Brad Watts
Vice President, Patents and Innovation Policy, Global Innovation Policy Center (GIPC), U.S. Chamber of Commerce
Published
February 10, 2025
What’s happening: The Biden Administration’s Inflation Reduction Act (IRA) introduced a provision that unfairly subjects small molecule (made through chemical synthesis) medicines to government price-setting after just nine years, compared to 13 years for biologics (made from living organisms). This disparity, known as the "pill penalty," is already discouraging investment in small molecule research and development (R&D), threatening the ability of American patients to access new medicines, treatments, and cures.
Why it matters: Small molecule medicines are essential for addressing chronic health conditions, particularly for older Americans. These medicines offer unique benefits, providing flexibility and convenience to patients, while targeting therapeutic areas inside cells and cross the blood-brain barrier. Small molecule medicines reduce treatment barriers for seniors and help lower the need for more expensive medical interventions.
The Impact of Price Setting: Before the IRA, small molecule medicines and biologics had roughly equal time to recoup development investments. The Biden Administration’s pill penalty disrupts this balance, disincentivizing innovation in small molecule drugs. A University of Chicago study estimates this policy will lead to a $232 billion reduction in R&D over the next 20 years, resulting in nearly 80 fewer small molecule medicines. This is a devastating blow to the health and well-being of American patients.
The big picture: The pill penalty is already reshaping market dynamics in harmful ways. By prioritizing biologics over small molecules, the IRA undermines the development of treatments that are often more accessible and cost-effective for patients. This policy threatens to limit options for seniors and reduce the availability of life-saving medicines.
What’s needed and our take: Thankfully, the Trump Administration and Congress have the ability to fix this problem and protect American patients. Amending the IRA and fixing the pill penalty is essential to restoring balance and ensuring continued investment in small molecule innovation. The U.S. Chamber of Commerce urges lawmakers to prioritize this issue. By addressing the pill penalty, Congress can protect patient access, foster innovation, and ensure that America remains a global leader in medical advancements. The stakes are too high to ignore—seniors and patients across the country depend on it.
About the authors
Brad Watts
Brad Watts is the Vice President for Patents and Innovation Policy at the U.S. Chamber of Commerce's Global Innovation Policy Center (GIPC). He works with U.S. Chamber members to foster a political, legal, and economic environment where innovators and creators can invest in the next big thing for the benefit of Americans and the world.
