Article Summary –
President Biden signed the Inflation Reduction Act (IRA) in 2022, targeting reduction in health care costs by mandating price reductions for some expensive Medicare/Medicaid drugs, excluding orphan drugs with a single indication. The Act may, however, lead to unintended consequences in the orphan drug market, as it could potentially disincentivize companies from pursuing additional indications for such drugs due to the associated price negotiation; as found in the case of Alnylam Pharmaceuticals Inc., which canceled trials due to new IRA price controls. Orphan drugs, defined as those directed to diseases affecting fewer than 200,000 people in the US, originally received incentives for development from the 1983 Orphan Drug Act, including tax credits and marketing exclusivity, with around 600 distinct drug products approved to treat orphan diseases since the Act’s introduction.
President Biden Signs Inflation Reduction Act Affecting Health Care Costs and Drug Prices
On Aug. 16, 2022, President Biden enacted the Inflation Reduction Act (IRA), aiming to reduce health care costs for Medicare and Medicaid participants. The IRA mandates price reductions for certain costly medications and excludes orphan drugs with a single indication from the drug price negotiation requirement (the Orphan Drug Exclusion).
In discussions prior to the IRA’s implementation, the Centers for Medicare & Medicaid Services (CMS) stated that drugs with orphan designations for more than one condition wouldn’t qualify for the Orphan Drug Exclusion, even without additional indication approvals. CMS confirmed it will only consider active designations/approvals for the Orphan Drug Exclusion without considering withdrawn orphan designations or approvals.
Despite the IRA’s well-intended aim, potential unintended negative consequences may occur, especially in the orphan drug market.
Understanding Orphan Drugs and the Orphan Drug Act of 1983
An orphan drug treats an orphan disease, affecting fewer than 200,000 people in the U.S. Over 10,000 rare diseases affect more than 30 million U.S. people, with approximately 95% lacking an FDA-approved treatment.
Developing drugs for orphan diseases can be challenging and expensive due to the medical complexity of rare diseases and small patient populations. To incentivize orphan drug development, Congress passed the Orphan Drug Act in 1983. It offers perks such as seven years of marketing exclusivity, tax credits for qualified trials, new research development grants, and FDA review fee waivers.
Since passing the Orphan Drug Act, the FDA has approved around 600 distinct products to treat orphan diseases.
The Inflation Reduction Act’s Impact on Orphan Drugs
The IRA provides a price negotiation exemption for orphan drugs with a single approved indication. If an orphan drug receives an additional indication, it loses its exemption and may face future price negotiation.
This significant change from the Orphan Drug Act could impact pharmaceutical companies and patients with rare diseases. Often, orphan drugs receive additional indications over time. One study showed, from 1990 to 2022, 15% of orphan drugs had multiple disease indications and 20% had both orphan and common disease indications.
The IRA could potentially discourage companies from pursuing additional orphan drug indications. Several have already canceled trials and halted further research. For instance, Alnylam Pharmaceuticals canceled a Phase III trial for its drug, Amvuttra, citing IRA’s price controls.
In a 2022 PhRMA survey, 95% of respondents said they planned to develop fewer uses for new medicines. This could result in patients having fewer potential treatments as companies struggle with revenue losses. If not revised or updated, the IRA’s Orphan Drug Exclusion may harm patients with orphan diseases the most.
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