The price Americans pay for the Inflation Reduction Act (IRA) “pill penalty” and disincentives for follow-on research is a reduction in new cancer treatments, a study finds.
The introduction of the IRA is associated with a 37% decline in follow-on small-molecule oncology studies and a 27% decline in lead-indication small molecule approvals, according to research by Vital Transformation. It also showed a 14% decline in the share of orphan oncology studies.
The research, published Oct. 20, analyzed 1,148 secondary clinical trials associated with 364 medicines approved by the Food and Drug Administration (FDA) from 175 companies between 2018 and 2025. Researchers used statistical modeling to compare post-approval drug development and research activity across disease areas before and after the IRA’s introduction.
“The findings indicate that the effects of the legislation on late-stage pharmaceutical research may warrant greater attention from policymakers, particularly in oncology, where continued clinical development can expand treatment options for patients with serious and difficult-to-treat cancers,” according to Vital Transformation.
Why small molecules and follow-up matter
The IRA allows the Centers for Medicare & Medicaid Services (CMS) to control the price of medications by making drug makers engage in “negotiations” or face steep penalties. Biologic medicines are exempted from these price controls for as long as 13 years, but small molecule drugs, which are often prepared as pills and comprise about 90% of prescription drugs, only receive a maximum of nine years of protection.
This “pill penalty” creates a disincentive to invest in small molecule drugs, which has been noted by policymakers and others.
Follow-up studies investigate whether a drug approved for one condition is useful for another indication. This approach can speed access to new drugs for patients, especially oncology drugs, for which approximately 60-75% of marketed medications have more than one indication, according to research.
The IRA discourages follow-up studies because drugs approved for an additional indication do not get additional protection from CMS price “negotiations.”
The Vital Transformation research puts actual numbers to the pill penalty in cancer research, identifying the 27% reduction in studies for new small molecule cancer drugs. It also shows that barriers to developing drugs for second indications puts an even greater damper on research—causing a decline of nearly 40% in follow-up studies for oncology drugs.
Policy corrections
There is bipartisan legislation to correct the pill penalty, entitled the Ensuring Pathways to Innovative Cures (EPIC) Act. It would give small molecule drugs the same protection from price negotiations that biologics receive.
The Biotechnology Innovation Organization (BIO) praised the EPIC act when it was introduced.
“For decades small molecule medicines that come in a pill or tablet have been recognized for improving patient adherence, being easier to take, and more broadly accessible to those who need them. As a result, hundreds of such therapies have been developed,” said BIO President & CEO John F. Crowley, explaining the importance of the EPIC Act. “Today, instead of building on years of biomedical progress, some innovator companies and investors are now being forced to pull away.”
The data indicates a need for policy solutions, according to the Vital Transformation study.
“We hope this study reinvigorates debate” about the IRA’s “unintended consequences and encourages thoughtful policy solutions,” says the study. “The IRA manifestly creates disincentives that negatively impact patients seeking treatments in areas of high unmet medical need, particularly those requiring cures addressing metastatic late-stage cancers.”
