OBBBA and Medicare Negotiation Eligibility: Considerations for Manufacturers
Summary
For IPAY 2028 and beyond, the OBBBA expands the exclusion for orphan drugs subject to Medicare negotiation, with implications for negotiation selection timing.The Medicare Drug Price Negotiation Program (MDPNP) excluded products with only indication(s) approved under a single orphan drug designation. The One Big Beautiful Bill Act (OBBBA), which passed in July 2025, expands the orphan exclusion requirements. The law makes several changes beginning in initial price applicability year (IPAY) 2028 (Figure 1).
Figure 1. OBBBA Provisions on Orphan Drug Exclusion (ODE) Requirements
| Products with only orphan indications | Product with orphan and non-orphan indications | ||
|---|---|---|---|
| Single designation | Multiple designations | First indication was orphan | First indication was non-orphan |
| Already qualified for exclusion from MDPNP | Now qualifies for exclusion from the MDPNP | Negotiation eligibility timing now based on approval date of first non-orphan indication | Negotiation eligibility and timing unchanged |
Impacts of Policy Change
As a result of this policy modification, there are meaningful changes to the estimated negotiation selection timeline, both for IPAY 2028 and in future years. Due to these shifts, Avalere Health estimates that:
- Three products, two Part B drugs and one Part D drug, that were slated for negotiation in IPAY 2028 will shift to selection in later years. Another Part D drug that was initially projected for IPAY 2028 will not be eligible for IRA negotiation under its status quo indication set.
- For IPAY 2028, four new products will be selected reflecting the new OBBBA provisions: one Part B product and three Part D products.
- A total of 43 additional products with only orphan indications will now be excluded from the MDPNP
- Between IPAY 2028 and 2029, the difference in the total projected Medicare spend of the selected drugs before and after OBBBA implementation is approximated at $47M
Implications
The OBBA introduces new complexity to MDPNP eligibility; identifying products eligible under the new ODE, including their dates of first non-orphan indication approval, presents a challenge due to a lack of centralized, comprehensive data sets. This makes it more challenging for stakeholders to forecast expected selection timing. However, understanding potential negotiation timing has critical implications for evidence generation and commercial strategy planning.
For products with a now extended window for negotiation preparation, there are now increased opportunities for evidence generation prior to selection. On the other hand, as some manufacturers may experience extended MDPNP ineligibility, others will take their place in earlier years of list selection. For these manufacturers, now is the time to catalyze internal teams to prepare for and understand the impacts of negotiation.
Even if the OBBBA provisions do not directly impact the risk of a product’s negotiation eligibility, there may be impacts to a manufacturer’s competitors, which also carries ramifications for market strategies to address changing price pressures and payer management, among other dynamics.
More broadly, stakeholders (e.g., investors, manufacturers) may consider the OBBBA impacts on long-term R&D strategies, such as indication sequencing decisions.
Next Steps
It is imperative that life science organizations understand these policy changes in terms of impact to projected MDPNP drug selection and subsequent R&D, HEOR, market access strategies.
Avalere Health has developed a comprehensive and validated flexible tool allowing users to adjust various IRA eligibility criteria, including the OBBBA provisions, and drug-specific market events and assess the impact on drug selection timing forecasts. Additionally, Avalere Health’s experts have extensive experience supporting negotiation preparation and understanding downstream MDPNP market strategies. Connect with us to learn more.
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