How the Inflation Reduction Act is Impacting Rare Disease Patients

A Deep Dive into the Inflation Reduction Act & What It Means for the Future of Healthcare

Part 3: How the Inflation Reduction Act is Impacting Rare Disease Patients

This is the third blog in a series examining the Inflation Reduction Act and how it will impact the healthcare system, patients, and innovation.

More than 7,000 rare diseases are impacting more than 30 million people in the United States, many of them children who won’t live beyond their fifth birthday due to the lack of available therapies. For most people with a rare disease, surgery or another medical procedure won’t help – they need prescription drugs to get better or be cured.

I have a friend whose daughter has epidermolysis bullosa (EB), which is the worst disease you’ve never heard of. It is a rare condition where the patient’s skin becomes extremely fragile, and blisters and tears with any friction. Wounds heal incredibly slowly, and people with severe cases of EB have a life expectancy that ranges from infancy to 30 years of age. He spends tens of thousands of dollars every year on bandages for his daughter. There is no treatment or cure outside palliative care.

I also have an employee whose daughter has a rare bleeding disorder. Intravenous immune globulin (IVIG) infusions and steroids provide only temporary relief and have dangerous side effects that don’t necessarily outweigh their risk. Their hope, which is the development of a drug specifically to treat the disease rather than mediocre and risky options to treat the symptoms, is tied to innovation in biopharmaceuticals.

During Rare Disease Week, we want to highlight a troubling aspect of the Inflation Reduction Act (IRA) that will result in the development of fewer treatments (orphan drugs) for people with rare conditions.

What Are Orphan Drugs?

Orphan drugs are products used to treat, prevent, or diagnose a disease that affects fewer than 200,000 people in the United States or that will not be profitable within seven years following approval by the U.S. Food and Drug Administration (FDA). According to the FDA, “Orphan drugs are desperately needed by patients with rare diseases”.

Again, according to the FDA, it is challenging to create treatments and cures for rare diseases, including “…the complex biology and the lack of understanding of the natural history of many rare diseases. The inherently small population of patients with a rare disease can also make conducting clinical trials difficult.”

As a result, Congress created incentives through the Orphan Drug Act, which was signed into law in 1983, for drug manufacturers and scientists to study and develop products in this space. The law’s benefits include:

The law has worked as intended. Since the passage of the Orphan Drug Act, more than 650 orphan drugs have been approved. While the number seems high, in reality, it is a small drop in the ocean given the number of treatments and cures that need to be brought to bear on the thousands of conditions without treatments, such as EB.

The Inflation Reduction Act

Under the IRA, if a chemical drug has been FDA-approved for at least seven years (at least 11 years for a biological product) it may be eligible for price “negotiation.” There are exceptions. For example, drugs with generic or a biosimilar substitute are exempt from price limits.

The law says that the Centers for Medicare and Medicaid Services (CMS) must exclude from price controls a drug “…for only one rare disease or condition and for which the only approved indication (or indications) is for such disease or condition” (Section 1191(e)(3)(A)).

The intent was to continue to incentivize drug development for rare diseases by not having products that treat rare diseases subject to price controls. However, drug developers often continue research on approved products for other indications and conditions. In the rare disease space, where studying repurposed products can lead to faster access and potentially less expensive therapies for diseases in need of treatments, this is particularly important. More than 60 percent of oncology medications approved more than a decade ago, for example, received additional approvals to treat new indications in later years. Yet under the IRA, if a product were used to treat EB and then further research indicated treatment for another disease, the product could be subject to price limits, thereby eliminating the incentive to study approved products on additional patient populations and disease groups

Intentionally or by mistake, the IRA makes clear that companies developing orphan drugs are now at increased risk of market failure – the opposite of what the Orphan Drug Act sought to address. Companies are unlikely to invest in products that could be subject to limits because they are unlikely to see a return on their investment. Stack that negative incentive on top of the others – fewer patients, high cost of clinical trials, and difficulty designing trials that meet the FDA’s demands – and it begins to make the market for orphan products very unfavorable. Faced with this uncertainty, investors and manufacturers are unlikely to develop follow on treatments for a huge community of patients (and caregivers) desperate for relief.

Many patients can say goodbye to hope as a result.

More Bad News

The penalty for secondary uses is already putting a halt to potentially life-saving research. In October 2022, Alnylam Pharmaceuticals Inc. cited the IRA’s new price controls as the reason it was stopping work on its potentially secondary use to treat the rare eye disease, Stargardt. The drug, Amvuttra, was approved to treat a rare disease called transthyretin-mediated amyloidosis. Alnylam was in the process of researching the drug for the treatment of Stargardt. Finding a second use for the drug would disqualify it from orphan status and potentially open it up to price negotiations.

Eli Lilly also cited the law as the reason it stopped research into a Phase I drug undergoing studies for treating various blood cancers. In an email to a reporter, a spokesperson for the company highlighted the IRA’s impact on small molecule research and development. The spokesperson told Endpoints, “The IRA changes many dynamics for small molecules in oncology and when we integrated those changes with this program and its competitive landscape, the program’s future investment no longer met our threshold.” These are just two stories of many that we will hear over the coming years about how the IRA stopped potential rare disease treatments from reaching those who need them most.

Fewer products mean more money spent on hospital and physician services, and, for my friend, bandages. This drives up costs for everyone, leading to higher premiums and out-of-pocket costs.

Even More Bad News

As we get closer to the full implementation of the IRA, we can expect more fallout. Earlier this year, the Department of Health and Human Services (HHS) announced its IRA implementation plan, and three upcoming dates that will impact the healthcare system:

Unfortunately, we could see more research projects shelved after these actions.

Fixing the IRA’s Orphan Drug Problem 

While the broader problems with the IRA are difficult to solve in the short term, fixing the orphan drug problem should be done quickly, on a bipartisan basis.

CMS has sufficient flexibility through program guidance in implementing the law to immediately help. CMS should at the very least protect single orphan designation products with multiple indications for the same disease. This is a plain letter reading of the law. A better approach would be to delay the start of the price control clock for when an excluded orphan product becomes no longer exempt from price controls because of FDA approval of a new non-orphan disease indication.

But this is a band-aid to the wound. A real fix requires Congress to amend the law to make clear that orphan drugs, indications, and their follow-on research are exempt products from price controls. This lives up to the bipartisan spirit of the Orphan Drug Act.

If Congress acts, it would restore hope to many patients who are waiting on the next scientific breakthrough that right now may never come. I hope my friend’s daughter with EB gets that opportunity.