Carving rare disease treatments out of a new Medicare drug pricing pilot would eliminate much of the savings the program is projected to produce on retail medications, according to a new analysis by a Harvard University researcher.
The finding lands while biotech companies lobby the administration for exactly that exemption. STAT reports that excluding rare disease treatments would wipe out savings from retail drugs under the pilots at issue: the Global Benchmark for Efficient Drug Pricing, known as GLOBE, and Guarding U.S. Medicare Against Rising Drug Costs, known as GUARD. The retail-drug savings estimate applies specifically to GUARD, which covers Part D.
This is one researcher's modeling of a policy that has not been decided. It is not an agency estimate, and the pilots remain proposed rather than final.
Mechanics of an Exemption
The arithmetic is the whole story, and it is not intuitive.
A carve-out sounds narrow. Rare diseases affect small numbers of patients by definition, so exempting their treatments sounds like it would cost little. The opposite is true, because orphan-designated drugs are among the most expensive per patient and several are among the highest-spending products in Medicare.
The two pilots cover different parts of the program. GLOBE targets Part B, and GUARD targets Part D, with GLOBE proposed to run from October 2026 and GUARD from January 2027, each through 2031. Both would require manufacturer rebates when United States prices exceed those in comparable countries, tested in randomly selected geographic areas covering about a quarter of Medicare beneficiaries. Drugs already subject to a maximum fair price under the existing negotiation program would be exempt.
Federal law already contains a version of the rare disease exemption. The Inflation Reduction Act excluded from price negotiation any orphan drug approved to treat only one rare disease with no other approved indication. The Orphan Cures Act, enacted as part of the One Big Beautiful Bill Act, widened it to cover drugs with multiple orphan designations and no non-orphan indications.
An expansion beyond that would pull in drugs that treat both rare and common conditions. Because a product only has to qualify once to be excluded, a broad carve-out creates an incentive to seek an orphan designation for a drug that will earn most of its revenue elsewhere.
Share of Spending Rare Disease Drugs Represent
Published modeling gives a sense of the scale. Of 645 branded drugs covered under Medicare Parts B and D as of 2022, 172 are projected to reach or exceed $200 million in annual Medicare spending between 2026 and 2030. Among those, 73, or 42 percent, have at least one orphan indication.
Breaking that group down, 28 already meet the criteria for exemption under the Inflation Reduction Act, 15 meet the newer law's exclusion criteria, and 30 are approved for both orphan and common indications.
A single example shows how large the individual numbers can be. Ibrutinib, sold as Imbruvica, treats rare blood cancers and cost Medicare nearly $2.4 billion in 2023 despite being used by roughly 17,000 Part D patients. Negotiation secured a 38 percent reduction from its list price beginning in 2026, and under a broadened carve-out, a drug of that profile would be exempt.
The taxpayer cost of the existing widening has already been revised upward. The Congressional Budget Office revised its forecast last fall to show the added exemptions will cost up to $8.8 billion rather than $4.9 billion.
Harvard Medical School researchers Benjamin Rome and Aaron Kesselheim, who have published repeatedly on this question, have argued that expanding the exemption would unnecessarily limit the number of eligible drugs while allowing continued high prices for products earning billions in Medicare.
Arguments on Both Sides of the Carve-Out
The industry case is not frivolous and deserves to be stated fairly. The Rare Disease Company Coalition is lobbying for exclusion, arguing that rare disease drug development serves small patient populations, which means fixed research costs are recovered from fewer people. Companies argue that price constraints reduce the incentive to pursue conditions with limited markets, and that patients with rare diseases have historically had few or no options. Smaller biotechs with narrow portfolios have less room to absorb the impact.
The counterargument is about targeting. Critics say the exemption as written does not distinguish between a genuinely small-market therapy and a blockbuster that happens to carry an orphan designation alongside common indications, and that the incentive it creates is misaligned with the policy's stated purpose.
Both positions can be partly right. Whether an exemption protects rare disease innovation or shelters high-revenue products depends entirely on how narrowly it is drawn, which is the decision now before the administration.
Nothing has been decided. The pilots are proposed rules; their scope is under discussion, and the analysis describes what would happen under one possible design.
Worth noting is that the debate concerns which drugs face price constraints, not whether patients keep access to them. An exempted drug stays on the market at its existing price, and a drug included in a pilot remains available at a rebated one. Neither outcome removes a treatment from the shelf.
Consequences That Reach Beneficiaries
For people on Medicare, the connection runs through two channels.
The first is out-of-pocket cost. The pilots are designed to reduce beneficiary coinsurance on the drugs they cover, and CMS estimated beneficiaries would save $1.5 billion when the first negotiated prices took effect in 2026. Drugs excluded from a program do not generate those savings.
The second is premiums. Part D premiums reflect overall program spending, so reduced spending on high-cost drugs can moderate what every enrollee pays, including people who never take the medications in question.
Patients should not expect any immediate change from this analysis, and nobody should alter or stop a prescription based on pricing policy news. Anyone struggling with drug costs now has existing options worth raising with a clinician or pharmacist: the Part D out-of-pocket cap, the Medicare Prescription Payment Plan that spreads costs across the year, Extra Help for low-income beneficiaries, manufacturer patient assistance programs, and therapeutic alternatives where they exist.
Next is a decision on the pilots' final structure, followed by which drugs are selected. MedicalDaily will report the design decision and its scope when announced.
The bottom line: the newest finding is modeling showing that a rare disease exemption would erase most projected retail drug savings from the Part D pricing pilot, the people most affected are Part D beneficiaries paying coinsurance and premiums, and the policy remains undecided.
Frequently Asked Questions
What is the carve-out being debated? An exemption that would remove rare disease, or orphan, drugs from two proposed Medicare pricing pilot programs known as GLOBE and GUARD.
What do the two pilots cover? GLOBE applies to Medicare Part B and is proposed to begin in October 2026. GUARD applies to Part D and is proposed to begin in January 2027. The retail savings finding concerns GUARD.
Why would exempting rare disease drugs matter so much? Orphan-designated drugs are among the most expensive per patient, and several rank among Medicare's highest-spending products, so excluding them removes a large share of projected savings.
Does an exemption already exist? Yes. The Inflation Reduction Act excluded orphan drugs approved for a single rare disease with no other indication, and the Orphan Cures Act widened it to drugs with multiple orphan designations and no common indications.
What has that widening cost? The Congressional Budget Office revised its estimate to as much as $8.8 billion, up from $4.9 billion.
Has this been decided? No. The pilots are proposed rules, and their final scope is under discussion. The analysis models one possible design.
What can someone do about drug costs now? Ask a clinician or pharmacist about the Part D out-of-pocket cap, the Medicare Prescription Payment Plan, Extra Help, manufacturer assistance programs, and therapeutic alternatives.
