

Sandip Shah, a visiting professor at Rutgers University, said a provision in the "Inflation Reduction Act" (IRA) could impact innovation by New Jersey pharmaceutical companies. 

Under the IRA, the brand-name drugs for which Medicare "negotiates" prices are split into two categories: small-molecule drugs and biologics. The IRA makes small-molecule drugs eligible for "negotiation" nine years after their approval, compared to a 13-year exemption period for biologics.

“Merck, Johnson & Johnson, Pfizer, BMS, all of those are small molecule companies that are based in New Jersey that could be impacted,” Shah told Somerset Times. "Biologics are great for dealing with complex diseases, but small molecules will have a greater benefit to the US population in many years to come, because it's easy to produce many generics that will be available.” 

Shah co-authored a March 29 op-ed in NorthJersey.com that said the IRA "penalizes research" on small molecule drugs and would have "painful consequences for patients."

He said a pending U.S. House bill, the "Ensuring Pathways for Innovative Cures (EPIC) Act" would equalize the exemption period for both biologic and small-molecule drugs. By granting both types of drugs a 13-year exemption, he said the bill would incentive innovation in small-molecule research.

“Make it both same and give the same incentives to both small-molecule factor as well as biologic small molecules,” said Shah. 

Otherwise, he said, the IRA provision amounts to "price controls" that will curtail investment in small molecule drugs. 

The EPIC Act was introduced by U.S. Reps. Greg Murphy, M.D. (R-N.C.), Don Davis (R-N.C.), and Brett Guthrie (R-Ky.) 

"Small molecule drugs are critical therapies that Americans with cancer, neurological conditions, and other debilitating diseases rely on every day," Murphy said in a press release. "The IRA’s price-fixing scheme shifts research and development away from these life-saving medications, ultimately leaving patients with fewer treatment options."

An October 2023 paper, authored by University of Chicago economists, said that “price setting under the IRA undermines existing intellectual property laws, reducing incentives for investment in research and development (R&D) that discovers new drugs and identifies new uses and populations who can benefit from already-approved drugs.”

“We conservatively find that the IRA’s policy to set prices at 9 years after market entry for select small molecule drugs will reduce their expected revenues in the U.S. market by 8.0%, which implies a reduction in R&D investment of almost 12.3%, or $232.1 billion over 20 years,” wrote the paper’s authors. “Over the same time frame, we conclude that there will be 188 fewer small molecule treatments, including 79 fewer new small molecule drugs and 109 fewer post-approval indications for these drugs.”

In addition to serving as a visiting professor at Rutgers University, Shah is president of Market Access Solutions, a Raritan, NJ-based consulting firm that works with pharmaceutical and biotech companies.