Small molecules vs. biologics – Healthcare Economist

The Inflation Reduction Act (IRA) allows the Centers for Medicare and Medicaid Services to negotiate drug prices. However, CMS can only negotiated drug prices 9 years after drug approval for small molecules and 13 years after approval for large molecules. Why the difference? Do biologic treatments produce superior health benefits for patients?

This is the question that a paper by Clifford et al. (2024) aims to answer. The use data on 1999–2018 drug approvals and evaluate cost-effectiveness analyses (CEA) to measure the health benefits of each treatment–whether small molecule or biologic–using the quality-adjusted life years (QALY) metric. Using this approach, the authors found CEAs for 271 of the 622 drugs FDA-approved drugs, of which 199 were small molecule and 72 were biologic. Using this approach, they found that:

Median health gains were 0.100 (interquartile range: –0.104 to 0.304) QALYs for small-molecule drugs versus 0.084 (IQR: –0.156 to 0.324) QALYs for biologics…Ten of the twenty drugs with the largest incremental health gains were small-molecule drugs, fifteen were orphan drugs, and eight were indicated to treat a cancer.

In short, small molecules produced similar or even slightly more health benefits per patients then biologics. Additionally, small molecules were less expensive than biologics and delivered more value.

Median incremental costs were $4,738 (IQR: –14,091 to 23,567) for small-molecule drugs versus $16,020 (IQR: –29,531 to 61,571) for biologics. Ten of the twenty drugs with the largest incremental costs were small-molecule drugs, sixteen were orphan drugs, and four were indicated to treat a cancer…

Small-molecule drugs had a median ICER of $108,314 per QALY…versus $228,286 per QALY…for biologics

You can read the full study here.