Why Orphan Drugs May Be Left Out of IRA Negotiations
Orphan drugs are medications created to prevent, diagnose, and treat rare diseases. According to the National Institutes of Health, rare diseases are those that affect about five in 10,000 people. Because these illnesses affect a relatively small number of people, pharmaceutical companies have not always been willing to spend time manufacturing medications to address them.
That has led the United States to provide certain incentives for the development of these drugs. One of these is the exemption of orphan drugs from Medicare price negotiations. But what does this mean for people with rare diseases? Can they expect to pay much more for their medications?
The Initial Impact of the IRA on Orphan Drugs
In 2022, the Inflation Reduction Act (IRA) became law. It addressed a variety of issues, including medication costs. One of the provisions in the IRA involved the Centers for Medicare and Medicaid Services (CMS) needing to negotiate the prices of certain medications covered by Medicare.
The goal of excluding these drugs was to incentivize pharmaceutical companies to manufacture them. Since they knew they could price them as they please without fear of negotiations, these drugs present potentially lucrative opportunities—even if the people who need them are relatively fewer than for conditions such as asthma or osteoporosis.
This act held one essential caveat, however, that many worried could ground development to a halt. To be eligible for negotiation exemptions, the drugs must only treat one rare disease. They must also not have had additional FDA approval for other conditions. If the medication had another use, even for treating another rare disease, it would lose its exempted status.
A New Law Amends the IRA’s Orphan Drug Provision
The efforts of the biopharmaceutical industry and patient advocacy groups have helped pass the One Big Beautiful Bill Act (OBBBA) (Public Law 119-21), a comprehensive legislative package signed into law on July 4, 2025. This new law directly amended the IRA, effectively incorporating elements of previous proposals like the ORPHAN Cures Act.
The One Big Beautiful Bill Act expanded the orphan drug exemption, clarifying that a drug can be approved for one or more rare disease indications and still be exempt from Medicare price negotiations, as long as it has not been approved for any non-orphan uses. This important change, which takes effect for negotiated prices beginning in 2028, was widely viewed as a victory for those who feared the original IRA provision would stifle rare disease research.
Potential Loopholes and Cost Implications
While the OBBBA encourages innovation, it may also allow drug companies to exploit the system. By obtaining orphan designations for multiple rare diseases, companies could avoid price negotiations, which could then lead to higher drug costs. For patients, this could make medications unaffordable, especially for those without insurance or access to prescription assistance programs.
Orphan Drugs are Still A State-by-State Divide
Medicaid coverage for orphan drugs varies by state, which is nothing new. Some states offer full coverage, while others exclude orphan drugs or impose strict eligibility requirements.
This state-by-state divide means patients in certain regions may face higher out-of-pocket costs or limited access to treatment. Patient advocacy groups continue to push for uniform coverage to ensure equal access to orphan drugs under Medicaid nationwide.
The Future Outlook
In the future, states may experiment with pilot programs to assess the cost-effectiveness of orphan drug coverage, and new drug formulations or generic options could help reduce prices. Patient advocacy will also help to push for reforms to balance innovation with affordable access, hopefully helping everyone find a way forward that addresses both a competitive market and health for all.
What This Means for Consumers
As important as this new legislation is for research, it does not fully solve the issue of affordability for consumers. If you have a rare condition, paying for your medications could still be very difficult, especially if you are a senior on a fixed income.
Finding a balance between incentivizing pharmaceutical companies to continue research while still ensuring medications are affordable is essential. One option to help people until legislation catches up is to participate in prescription assistance programs.
These programs allow you to receive discounts and copay help so that you can afford your medications. The majority of these programs work closely with pharmaceutical companies and even government agencies.
Get Affordable Access to Prescription Medications
Simplefill is a full-service prescription assistance company that researches, qualifies, and maintains patients’ enrollment in all sources of assistance available to them.
Apply today by calling 877-386-0206. A caring Simplefill representative will contact you within 24 hours to discuss your application and, if qualified, enroll you in the program.