Harvard Researchers Urge Removal of Single Orphan Drug Exemption in Inflation Reduction Act

November 29, 2023

Biopharma companies are protesting the Inflation Reduction Act’s (IRA) pricing negotiations for drugs with multiple orphan designations. Harvard researchers are urging Congress to remove the exemption for medications with a single orphan designation. According to a JAMA Internal Medicine paper, eliminating this exemption could save billions more, as the IRA currently exempts drugs with one orphan indication from Medicare price negotiations. From 2012 to 2021, only 25 drugs would have fallen under this category, potentially affecting $1.1 to $3.0 billion in Medicare spending annually.

Industry executives, like former Genentech CEO Alexander Hardy, express concerns about how this exemption influences drug development decisions, particularly regarding which indications to pursue first. However, Harvard researchers argue that orphan drugs, even with a single indication, often achieve substantial financial success, negating the need for additional incentives. They point out that the median revenue for sole orphan drugs is significantly higher than average drug development costs.

The suggestion to remove the sole orphan exemption counters the pharmaceutical industry’s efforts to limit the IRA’s impact. Ben Rome of Harvard Medical School notes that the potential savings from Medicare price negotiations will unlikely deter companies from developing high-revenue rare disease treatments. However, any moves by Congress to amend the IRA and remove the exemption are expected to face strong opposition, especially from Republicans, making legislative changes to the IRA unlikely in the current political climate.

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[Source: Endpoints, November 29th, 2023]

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