Small Biotech Innovation Act
The Small Biotech Innovation Act would create an exemption from Medicare drug price negotiation for certain “small biotech manufacturers” that are highly invested in research and development (R&D). Starting in 2029, drugs produced by qualifying manufacturers could be classified as “negotiation eligible” or exempt based on the number of qualifying single source drugs they have and their level of R&D spending. The core idea is to reward smaller biotech firms that invest a large share of their net revenue into R&D, by shielding their qualifying drugs from Medicare’s drug price negotiation program. The bill also lays out annual reporting requirements, an acquisition-related rule, and a dispute-resolution process for firms seeking qualification. In short, if a small biotech meets the defined R&D investment threshold and other criteria, some of its single-source drugs would not be subject to Medicare’s price negotiation starting in 2029, with the percentage of revenue (and thus the likelihood of exemption) rising as the number of qualifying drugs increases. The Secretary would oversee applications, determinations, and disputes.
Key Points
- 1New exception from Medicare drug price negotiation for 2029 onward: “negotiation eligible drug” excludes a qualifying single source drug of a research and development-intensive small biotech manufacturer (RSB for short).
- 2Definitions and thresholds:
- 3- Small biotech manufacturer: 5 or fewer qualifying single source drugs and not owned or controlled by a foreign government or foreign-registered entity.
- 4- Research and development-intensive (R&D-intensive): a small biotech that spends at least a defined percent of its net revenue (average of the prior three years, GAAP-based) on R&D.
- 5- Applicable percent: scales with the number of qualifying single source drugs a company has.
- 6- 1 drug = 30%
- 7- 2 drugs = 40%
- 8- 3 drugs = 50%
- 9- 4 drugs = 60%
- 10- 5 drugs = 70%
- 11- Qualifying single source drug: defined in the bill by reference to an existing provision (subsection (e)) of the Social Security Act; this bill does not redefine that term here.
- 12Acquisition rule: If a 2029 or later-acquired drug maker is purchased by a non-R&D-intensive company, its drugs lose the exemption starting the plan year after the acquisition.
- 13Annual application process: To qualify, manufacturers must submit information on net product revenue and R&D expenditures (plus a certification of accuracy and other Secretary-specified data) for the relevant period, starting with the initial price applicability year (2029).
- 14Dispute resolution: The Secretary must establish an appeals process for manufacturers deemed not to be RSBiM. The process must conclude by the “selected drug publication date” for the relevant initial price applicability year.
- 15Legislative title: The act is named the “Small Biotech Innovation Act.”