Revised Inflation Reduction Act Guidance Increases Risk of Rare Disease Drug Development

A Setback in Investment for Continued Research & Development for the Rare Disease Community

Posted June 30, 2023

CMS today released revised guidance on the Inflation Reduction Act Medicare Drug Price Negotiation Program, clarifying that a drug with more than one designation for a rare disease or condition will not qualify for the Orphan Drug Exclusion, even if the drug has not been approved for any additional indications. Unfortunately, by making orphan products with a second designation eligible for drug price negotiation, this provision will disincentivize further investment in rare disease research and development. 

Why it’s important: This policy will impact the rare disease drug development pipeline for decades to come, increasing health disparities for the 30 million Americans living with rare, debilitating diseases, 50% of which affect children.

• Today, 95% of rare diseases lack an FDA-approved treatment.
• Companies will be forced to make difficult decisions regarding R&D investment. Investors and companies make early decisions to minimize risk, long before a drug could become eligible for Medicare price negotiation, due to the complexity and long timeline from initial drug discovery and early R&D to full FDA approval. 

Undermining the bipartisan Orphan Drug Act (ODA): The ODA was enacted to incentivize the development of drugs for rare diseases and has demonstrated overwhelming evidence of success.

• Since the passage of the ODA 40 years ago, more than 600 rare disease treatments have obtained FDA approval, compared to just 38 treatments prior to its implementation.
• This framework will achieve the opposite of the intended purpose of the ODA, which is to encourage the development of drugs for rare diseases by providing tax credits, longer market exclusivity and other incentives.

The final word: The RDCC is disappointed in CMS’s revised guidance and remains committed to working with stakeholders in the Administration and Congress to find ways to mitigate the impact of this policy on Americans living with rare diseases.