This Report takes a deep dive into the complex world of rare and orphan drugs – and the unique challenges of how they’re priced. This week we highlight two insightful articles. As we peel back the layers, some surprising and thought-provoking insights emerge.
The Blockbuster Orphan Paradox: Medicare’s Rare Disease Dilemma
The ‘One Big Beautiful Bill Act (OBBBA) of 2025’ reshaped Medicare’s new drug price negotiation program by expanding protections for rare disease drugs. Building on the 2022 Inflation Reduction Act (IRA), which exempted “pure orphan” drugs (single rare disease use), the OBBBA went further: it shields drugs with multiple orphan designations and delays negotiation for drugs that add common disease indications, starting the negotiation clock only from their first non-orphan approval.
Analysts call this the ‘blockbuster orphan paradox.’ Drugs once seen as risky bets for rare diseases now bring in billions, especially cancer treatments. In 2023 alone, exempt drugs cost Medicare over $30 billion. By keeping these blockbusters out of negotiations, projected savings dropped sharply.
Beyond lost savings, exemptions may distort drug development incentives. Manufacturers may avoid pursuing non-orphan indications—even where patients would benefit—to preserve exemption status. This risks slowing broader innovation while sustaining blockbuster profits in rare disease markets.
The policy dilemma is clear… exemptions protect investment in rare disease therapies but at the cost of Medicare’s ability to lower prices on its most expensive drugs. Future legislation may seek to narrow or reconsider these carve-outs. Without reform, Medicare’s negotiation program are primed to be undermined by the very blockbusters that reform was designed to address.
The Blockbuster Orphan Paradox: Consequences of Special Treatment of Rare Disease Drugs In Medicare Negotiation
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