A recent update to the tax and budget law is poised to change how Medicare negotiates drug prices — with major implications for people who depend on high-cost orphan drugs. Under the current system, Medicare negotiates prices for some expensive drugs that have few or no competitors, helping drive down costs for both the government and patients. But the new legislation expands protections for orphan drugs — medications intended to treat rare diseases — effectively delaying or excluding them from the negotiation process.
That shift could add up to at least $5 billion in extra Medicare spending over time, and translate into higher out-of-pocket costs for beneficiaries who use these therapies. The Congressional Budget Office estimates the cost could be even higher, particularly as more orphan drug treatments enter the market.
Among the drugs affected are well-known cancer therapies like Keytruda and Opdivo, which already represent billions in Medicare and beneficiary spending. Under the new law, certain drugs won’t be eligible for negotiation until they gain non-orphan approvals — even if they’ve been on the market for years. In practical terms, that means price reductions that might have lowered cost-sharing for patients could be postponed by one or more years.
Because many high-cost drugs require coinsurance (a percentage of the total drug price), keeping the list price high has a direct and immediate impact on what patients pay. For example, if Medicare had negotiated a 22 percent discount on Keytruda, beneficiaries could have saved roughly $3,300 annually in cost-sharing on their treatments. Instead, the delay in negotiation keeps those savings out of reach for many.
As the Medicare negotiation program loses some of its reach, patients may face tougher decisions: does one continue a critical therapy despite the high cost burden? Will more people need supplemental coverage? It’s a stark reminder that changes to the rules of drug pricing — even those made in the halls of budget committees — can ripple all the way to the pharmacy counter.