9/13 Day: Incubate Marks Four Years of Working to Fix the Pill Penalty

September 13 -- or 9/13 -- is a reminder of a disparity in federal law that continues to shape which new medicines receive investment. 

Under the Inflation Reduction Act (IRA), small molecule drugs become eligible for Medicare price setting just nine years after FDA approval, compared with 13 years for biologics. That four-year difference, known as the "pill penalty," gives investors an incentive to favor biologics over small molecule medicines. 

Drug development is a long and risky process. When federal policy gives one type of medicine four additional years before price setting, investors have to account for that difference when deciding which early-stage research to fund. Incubate's latest investor survey found that 74% of life sciences investors say the pill penalty is diverting resources away from small molecule drug development. 

Incubate has worked to document how federal policy like the pill penalty is affecting investment decisions. In 2024, Incubate launched the first-of-its-kind Life Sciences Investment Tracker, which draws from SEC filings, earnings reports, clinical trial data, and company announcements. To date, the Tracker has documented 56 discontinued research programs and 26 discontinued drugs since the IRA became law.

And Incubate has consistently brought these findings -- and the case for reform -- into the public conversation. Executive Director John Stanford and Incubate partners have written about the pill penalty in BioSpace, the Boston Business Journal, the Triangle Business Journal, DC Journal, and RealClearHealth, while Stanford has discussed its impact in STAT, Endpoints News, Axios, Bloomberg Law, BioPharma Dive, PharmaVoice, and other outlets.

And this 9/13 Day, Incubate is continuing that conversation with a special episode of its Making Medicine podcast focused on the pill penalty, its impact on investment, and the bipartisan push to fix it.

Across those conversations, the message has remained consistent: Federal policy should not favor one type of medicine over another. Investors and researchers should be able to pursue the science with the greatest potential for patients. 

Incubate supports a bipartisan proposal to address the disparity. The Ensuring Pathways to Innovative Cures (EPIC) Act would eliminate the pill penalty by giving small molecules the same 13 years as biologics before they become eligible for Medicare negotiation. 

This 9/13 Day, Incubate remains committed to educating policymakers about the pill penalty and building support for the bipartisan EPIC Act.