What is the story about?
What's Happening?
Changes to Medicare's drug price negotiation program, resulting from the new tax and budget law, could lead to at least $5 billion in additional Medicare spending and higher out-of-pocket costs for beneficiaries. The law modifies the orphan drug exclusion, delaying or excluding certain high-spending drugs from negotiation, which impacts drugs like Keytruda and Opdivo. These changes mean higher costs for beneficiaries who use these medications, as Medicare's negotiated prices help lower the amount beneficiaries pay, particularly for drugs with coinsurance requirements based on the drug's price.
Why It's Important?
The new tax and budget law's impact on Medicare's drug price negotiation program could reduce savings and increase costs for beneficiaries. By delaying or excluding orphan drugs from negotiation, the law maintains higher prices for these drugs, translating to higher out-of-pocket liability for beneficiaries. This could lead to cost-related access problems and lower utilization, affecting health outcomes. The changes could also cost the federal government several billion dollars over the coming decade, impacting Medicare's financial health and potentially increasing the federal deficit.
What's Next?
The changes to the orphan drug exclusion will take effect in 2026, impacting which drugs are selected for negotiation. Drugs like Keytruda and Opdivo will face delayed eligibility, while others may be excluded unless they receive non-orphan approvals. The pharmaceutical industry may respond by adjusting research and development strategies, potentially affecting the pipeline of new drugs and incentives for seeking additional orphan indications.
Beyond the Headlines
The law's changes reflect broader concerns about the impact on drug development associated with policies to reduce drug prices. While high drug prices create affordability challenges, the industry argues that pricing reform could dampen innovation. The changes to the orphan drug exclusion were made in response to claims about less innovation related to drugs for rare diseases, highlighting the ongoing debate between affordability and scientific progress.
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