If you or your child have a rare disease, the chances of getting newly developed medicine to treat it just got better. This is one of the less-discussed benefits of the Big Beautiful Bill (BBB) just passed by Congress and signed into law by President Trump.
The BBB reverses the damage done by President Biden’s Inflation Reduction Act (IRA) that was woefully misnamed. The Editorial Board of The Wall Street Journal tells us the IRA was a woeful bill in countless ways, but the worst is its Medicare drug price controls. The early damage has been less investment in so-called orphan drugs for rare diseases. Because the pool of patients is small, manufacturers have to set higher prices to recoup their investment. This makes them an attractive target for Medicare bureaucrats.
The IRA price controls exempted orphan drugs, but only if they are approved for a single indication. They lose their exemption if they are used to treat more than one rare disease, though many diseases share an underlying pathology such as a gene mutation. Of the 280 orphan drugs approved between 2003 and 2022, 63 were approved later for another indication.
The law has discouraged companies from studying orphan drugs for multiple rare diseases. Some face a Hobson’s choice. If an experimental medicine works for two rare diseases, companies might have to jettison one use lest their drug become subject to price controls and return on its investment collapse.
Several orphan drug makers have canceled studies for follow-on indications since the IRA controls took effect. A recent analysis by the National Pharmaceutical Council found that the share of orphan drugs that received a second orphan drug designation fell by nearly half after the law passed—to 6.3% from 12.1% pre-IRA. This is a disincentive to finding new uses for existing drugs.
Republicans addressed this problem in the BBB by adding a provision to their tax bill that would ensure orphan drugs remain exempt from the price controls even if they are repurposed for other rare diseases. Many Democrats have signed onto similar legislation, though it’s telling that the left’s price-control crowd is now screaming about the provision’s $5 billion budget cost.
Progressives say expanding the orphan drug exemption will encourage Congress to make more tweaks that erode the price controls. Let us hope so. The orphan drug is a microcosm of the IRA’s disincentives to innovate. America has always been the leading country for new drug innovations and should remain so. Patients with rare diseases were an important voice in helping rouse political support for the orphan drug fix. Their success will improve and lengthen countless lives.
Most of the talk about the BBB will focus on the tax law changes and who benefits most. Democrats will try to convince you that only the rich will benefit although I doubt the rich care about no taxes on tips, no taxes on overtime, and reduced taxes on social security – all provisions of the new law which will benefit low income Americans. But you won’t hear about removing disincentives to new drug innovations – which will benefit everyone since disease is no respecter of incomes.
