We’ve said it before and we’ll say it again. Lowering out-of-pocket costs is key to making medicines affordable to patients, and it can be done without stifling innovation. OOPs are what separate real insurance that people can depend on from the fiasco many are forced through today.
For its part, the Inflation Reduction Act made a great start at insurance reform by capping drug OOPs for those on Medicare Part D. But why stop there?
And while we’re praising the IRA, it’s worth mentioning again how close it comes to a sensible policy that Peter Kolchinsky proposed in *The Great American Drug Deal* called “contractual genericization,” in which a drug is artificially brought down to a generic-like price after a patent-period of exclusivity, as intended by Hatch-Waxman. The problem, as we discussed earlier in this chapter, is that the IRA does not give small molecules (and really all drugs that are regulated under the NDA path by the FDA) a long-enough period of market-based pricing, imposing price controls (i.e., Medicare Negotiation) on them just 9 years after launch, far too short to allow investors and companies to justify pursuing such programs. Meanwhile, biologics get 13 years, which is close enough to Hatch-Waxman and what Peter had proposed. Fortunately, the IRA grants drugs that work for a single orphan disease an exception to price controls and it only applies to drug spending by government programs. So the IRA is currently discouraging development of small molecule drugs (and oligos and short peptides) for non-orphan diseases of aging, which includes lung cancer, breast cancer, heart failure, Alzheimer’s, and many other diseases. But there’s plenty else for the drug industry to work on while we wait for (and advocate for) Congress to recognize its mistake and hopefully reactivate incentives for such programs.
It’s also worth noting that a key feature of contractual genericization is incentivizing additional upgrades of launched medicines, including developing them for new uses (so-called “indication expansion”) and with better and more convenient formulations (e.g., turn a twice-daily pill into a once-daily pill or turn an I.V. Formulation into one that can be self-administered as a subcutaneous shot). The way this would work is much the same as how the FDA currently encourages companies that launch drugs for adult conditions to also test how they could be used in kids (since sometimes that’s necessary) by offering them a 6-month extension of their patent and market exclusivity. The IRA could encourage continued upgrades of a launched drug by offering a 6-month delay to price controls and a similar period of extension of a company’s patent period. Otherwise, companies might pursue new uses of a drug if those ideas occur to them soon after a drug launches since there would still be time to profit from those new uses before the drug goes generic or is price controlled but then lose interest in risking capital on such post-market R&D as a drug reaches the end of its profitability.
While there is considerable effort to fix the IRA by changing 9 to 13 for small molecules, as of 2024 there is not yet a widespread effort to amend the IRA to encourage post-marketing indication expansion through the use of patent extensions and Medicare negotiation delays. That may change, especially if we encourage that change.