The Big Beautiful Bill Fixes One Drug Problem—But Highlights An Even Bigger One

Forbes

21-07-2025

"It's a good thing that the Orphan Cures Act was added to the One Big Beautiful Bill Act," writes ... More health policy expert Sally Pipes. "But it would be better had the legislation not been necessary in the first place."
Buried within the One Big Beautiful Bill Act, which President Donald Trump signed into law July 4, is a provision that could improve or even save the lives of the 30 million Americans suffering from rare diseases.
That provision is the Orphan Cures Act, which exempts certain drugs that treat rare diseases from the scheme of price controls Democrats established in Medicare as part of the 2022 Inflation Reduction Act. The first round of price controls takes effect on ten medicines dispensed through the Part D drug benefit in January 2026.
This exemption is common sense. Why should federal policy discourage companies from investing in drugs that treat rare diseases—defined as those that afflict fewer than 200,000 Americans per year—by threatening them with price controls?
But that's exactly what the IRA did. Drugs that were approved for treating just one rare disease were carved out from the law's price controls. But if a manufacturer secured approval for a second indication for a given rare-disease drug, then it lost that exemption.
That's obviously not in patients' interests. Shouldn't public policy encourage pharmaceutical companies to investigate whether their drugs have multiple applications?
Thousands of rare diseases lack effective therapies of any kind. The IRA, wittingly or not, aimed to keep it that way.
It's a good thing that the Orphan Cures Act was added to the One Big Beautiful Bill Act. But it would be better had the legislation not been necessary in the first place.
The IRA's price controls stifle pharmaceutical innovation. The Incubate Coalition's Life Sciences Investment Tracker shows that drug companies have discontinued more than 50 research programs and canceled 26 drug projects since the passage of the IRA.
And there's evidence that companies have been curtailing their research into orphan drugs, in particular. According to the National Pharmaceutical Council, 'the percentage of drugs with a first orphan designation that later received a second designation decreased by 48.0%' after the Inflation Reduction Act passed.
That's especially shocking considering that, over the four years prior to the passage of the bill, the number of orphan drugs that received a second indication had been steadily increasing.
Orphan drug research may be an especially risky proposition. But developing more mainstream drugs is hardly a blue-chip process. It costs $2.6 billion and can take more than a decade for companies to bring a single new drug to market. Roughly one in ten drug candidates successfully makes it from phase one clinical trials to the market.
Drug development would almost certainly be a money-losing industry more often than not, were it not for the fact that pharmaceutical companies in America have a period of exclusive, market-driven sales during which they can earn a return on their investment. The money they earn from the drugs that do get approved allows them to recoup their losses from failed drugs and earn enough money to invest in future lines of research.
Price controls upend that economic calculus. If drug makers know that the government will swoop in and set arbitrarily low prices on the products they manage to bring to market, they'll be discouraged from investing the billions it takes to do so.
The IRA's price controls could lead to the development of 135 fewer drugs by 2039, according to one study. That disruption in innovation could cost the United States $18 trillion in 'health losses' in the same window, according to research from University of Chicago economist Tomas Philipson.
The inclusion of the Orphan Cures Act in the One Big Beautiful Bill may ward off some of those potential losses. But making a single exemption to the IRA is not enough. Congress must roll back price controls on prescription drugs altogether.