When Congress passed the "One Big Beautiful Bill" and President Trump signed it on July 4, 2025, most of the attention landed on the tax cuts and Medicaid restrictions. But buried in the legislation was a provision worth $8.8 billion to the pharmaceutical industry, a carve-out that shielded some of the country's most expensive cancer drugs from Medicare price negotiation, and cost every taxpayer and patient it touched accordingly.
What the Law Actually Did
The reconciliation law expanded what is called the "orphan drug exclusion" in Medicare's price negotiation program. Under the original Inflation Reduction Act, Medicare gained the authority to negotiate prices directly with drug manufacturers on high-spending drugs, a program with 85% public support according to KFF polling. The first 10 negotiated drugs take effect in 2026, projected to save Medicare $6 billion per year and cut $1.5 billion in annual out-of-pocket costs for beneficiaries.
The ORPHAN Cures Act, tucked into the "One Big Beautiful Bill," rewrote the exclusion rules in two key ways. First, any drug with more than one orphan disease designation, regardless of how blockbuster its revenues became, was now exempt from negotiation. Second, the law reset the eligibility clock, meaning drugs that had already spent years on the market no longer had those years counted against the timeline before negotiation could begin.
The result: Keytruda, the cancer drug generating $5.6 billion in Medicare and beneficiary spending in 2023 alone, had its negotiation timeline pushed back. Opdivo, at $2.0 billion in 2023 Medicare spending, faced the same delay. Jakafi and Brukinsa, both already excluded, remained shielded. In total, drugs with $17.5 billion in combined 2023 Medicare and patient spending were affected.
The Congressional Budget Office scored the original orphan drug provision at $4.9 billion. When analysts added Keytruda, Opdivo, and Darzalex to the calculation, the revised CBO estimate reached $8.8 billion in higher Medicare spending over the coming decade, reducing the negotiation program's projected savings by nearly 10%.
The Industry Responded Immediately
Patients for Affordable Drugs tracked what happened next. In the first week of January 2026, pharmaceutical companies raised prices on 208 rare disease drugs. More than 80% of those increases exceeded the rate of inflation. Among the drugs getting price hikes: Firdapse, Tibsovo, Brukinsa, Juxtapid, and Tyvaso, medications that already carry annual costs ranging from tens to hundreds of thousands of dollars for individual patients.
The pattern fits a well-documented industry dynamic. When regulatory pressure on pricing eases, manufacturers move quickly to widen their margins before the next constraint arrives. Congress handed them the easing; they moved within months.
Meanwhile, the broader context has not shifted: U.S. drug prices remain 2.78 times higher than prices in comparable wealthy nations, according to RAND Corporation research. Even after Medicare's newly negotiated prices took effect in 2026, the program still pays more than three times what peer nations pay for roughly half the negotiated drugs. The orphan drug carve-out does not create that gap. It widens it deliberately.
Who Paid for That Loophole
The pharmaceutical industry spent $457.3 million on federal lobbying in 2025, the largest single-year total on record. The 17 drug companies most directly tied to the White House's drug pricing program drove a 23% surge in their own lobbying spend, according to OpenSecrets reporting. The Pharmaceutical Research and Manufacturers of America (PhRMA) alone logged more than $20.6 million in the first half of the year.
The investment returned $8.8 billion in protected revenue over a decade. That math is not complicated. An industry that spends half a billion dollars annually on lobbying, and concentrates that spending in the period when Congress is writing a multi-trillion dollar reconciliation bill, does not do so accidentally. The carve-out was not a drafting oversight; it was a negotiated outcome.
"Congress quietly handed drugmakers an $8.8 billion carve-out from Medicare price negotiation. Months later, manufacturers raised prices on 208 drugs. The math runs in one direction."
The Alternative Already Exists
The argument that Medicare negotiation stifles pharmaceutical innovation has been tested in court and rejected. The Supreme Court declined to hear pharmaceutical industry challenges to the negotiation program in May 2026, leaving the lower court victories for the program intact. The IRA's negotiation structure, when applied to the full list of eligible drugs without carve-outs, offers a tested model: regulated prices for mature, patent-protected blockbusters, while early-stage drug development is deliberately excluded from the program's reach.
Other wealthy nations handle this through formal value assessment and collective negotiation. Australia, Canada, England, France, Germany, and Sweden all assess the clinical value of new medicines, negotiate collectively, and limit patient financial exposure. Those systems are not blueprints for eliminating markets in pharmaceuticals. They are regulated markets making rational decisions about how much pricing power to extend to products developed substantially on publicly-funded research. The United States has the same capacity. The orphan drug carve-out represents a political choice not to use it.
Senators Ron Wyden and Peter Welch introduced legislation to repeal the ORPHAN Cures Act provision and the Medicaid cost-sharing rules added by the reconciliation bill. That bill has not advanced in a Republican-controlled Congress. The CBO numbers are public, the price hike data is public, and the lobbying totals are public. Voters who want to know why their prescriptions cost what they cost have a clear factual record to consult.
Sources
- KFF: People with Medicare Will Face Higher Costs for Some Orphan Drugs
- CBO: Revised Estimate of Changes Under the 2025 Reconciliation Act for Orphan Drug Exemptions
- Patients for Affordable Drugs: Drugmakers Hike Prices Following Reconciliation Package
- Fierce Healthcare: Expanded Exemption to Cost Medicare $8.8B Over 10 Years
- Medicare Rights Center: Negotiated Prices Take Effect for Ten Drugs in 2026
- RAND: U.S. Drug Prices 2.78 Times Higher Than Comparable Nations
- Patients For Affordable Drugs Now: Congress Hands Big Pharma a $5 Billion Taxpayer Giveaway
- OpenSecrets: Drug Companies Boosted Lobbying by 23% Ahead of TrumpRx Launch
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