North Carolina is a leading hub of medical innovation. Our state is home to elite research universities, state-of-the-art laboratories, and over 800 biopharmaceutical companies that employ more than 75,000 residents. Our life sciences industry generates $2.4 billion in state and local government revenue every year.

But this thriving innovation economy is at risk, thanks to a provision in the 2022 Inflation Reduction Act (IRA) that discourages investment in an entire class of medicines known as “small molecules.” Many North Carolinians take small-molecule medicines every day, including antibiotics to treat infections, antihistamines to address allergies, and various cancer treatments. In fact, fully 90% of medicines on the market are small molecules. 

Fortunately, North Carolina’s own US Reps. Greg Murphy, a Republican medical doctor representing NC-3; and Don Davis, a Democrat representing NC-1; as well as Rep. Brett Guthrie of Kentucky, recently introduced the bipartisan Ensuring Pathways to Innovative Cures (EPIC) Act. The bill will reverse this misguided policy and restore incentives for small-molecule drug development. Passing their bill would protect local jobs, boost North Carolina’s economy, and help countless patients in need. 

The IRA empowered Medicare to negotiate drug prices directly with manufacturers for the first time in history. But the law made different types of medications eligible for negotiations on different timelines. New small molecules — which typically come in the form of pills or tablets — become eligible for price negotiations just nine years after Food and Drug Administration (FDA) approval. In contrast, larger molecule “biologic” medicines made using living cells become eligible for negotiation after 13 years.

This arbitrary distinction will distort the incentive structure for those who invest in research and development, because in the first 13 years after FDA approval, years nine to 13 account for about 50% of the revenue a new drug generates. So the IRA is, quite understandably, already driving investors to favor biologics over small molecules.

Consider Pappas Capital, a Durham-based investor in cutting-edge life-science technology. For decades, Pappas has helped life sciences firms engage in high-risk research and development with the potential to save lives. But because of the differing negotiation timelines in the IRA, Pappas and other firms like it could be forced to scale back funding for small-molecule development projects. This sudden shift could leave dozens of revolutionary compounds languishing in labs. Clinical trials could even halt midway through.

This sudden shift in the investment landscape could jeopardize the revolutionary small-molecule development being done right here in North Carolina. In 2021, after nearly a decade of development costing up to $1 billion, Durham’s G1 Therapeutics received FDA approval for Cosela, a first-in-class small-molecule drug that protects the bone marrow and immune system of cancer patients from damage during chemotherapy.

Mycovia is a Durham company focusing on medical needs that are not being adequately addressed. Its first product, Vivjoa, is a small-molecule drug that treats a specific fungal infection in women and is the only drug FDA approved for this condition.

These are just a few examples of both the economic and medical promise of small-molecule drug research, development, and production. And these are precisely the kinds of benefits that are at risk under the IRA’s “pill penalty.” One expert analysis estimated that, in total, the IRA will lead to 79 fewer small-molecule therapies being developed and 116 million life years lost over the next two decades.

In addition to lost cures, the pill penalty will have real-world consequences for vulnerable patients in North Carolina and beyond. Small-molecule drugs are easily absorbed into the bloodstream and can cross the blood-brain barrier, making them crucial therapeutic options for neurologic conditions and many cancers. And while biologics typically must be administered via injections at a clinic or hospital, small molecules can usually be taken as pills at home, leading to an improved patient experience.

Fortunately, federal lawmakers have recognized the negative impact the pill penalty could have on new drug development. The bipartisan EPIC Act would equalize the period of price-control exemptions for small-molecule drugs and biologics at 13 years.

This fix would once again put life sciences research back on a path to following the science, not a distorted incentive structure. That’s the right way forward for North Carolina innovators. 

Laura Gunter is president of the North Carolina Life Sciences Organization (NCLifeSci).