A provision of the summer’s One Big Beautiful Bill Act bumping a slew of orphan drugs from Medicare price negotiation is estimated to cost the program $8.8 billion over the course of a decade, according to a revised estimate from the nonpartisan Congressional Budget Office.
That tally is about $3.7 billion higher than the CBO’s estimate over the summer, which did not include three drugs that the office now believes would be eligible—Darzalex (daratumumab), Keytruda (pembrolizumab) and Opdivo (nivolumab).
Monday’s updated tally (PDF) was requested by Democrat lawmakers, though the CBO acknowledged in its response that it had also been contacted by outside experts shortly after its summer release with suggestions on additional products that could be affected by the reconciliation bill’s expanded orphan drug exemption.
The lawmakers said Monday the report details “an enormous $8.8 billion sweetheart deal to Big Pharma companies at the expense of seniors.” The pharmaceutical industry and the administration have said the broadened exemptions are needed to encourage ongoing investment into rare disease treatments.
The CBO’s new estimate includes some wiggle room due to how the Centers for Medicare and Medicaid Services could subject different formulations of the three drugs to price negotiation.
“If all formulations were subject to negotiation in the same year, the estimated cost of section 71203 over the 2025–2034 period would be $10.9 billion,” the CBO wrote. “Conversely, if CMS treated some formulations as separate drugs, the estimated cost would be $6.7 billion for the same period.”
The office also warned that its updated estimate does not reflect policies outlined in final guidance for 2028 price negotiations released by CMS last month, which notably include a plan to incorporate Medicare Advantage spending into the drug expenditure formula used to rank drugs for negotiation.
The Inflation Reduction Act of 2022, which authorized CMS to negotiate prices for a select number of drugs, included an exemption for rare disease treatments that have received a single orphan drug designation from the Food and Drug Administration, and with approved indications limited to that designation. The exemption ran nine years for small-molecule drugs and 13 years for biologics.
The pharmaceutical industry argued that the structure of that exemption disincentivized companies from conducting follow-tests of rare disease therapies in pursuit of a second designation. Provisions included in the One Big Beautiful Bill Act broadened those exemptions, and CMS began putting the changes into effect with September’s final guidance.
“These enhanced protections preserve critical incentives for rare disease research while maintaining negotiation eligibility when appropriate,” CMS said at the time.
However, the new numbers triggered harsh words from leading Democrats.
In a joint statement, House Ways and Means Committee Ranking Member Richard Neal, D-Massachusetts; House Energy and Commerce Committee Ranking Member Frank Pallone, Jr., D-New Jersey, and Senate Finance Committee Ranking Member Ron Wyden, D-Oregon, who had requested the CBO’s report, said the recent legislation allows drug companies to maintain high prices. They cast the bill’s “giant loophole” alongside Medicaid funding cuts, expiring Affordable Care Act Marketplace enhanced subsidies and other healthcare policy points at the heart of the ongoing shutdown.
“While Republicans were drafting the largest health care cut in history, they quietly tucked in language to weaken Medicare’s ability to negotiate lower drug prices for seniors,” they said. “This is a Trojan Horse policy that will undermine efforts to lower prescription drug prices for years to come.”
Brianna Allen, spokesperson for drug manufacturer industry group PhRMA, said "Congress passed the Orphan Drug Act in recognition of the unique challenges of researching and developing medicines for rare and orphan diseases with bipartisan support. With more than 90% of rare diseases still lacking an approved therapy, it’s critical that we have policies that support continued innovation to meet the urgent needs of patients and families."
Merith Basey, executive director for Patients for Affordable Drugs Now, a consumer advocacy group, echoed the Democrats by describing the expanded exemptions as "a wildly expensive handout to Big Pharma." She also urged lawmakers to reject two other bills that would expand small-molecule drugs and genetically targeted drugs' nine-year delays from price negotiation to 13 years.
"Any support for these bills goes against the will of the 90% of Americans who want Congress to go further to lower drug prices—not facilitate another handout to Big Pharma,” she said in a Monday statement.
Mark Miller, executive vice president of healthcare at philanthropy and policy research group Arnold Ventures, responded to the updated analysis with calls for Congress to repeal the exemption.
“This nearly $9 billion exemption is a giveaway that protects pharmaceutical monopolies and leaves patients and taxpayers on the hook for higher cancer treatment costs,” he said in a statement. “It contradicts the administration’s expressed interest in reducing drug prices and the public’s demand for Congress to act in addressing the high cost of prescription drugs.”