Small-Molecules Are More Cost Effective Than Biologics, Tufts Researchers Find

From the perspective of their makers, the Inflation Reduction Act (IRA) of 2022 creates a marked advantage for biologics over small-molecule drugs. The small-molecule drugs are eligible for CMS Medicare price negotiation nine years after they were approved by the FDA. For biologics, eligibility doesn’t kick till 13 years after the FDA approval. For a drug companies, that might be four more years of higher prices that yield bigger profits.

James Chambers, Ph.D.

Research findings published in Health Affairs this month suggest that edge given to biologics may be misguided. Corresponding author James D. Chambers, Ph.D., a professor at Tufts Medical Center Institute for Clinical Research and Health Policy Studies, and his colleagues showed that small-molecule drugs and biologics produce similar health benefits but because small-molecule drugs are often priced lower than biologics, they are often a better value.

The IRA may cause drugmakers to shift their priorities to biologics, wrote Chambers and his colleagues. “This concerning as small-molecule drugs generally have more favorable cost-effectiveness profiles than biologics,” they wrote.

Their study included 28 small-molecule drugs and 115 biologics that were approved by the FDA during the from the beginning of 1999 through the end of 2018. They set 2018 as a cut off because studies on the cost-effectiveness tend to lag behind when drugs are approved. Using findings from studies published in Pubmed, they found that the incremental health benefit — as measured in quality-adjusted life years (QALYs) — for small-molecule and biologics was roughly the same: a median of 0.1 QALY of benefit for the small-molecule drugs compared with a median of 0.084 for the biologics.

But when cost is factored in, the small-molecule drugs were shown to have a decided advantage. They had a much lower incremental cost (a median of $4,738 compared with $16,020 for the biologics). They also surpassed the biologics when cost and health benefit are calculated as a ratio known as the incremental cost-effectiveness ratio (ICER), which is computed by dividing the average incremental cost estimate by the average incremental QALYgain. The small molecules had a median ICER that is less half that of the biologics ($108,314 per QALY compared with $228,286) and were, therefore, according to these calculations, more than twice as cost effective.

Mathematically, medians obscure ranges and the range QALY and ICERs of the drugs that Chambers considered were large. Among the 20 with the drugs with largest QALY gains, Orfadin (nitisinone), a small-molecule drug approved in 2002 as a treatment for hereditary tyrosinemia type 1 had an average QALY gain of 28.83, far larger than agent that produced with the next largest QALY gain, Kalydeco (ivacaftor), which generated 6.87 QALY

Among those 20 drugs, the range in the difference in ICERs was also large.
Because of its low cost, Trisenox (arsenic trioxide), small-molecule agent approved in 2000 as a treatment for acute promyelocytic leukemia had the lowest aggregate ICER of $307. In contrast, Myozyme (alglucosidase alfa), a biologic that is a treatment for Pompe disease, had an aggregate ICER of $3,249,827.