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Inflation Reduction Act: New Uses for Orphan Drugs Face Challenges

More than 30 million U.S. residents live with at least one of the over 7,000 identified “rare diseases,” according to the Food & Drug Administration (FDA). For many of these conditions, no targeted treatment exists, making new uses for orphan drugs attractive.

Since the passage of the Orphan Drug Act in 1983, approximately 650 drugs for rare disease have been approved by the FDA. However, the FDA notes that “most” rare diseases still lack any medication approved specifically for their treatment.

The Inflation Reduction Act (IRA) seeks, among other goals, to reduce government spending on medications through Medicare and Medicaid. Unfortunately, the law’s rules on price limits may have the blowback effect of slowing research on additional uses of already-existing orphan drugs.

Price Limits May Hinder Additional Research on Orphan Drugs

Section 1191(e)(3)(A) of the Inflation Reduction Act states that the Centers for Medicare and Medicaid Services (CMS) cannot place price limits on any drug “…for only one rare disease or condition […] and for which the only approved indication (or indications) is for such disease or condition.”

This provision was intended to encourage pharma companies to develop new treatments for rare diseases. Since a drug may be subject to price controls if it’s approved for a second condition, the provision also disincentivizes pharma companies from researching additional uses for already-existing drugs.

For example, in late 2022, Alnylam Pharmaceuticals announced that it was pausing research into the use of one of its products to treat Stargardt’s disease, a rare eye disease that can lead to vision loss. The drug, Amvuttra, is currently approved to treat another rare disease, transthyretin-mediated amyloidosis.

Because Amvuttra is currently approved to treat only transthyretin-mediated amyloidosis, it is exempt from the IRA’s price control measures. Were it approved to treat Stargardt’s disease, Amvuttra would then be subject to price controls. Alnylam CEO Yvonne Greenstreet cited the IRA in its decision to rethink phase 3 trials of Amvuttra for Stargardt’s disease.

The IRA’s price control provisions are expected to take full effect in 2026 or 2027, depending on when prices are negotiated for certain medications. Given the new disincentives for drugmakers to find new uses for existing orphan drugs, more clinical research on rare disease treatments may be shelved in the coming years.

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Balancing Price Concerns and Research Incentives

The Inflation Reduction Act seeks to target prescription drug costs as a whole. Medicare Part D contracts with private payers to provide prescription drug benefits under Medicare. Originally, the Medicare Part D law prohibited the Department of Health and Human Services from negotiating drug prices with manufacturers, pharmacies or prescription drug plans.

Under the IRA, however, HHS now has the power to negotiate these costs — to an extent. According to Juliette Cubanski, Tricia Neuman and Meredith Freed at KFF, several categories of drugs are exempt from the negotiation process. These include orphan drugs with one approved indication, and also drugs with low Medicare spending, drugs with generics or biosimilars available, drugs within a set time limit from their FDA approval or licensure date, and plasma-derived products.

The Centers for Medicare and Medicaid Services (CMS) is also required to consider several factors in its price negotiations. These include “the manufacturer’s research and development costs, including the extent to which the manufacturer has recouped those costs,” write Cubanski, Neuman and Freed. The law does not specify, however, whether those costs should be connected to a particular indication for a drug.

The IRA’s provisions are unlikely to halt all research into additional indications for existing orphan drugs. Even Alynlam described its decision not to proceed with phase 3 clinical trials for Amvuttra for Stargardt’s disease as a “pause” rather than a cancellation or abandonment. Yet additional rare disease treatments may be significantly delayed as pharmaceutical companies examine the impact of the price control rules, writes Steve Usdin in BioCentury.

Managing medication prices remains an ongoing concern. Price remains one of the top challenges patients face in receiving treatment after diagnosis and prescription.

While there are some resources that help patients pay for existing orphan drug treatments, no patient can receive a treatment that does not exist. Hindering approval of existing drugs to treat new rare diseases precludes patients from accessing treatment altogether. In this case, the IRA’s balance between price controls and orphan drug development may need rebalancing.

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