Congress quietly carves out drug-price exemption for small biotech firms
H.R. 3731 — Small Biotech Innovation Act · Filed by August Pfluger (R-TX) · 4 cosponsors · Introduced Jun 4, 2025 · Referred to committee
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What it does
This bill exempts drugs made by small biotech companies from Medicare's drug price negotiation program, starting in 2029. A small biotech company with 5 or fewer drugs can avoid price negotiation if it spends at least 30–70% of revenue (depending on how many drugs it makes) on research and development. The exemption disappears if the company is acquired by a larger manufacturer.
Why we flagged it
The bill's core function is to exempt a defined class of drug manufacturers from federal price negotiation authority. Although framed as supporting innovation, it is mechanically a price-control exemption that benefits a narrow industry segment at the expense of Medicare beneficiaries.
What the text implies
- The 'applicable percent' R&D spending threshold (30–70%) is self-reported and verified only through annual application; no independent audit mechanism is specified, creating potential for gaming or misclassification.
- A small biotech with 5 drugs at 70% R&D spending can avoid negotiation entirely, but the bill does not cap price increases or require transparency on how much of that R&D spending actually benefits the negotiation-exempt drugs versus pipeline candidates.
The full analysis lists 5 implications of this text.
Who stands to gain
small biotech manufacturers (5 or fewer drugs); biotech companies with high R&D spending ratios; pharmaceutical firms in the $100M–$1B revenue range