The inclusion of the Orphan Cures Act in the One Big Beautiful Bill legislation has sparked debate and controversy. This act implies that certain high-cost drugs with orphan indications will either no longer be eligible for Medicare price negotiation or will have their eligibility deferred.
Senators Welch, Cortez Masto, and Wyden introduced legislation last month to repeal a provision in the One Big Beautiful Bill that exempts all orphan-only drugs from Medicare price negotiation. Instead, they propose a policy that would only exempt “true rare-disease drugs” that account for less than $400 million in annual Medicare spending.
Researchers have argued against orphan drug exceptions, stating that these stipulations prevent potential cost savings for Medicare. They believe that granting manufacturers of rare disease drugs a “special exemption” is unnecessary for them to achieve financial success.
The Senators aim to preserve incentives for “genuine rare-disease innovation” while ensuring that “blockbuster drugs can still be negotiated.” The bill sets a threshold: If Medicare spending on a rare disease drug exceeds $400 million annually, that medication would be eligible for negotiation regardless of orphan status.
However, the question arises whether we can determine what constitutes “genuine” orphan drug innovation based on a sales figure like the $400 million threshold. Why should the fact that a drug has Medicare revenues greater than $400 million make its orphan status any less valid?
The Inflation Reduction Act initially included an exception that protected orphan drugs with a single approved indication from price negotiations. It also excluded medicines that generate less than $200 million in annual Medicare sales from negotiations.
Restricting the orphan drug exemption to therapeutics with a sole rare disease indication could hinder the pursuit of a common pathway in drug development. Orphan drugs initially approved for one disease often prove beneficial in treating other diseases, especially in the cancer space.
Manufacturers often apply to add supplemental indications to their drugs’ labels. However, under the original IRA stipulation, doing so could subject drug makers to possible selection for Medicare price negotiations. The industry lobbied for a change in the law, leading to the incorporation of the Orphan Cures Act in the OBBB.
The Orphan Cures Act affects all “orphan-only drugs,” which are medications used to treat conditions affecting fewer than 200,000 people in the U.S. The two biggest blockbuster drugs impacted by the change are Keytruda, Opdivo, and Darzalex. The modifications may delay negotiations indefinitely for cancer drugs like Opdivo and Darzalex, among others.
While the updates to the IRA address concerns of the pharmaceutical industry, they result in a significant decline in government cost savings. The Congressional Budget Office predicts that including the Orphan Cures Act in the OBBB will raise costs to the government by as much as $8.8 billion.
In conclusion, the amendment to the orphan drug exemption in the OBBB involves tradeoffs with winners and losers. Should the repeal efforts by Democrats succeed, the roles of winners and losers would reverse. It is essential to weigh the implications of these legislative changes carefully.
