WASHINGTON, DC — Today, Congressman August Pfluger (TX-11), alongside Senator Bill Cassidy, M.D. (R-LA) and Congressman David Kustoff (TN-08), introduced legislation to protect innovative small biotech manufacturers from the Medicare drug price negotiation program. The Small Biotech Innovation Act will establish a new exemption for small biotech companies based on the amount of revenue they reinvest in research and development.

“The Inflation Reduction Act has proven to fall short in several areas, including its small biotech exemption that disincentivizes companies from investing in R&D and hinders the development of innovative therapies. By tying eligibility to R&D spending, we can better incentivize companies to develop new treatments that will benefit patients nationwide,” said Rep. Pfluger. “The bicameral Small Biotech Innovation Act is a forward-thinking approach that will strengthen America’s leadership in life-saving science by modernizing the small biotech exemption to reward real innovation and research investment, and ultimately protect these innovative small biotech companies.”

“When the federal government stands in the way of developing better care, there’s a problem. The cures developed through small biotech innovation change the future for many patients. Instead of limiting it, we should encourage it,” said Dr. Cassidy.

“It is critical that the United States remains at the forefront of developing new medical technologies, treatments, and drugs,” said Rep. Kustoff. “The Small Biotech Innovation Act will help smaller companies invest in research and development by alleviating the excessive Biden-era regulations placed on them. This legislation is an important step in boosting innovation and helping find new cures for patients across the globe.”

Read the full text of the legislation here.

Rep. Pfluger's legislation is supported by several outside organizations, including the National Hispanic Council on Aging (NHCOA) and the National Council of Black Aging Inc. (NCBA).

Dr. Yanira Cruz, President and CEO, NHCOA, said, "NHCOA strongly supports the 'Small Biotech Innovation Act' sponsored by Senator Cassidy and Congressman Pfluger. This important legislation would incentivize eligible small biotech manufacturers to invest in innovative new therapies and cures that will help patients suffering with chronic or complex diseases, many of which disproportionately impact the Hispanic aging community. NHCOA supports a robust research environment that helps–rather than hinders–companies with one or only a few commercial products that could prove lifesaving for so many patients. We don’t want these small companies to stop investing in R&D after one blockbuster drug, which could happen under the Inflation Reduction Act (IRA) with its limited small biotech exception that expires in 2029. We commend Senator Cassidy and Rep. Pfluger for looking out for our Hispanic seniors with this policy that incentivizes those small biotech companies that are willing to keep investing in R&D to keep innovating so more patients in our community will benefit from focused investments in new cures that they desperately need."

Karyne Jones, President & CEO, NCBA Inc., said, "The NCBA, Inc., would like to express our support for federal policy proposals that promote research and development (R&D) in innovative new therapeutics and cures for patients. Communities of color disproportionately suffer from a variety of chronic illnesses, such as cancer, diabetes, Alzheimer's, and more, and we would like to see more advanced treatments and cures made available and accessible to improve the overall health and well-being of our aging communities. As such, we support Senator Cassidy and Rep. Pfluger's legislation, the "Small Biotech Innovation Act," to ensure that smaller biotech companies that focus significant percentages of their net revenues on R&D are supported to continue their important work in developing cures for our nation's aging patients, while also not eroding policies to ensure these life-saving treatments are affordable and accessible for older adults." 

Background:

The Inflation Reduction Act created the Medicare Drug Pricing Negotiation Small Biotech Exception to protect small and mid-sized manufacturers that the Medicare price negotiation program would disproportionately impact. These manufacturers often have one commercial product and would likely not survive if subjected to Medicare Negotiation. 

However, the current exception is flawed and creates a disincentive for these manufacturers to invest in R&D and continue developing innovative therapies, as it effectively limits the exception to “one-drug” companies, applies only to products marketed in 2021, and expires at the end of 2028. 

The Small Biotech Innovation Act would create a new exception that allows any small biotech manufacturer to delay one of their drugs from Medicare price negotiations based on the amount of revenue they reinvest in R&D. Additionally, the bill also prohibits any company that is owned by a foreign adversary from being eligible for the delay. This new policy would incentivize all eligible manufacturers to put more money towards R&D, ultimately benefiting every American.