While the broader pharmaceutical industry grapples with the potential impacts of the Trump administration's latest tariff escalation, one segment of the drug market has found a crucial silver lining in a parcel of health care reform introduced by the US president’s One Big Beautiful Bill Act (OBBA).
The legislation brings expanded exemptions for orphan drugs — those developed to treat rare diseases — sheltering them from Medicare price negotiations, with particularly positive implications for companies with Fast Track designation from the US Food and Drug Administration. The policy allows rare disease drug developers to secure longer periods of market exclusivity, encouraging further research and innovation in a space that often lacks commercial incentive.
What is the orphan drug exclusion?
The Orphan Drug Act is intended to incentivise the development of treatments for diseases affecting fewer than 200,000 people in the US. Known as orphan diseases, these conditions often lack sufficient treatment options due to limited market potential. The Orphan Cures Act, now incorporated into the OBBBA, modifies key provisions under the Inflation Reduction Act (IRA), broadening exemptions for orphan drugs from Medicare price negotiations.
Specifically, it extends the exemption to drugs approved for multiple rare diseases and delays the start of price negotiation eligibility until after a drug is approved for a non-orphan indication.
Key changes in the OBBBA for orphan drugs include:
- Expanded exemption: Orphan drugs treating multiple rare diseases remain exempt from Medicare price negotiations;
- Price negotiation delay: Eligibility for price negotiations begins only after a drug is approved for a non-orphan indication; and
- Impact on pharma: Encourages companies to continue research into multiple indications for existing orphan drugs without the threat of price reductions.
The previous IRA provisions had limited the scope of orphan drug exemptions, seen as discouraging further research and development. The OBBBA's changes aim to stimulate innovation in rare disease treatments by providing longer periods of market exclusivity and reducing the risk of price negotiations under Medicare.
Australian biotech companies poised to benefit
Several Australian biotech companies with Fast Track designations for are well-positioned to capitalise on these legislative changes:
- Prescient Therapeutics Ltd (ASX:PTX, OTC:PSTTF) received Fast Track designation from the FDA in May for its PTX-100, a first-in-class compound targeting T-cell lymphomas, potentially enhancing commercial viability.
- In March, Imugene Ltd (ASX:IMU, OTC:IUGNF)’s AZER-Cel, a CAR-T cell therapy for various cancers, was granted Fast Track status by the FDA. This designation could expedite its development and market entry and providing a critical pipeline boost.
- Race Oncology Ltd (ASX:RAC, OTC:RAONF) was recently awarded an extension of its Orphan Drug Designation for RC220, a treatment for acute myeloid leukemia, enabling it to benefit from FDA regulatory and guidance support.
What this means for biotech
By expanding orphan drug exemptions and delaying price negotiations, the OBBA’s rare-disease provisions aim to foster innovation and ensure continued development of treatments for conditions with limited market incentives. For Australian biotech companies, these changes could enhance the attractiveness of their rare disease drug pipelines to investors and partners, potentially leading to increased funding and collaboration opportunities.