The pharmaceutical industry has a fresh sense of direction after President
The brief provision in Republicans’ bill passed this month exempts drugs with multiple rare disease indications from the Medicare Drug Price Negotiation Program.
The negotiation program, which was initiated under former President Joe Biden and seeks to lower drug prices through talks with manufacturers, previously limited the exemption to drugs that treat only one rare disease from negotiations. That limitation created uncertainty with drugmakers, who planned to reshape or halt research out of concern that they may not recoup costs under the negotiations.
Now, the change is prompting drugmakers that develop rare disease treatments to ease back into exploring additional rare indications, drug industry groups and attorneys say.
“Companies are indeed exploring additional rare disease indications in response,” said Stacey Frisk, executive director of the Rare Disease Company Coalition, a group representing rare disease drugmakers such as
Some companies have shared plans to resume research and development efforts that had “previously been put on hold due to uncertainty,” Frisk said, while others are “actively reevaluating their investment strategies and pipeline priorities.”
The provision is especially significant for companies that largely focus on, or only develop, rare disease treatments.
An analysis published in May by the National Pharmaceutical Council found the percentage of drugs with a first orphan designation that later received a second designation decreased from about 12% to 6% following the passage of the 2022 Inflation Reduction Act that created the negotiation program.
“Part of our life cycle management is to look for other rare indications and other patient populations that we can serve with existing compounds,” said Adora Ndu, chief regulatory officer at BridgeBio, a biotech company with three FDA-approved medicines in rare genetic diseases.
“This is a really significant part of our commercial calculus and will allow us to continue to invest in rare diseases,” Ndu said.
What’s Next
The industry is moving forward with decisions despite lacking potential formal guidance from the Centers for Medicare & Medicaid Services that could clarify how the exemption policy would be implemented.
“I’ve had multiple conversations with clients trying to understand the impact on their development programs,” said George O’Brien, a partner at Mayer Brown representing pharmaceutical companies that have orphan drug designations and exclusivities.
“I expect that companies who have decisions to make at this point are going to go forward—following the law without waiting for guidance,” O’Brien said. “Who knows how long that might take?”
It remains to be seen how far drugmakers will go to explore additional rare disease indications in an effort to avoid being subject to price negotiations.
An orphan drug can lose its exemption under negotiations if it gains a non-orphan indication, meaning the drug could be expanded to treat a wider patient population.
While that seems like an incentive to dodge government price cuts, it would be unlikely for drugmakers to decline studies for non-rare diseases, attorneys say.
“Most pharma and biotech companies are science and patient driven,” O’Brien said. “I’ve never heard of a company declining to study something for a non-rare disease for these kinds of circumstances.”
The decision to explore a rare or non-rare indication would ultimately boil down to the economics of the drug, said Matt Wetzel, a partner at Goodwin Procter LLP.
“It’s all an internal question, but it removes some of those decision points that would have previously restricted how companies think about pursuing a rare disease drug,” Wetzel said.
Despite the positive outlook, some industry advocates say it may take some time to fully bounce back from the uncertainty companies and life science investors faced prior to the expanded exemption.
“For the two plus years that this has been in place, investors were pulling back,” said John Stanford, executive director of Incubate Coalition, an organization representing venture capital firms. “We are thrilled that that disincentive is gone, and we expect to see a return to investment now that that economic case is back.”
Who Benefits?
The industry has been praising the provision as a win for patients.
The Biotechnology Innovation Organization said the amendment will “help ensure that more investment flows into programs for some of the hardest to treat diseases.” The Pharmaceutical Research and Manufacturers of America similarly said the provision removes the disincentive for companies to invest in treatments.
Some patient groups, however, are struggling to find the benefits of the new exemption.
The change could keep cancer drugs like
“This policy will basically provide a loophole for pharma to enable them to keep more expensive drugs on the market at high prices,” said Merith Basey, executive director of Patients for Affordable Drugs.
Patients for Affordable Drugs, along with AARP, sent a letter to senators prior to the passage of the bill sharing concerns that the provision would harm patients by exempting more medicines from negotiations and keeping prices high.
Other drug pricing experts have also gone as far to say the exemption walks back Trump’s agenda to lower US drug prices.
“It carves out more and more from negotiations,” said Anna Kaltenboeck, president of Verdant Research. “This is a win for pharma, but it makes me wonder whether or not this is really a patient’s best interest the way that this has been set up.”
To contact the reporter on this story:
To contact the editors responsible for this story: