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Inflation Reduction Act: Unintended consequences for rare disease, orphan drugs

“The Inflation Reduction Act (IRA) was one of President Biden’s signature achievements and will help many Americans,” began Christina Hochul of Alexion Pharmaceuticals, Inc., during the Biotechnology Innovation Organization (BIO) Patient and Health Advocacy Summit on October 23.

“For example, insulin is capped at $35 per month,” she continued. “The law also caps prescription drug out-of-pocket costs at $2,000, which is spread throughout a plan, known as smoothing.”

“But today we’re going to talk about one of the unintended consequences of the IRA—specifically a narrow provision, or the orphan drug exclusion, which is already slowing, and in some cases, stopping the development of rare disease therapies.” 

Indeed, since the IRA’s passage, patient advocates, researchers, and investors in the biotech industry have been pointing to this particular blind spot in the legislation, advocating that it be amended and changed to ensure that rare disease patients do not lose access to the drugs or potential drugs that could change or save their lives. 

“We need to break down barriers, encourage massive private capital flows to fund biotech entrepreneurs [and] incentivize our largest biopharmaceuticals companies to invest in rare disease programs,” John Crowley, CEO of Amicus Therapeutics and Vice Chair of the Board of the Biotechnology Innovation Organization (BIO), testified at a congressional hearing in September

“We are instead now facing a massive headwind brought about by an ill-conceived drug control pricing law with consequences—some intended, some unintended—that are instead curtailing funding, further closing avenues of research and, tragically, taking away hope for many who are most in need.”

How the IRA is already harming drug development

The panel at the summit echoed Crowley’s concerns, especially since some of the harm may already be in motion.

“Decisions are being made now based on the legislation that passed over a year ago,” explained Amy Rick, Chair of the IRA Orphan Task Force. “I fear problems have already arisen and we will be struggling with those decisions for 10 years.”

“For rare disease drug development, you have to create incentives to bring a product to market and you have to unlock incentives for this really complex work,” said Karin Hoelzer of the National Organization of Rare Disorders (NORD).

“The problem now is that the way the IRA is written,” Hoelzer went on to explain, “once these orphan drugs apply for a second designation, even though there is no revenue associated with it, they will become negotiable. We think that it has a tremendous chilling effect on the pipeline, in particular for the small biotech where we get a lot of really big innovation in the orphan drug space.”

“My main concern about the IRA is those 95% of patients that have no treatment right now will have to wait longer,” echoed Jamie Sullivan of the EveryLife Foundation for Rare Diseases. “And our mission is to get people the right treatment at the earliest possible moment. It’s a big concern for our organization.”

The importance of engaging with CMS

Much of the panelists’ work is oriented towards educating the Centers for Medicare and Medicaid Services (CMS) on the struggles associated with the orphan drug exclusion of the IRA.

“We’ve been working very closely with CMS for the last year to year and a half,” said Sullivan.

CMS has been receptive to the organization’s concerns and education, holding a listening session in which patients were able to speak for 3 minutes each about their concerns and needs, she explained. 

“We have been tremendously thankful to CMS for these sessions and will be continuing them,” she said.

“One thing we really stress when talking about the issues in the IRA is in the value area,” added Sullivan. “And while CMS is prohibited by legislation from considering QALYs [Quality-Adjusted Life Years] in their value calculation, because of the nature of QALY and that they treat the life of a disabled person as less than a non-disabled, then they have effectively been banned from using QALYs in their negotiation process.”

“So, the question becomes, should they be looking at values? And so, we really urge CMS to work with the groups that are out here in the patient community that have been really putting effort behind developing patient-driven metrics of value and look at the full scope of the value of drug,” she continued.

How to combat the unintended consequences of the IRA

Something needs to be done to combat the chilling effect on the industry. Already, some companies have stopped research in the orphan drug space and VCs are pulling out of investments in rare disease drug development. The nuts and bolts of the industry have clearly reflected the issues; with this exclusion, investment and innovation are simply not as viable an option. 

Nonetheless, biotech CEOs, patient advocates, and everyone in between are not going to let this issue go any time soon.

“There is some momentum for resolving this issue,” said the IRA Orphan Task Force’s Rick. “We are still very optimistic because there’s bipartisan support. On September 18, representatives introduced legislation that is focused very specifically on the incentives for rare research and development for orphan drugs….and it was introduced soon after the CMS final guidance came out on the very last day of June.”

“The fact that this was introduced in September makes us very, very optimistic about gaining bipartisan momentum,” concluded Rick.