Assessing the Impact of the United States (US) Inflation Reduction Act (IRA) Regulations on Investment Incentives for Orphan Disease Drug Development
Author(s)
Naoko Ronquest, PhD, Yiwei Zhang, PhD, Dee Dee Mladsi, BA;
RTI Health Solutions, Research Triangle Park, NC, USA
RTI Health Solutions, Research Triangle Park, NC, USA
Presentation Documents
OBJECTIVES: The Orphan Drug Act of 1983 incentivized orphan drug development in the US through accelerated approval (AA), priority review, and fast-track designation pathways. Orphan drugs often have high prices, sometimes maintained even after approvals for broader indications. The IRA of 2022 introduced Medicare price negotiations, affecting high-expenditure drugs, including orphan drugs with subsequent indications. This study examined the potential effects of the IRA on manufacturers’ orphan drug development incentives.
METHODS: The Center for Drug Evaluation and Research database was used to identify drugs approved for an orphan indication via the AA pathway and later approved for broader indications and to select a case study. An Excel model was developed and populated with historical approval timing, population size, and pricing data to approximate the net present value (NPV) of revenues over an 18-year time period. To assess the potential impact of IRA provisions, scenario analyses were conducted under various clinical development scenarios.
RESULTS: Among 219 AA submissions reviewed, 147 involved orphan indications; 48 also had broader indications. Nilotinib, approved in 2007 for an ultra-orphan population (n ≈ 650) and in 2010 for a broader indication (n ≈ 8,500), was analyzed as a case study. The sequential submissions yielded an NPV of $6.9 billion (2007 US dollars); launching both indications in 2010 would have decreased the NPV. A hypothetical 50% IRA price discount from year 9 reduced the NPV by 40%. Delaying the orphan approval to 2010 mitigated this loss to 30% . Sensitivity analyses indicated a delayed launch strategy would result in higher NPV gains under scenarios with higher IRA discounts and larger indication sizes.
CONCLUSIONS: The IRA provisions may substantially reduce incentives for early development of orphan drugs, shifting the focus towards broader patient populations over unmet needs. Further policies are needed to balance cost containment with timely developments for rare serious diseases.
METHODS: The Center for Drug Evaluation and Research database was used to identify drugs approved for an orphan indication via the AA pathway and later approved for broader indications and to select a case study. An Excel model was developed and populated with historical approval timing, population size, and pricing data to approximate the net present value (NPV) of revenues over an 18-year time period. To assess the potential impact of IRA provisions, scenario analyses were conducted under various clinical development scenarios.
RESULTS: Among 219 AA submissions reviewed, 147 involved orphan indications; 48 also had broader indications. Nilotinib, approved in 2007 for an ultra-orphan population (n ≈ 650) and in 2010 for a broader indication (n ≈ 8,500), was analyzed as a case study. The sequential submissions yielded an NPV of $6.9 billion (2007 US dollars); launching both indications in 2010 would have decreased the NPV. A hypothetical 50% IRA price discount from year 9 reduced the NPV by 40%. Delaying the orphan approval to 2010 mitigated this loss to 30% . Sensitivity analyses indicated a delayed launch strategy would result in higher NPV gains under scenarios with higher IRA discounts and larger indication sizes.
CONCLUSIONS: The IRA provisions may substantially reduce incentives for early development of orphan drugs, shifting the focus towards broader patient populations over unmet needs. Further policies are needed to balance cost containment with timely developments for rare serious diseases.
Conference/Value in Health Info
2025-05, ISPOR 2025, Montréal, Quebec, CA
Value in Health, Volume 28, Issue S1
Code
HPR55
Topic
Health Policy & Regulatory
Topic Subcategory
Pricing Policy & Schemes
Disease
No Additional Disease & Conditions/Specialized Treatment Areas, SDC: Rare & Orphan Diseases