House moves on 'pill penalty,' R&D expensing

What a day on Capitol Hill. Yesterday brought the introduction of a bill that would fix the small molecule “pill penalty” in the Inflation Reduction Act, the passage of legislation to restore immediate R&D expensing, and a discussion on the need for PBM reform—we recap everything below. (766 words, 3 minutes, 49 seconds)

House introduces bill to fix small molecule ‘pill penalty’

Bipartisan legislation introduced in the House yesterday would increase the period of exemption from Inflation Reduction Act (IRA) price controls for small molecules from nine years to 13 years—something BIO, our members, and state affiliates have been working on.

The legislation: The Ensuring Pathways to Innovative Cures (EPIC) Act—introduced by Reps. Greg Murphy, M.D. (R-NC), Don Davis (D-NC), and Brett Guthrie (R-KY)—would give small molecule drugs the same period of exemption from price controls as biologics.

Why it matters: The difference in exemption periods created a significant disincentive for developing small molecule drugs, which are the majority of drugs on the market and serve a critical need.

“BIO strongly supports this important legislation, and we commend Representatives Murphy, Davis, and Guthrie for their tireless work on behalf of patients, and their continued efforts to make the U.S. a leader in medical innovation,” said BIO Interim CEO Rachel King. 

What NcLifeSci is saying: “It is great to see two North Carolinians come together in a bipartisan fashion to support innovation, investment and the development of new medicines to treat unmet medical needs,” says Laura Gunter, President of the NC Life Sciences Organization.

What an investor is saying: “Over the last year, I’ve seen firsthand how the small-molecule penalty is impacting the way firms approach their investment,” said life sciences investor Tom Mathers of Pappas Capital. “The penalty created a serious market distortion. We should be following where the science leads us and where it can most benefit patients.”

Watch BIO’s Chief Advocacy Officer Nick Shipley discuss the bill:

House passes bill restoring full R&D expensing

Legislation to restore immediate R&D expensing passed the House by 357-70. BIO has long advocated for this policy for this reform.

The proposal: R&D expenses would be 100% deductible through 2025 under the $78 billion Tax Relief for American Families and Workers Act. The bill, which includes other tax breaks, reverses a change to make companies amortize R&D expenses over five years, reducing the full deduction to 20% annually.

Why it matters: Biotech can require hundreds of millions of dollars and years of work before research pays off. Being forced to amortize R&D expenses reduces funding available for developing new drugs.

BIO’s long-time efforts to revive R&D expensing include a BIOAction campaign to ensure lawmakers understand the bill's importance. BIO joined 260 signatories in a letter backing the bill, sent to congressional leaders Jan. 19.

What they’re saying: The bill “sharpens our competitive edge with China, and it boosts innovation right here in the United States,” Ways and Means Chair Jason Smith (R-MO), the bill’s sponsor, said yesterday. Restoring immediate R&D expensing “will create more than $400 billion in investment and create 73,000 jobs.”

What’s next: The legislation must be approved in the Senate, where it is championed by Finance Committee Chair Ron Wyden (D-OR).

Watch:

House hearing promotes PBM transparency legislation

Preventing drug price increases driven by pharmacy benefit managers was a hot topic in yesterday’s House Energy & Commerce (E&C) Health Subcommittee hearing on health care spending.

Why it matters: PBMs act as middlemen between drug makers, health plans, and pharmacies, using their market power and opaque practices to profit by driving up drug prices. BIO has long been pushing for reform.

The Lower Cost, More Transparency Act, which passed the House Dec. 11, includes PBM oversight. Backed by BIO, the bill is sponsored by E&C Chair Cathy McMorris Rodgers (R-WA), Ranking Member Frank Pallone (D-NJ), and Reps. Jason Smith (R-MO) and Virginia Fox (R-NC).

We need PBM transparency, agreed bipartisan Reps. Michael Burgess, M.D. (R-TX), Debbie Dingell (D-MI), Neal Dunn, M.D. (R-FL), Buddy Carter (R-GA), Diana Harshbarger (R-TN), and Subcommittee Ranking Member Anna Eshoo (D-CA).

Spread pricing, in which PBMs get more for an insurance claim than they pay to the pharmacy, costs Florida more than $90 million a year, and reforming PBM compensation could save Medicaid billions, Rep. Dunn said.

The impact: “We are prescribed drugs from a formulary that is largely driven by money and rebates, not clinical efficacy,” said witness Kevin Lyons of the New Jersey State Policemen’s Benevolent Association.

What’s next: BIO is pushing for robust PBM reforms including the Lower Cost, More Transparency Act as part of a government funding package in March, said Aiken Hackett, BIO VP of Federal Government Relations. 

President Biden’s Thursday: Campaigning in Michigan, just days after receiving the United Auto Workers endorsement, per POLITICO.

What’s Happening on Capitol Hill: Following yesterday’s passage of the tax package in the House, Senate Finance Chair Ron Wyden (D-OR) released a statement saying he’ll work with leaders on both sides of the aisle to get it done in the Senate, too.