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Massachusetts Biotech Community Calls On Congress To Fix The Small Molecule Penalty

Given the tremendous focus of MA-based companies and investors, we had an opportunity to pen some thoughts which are shared in the attached letter.


Lead by Incubate, over two dozen entrepreneurs, investors, and leaders within the Massachusetts biotech community came together to urge Congress to fix the small molecule penalty – a provision in the Inflation Reduction Act that disincentives investment into small molecule drugs. In a letter shared with the Massachusetts Congressional delegation, the signers called on Congress to swiftly fix this issue, warning that failure to act could have grave consequences for the thriving biotechnology industry in Massachusetts and beyond. As the letter explains:

“Fixing the IRA’s small molecule penalty is of the utmost importance – the impact is already being felt. We are seeing market shifts in value for small molecule drugs. More specifically, there is less interest and less investment in this space, which ultimately means fewer treatments for patients. Without a change to align the negotiation timelines to 13 years for all drugs, the IRA will force investors to make a simple choice between a thirteen-year return or a nine-year return, which is especially impactful since 50% of revenues from a drug come in years nine through thirteen. Capital always flows to the best risk-adjusted return, and the IRA’s arbitrary prioritization of biologics means investors will follow suit.”

The letter was the product of a series of discussions at the annual Convergence Forum earlier this spring. As a gathering primarily focused on science and investment topics, the Convergence Forum rarely serves as a venue for conversations about policy topics. This year was different due to the existential challenges presented by the small molecule penalty. The authors of the letter hope that their advocacy serves to educate lawmakers about the unintended consequences of the Inflation Reduction Act.

Read the full text of the letter here.

Download PDF • 209KB

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