People with Medicare Will Face Higher Costs for Some Orphan Drugs Due to Changes in the New Tax and Budget Law

(Authors: Juliette Cubanski and Tricia Neuman for The Kaiser Family Foundation Published: Oct 20, 2025)

Changes are coming to Medicare’s drug price negotiation program that could result in at least $5 billion in additional Medicare spending over time, if not more, and higher out-of-pocket costs for people with Medicare. Under the Medicare Drug Price Negotiation Program, the federal government is required to negotiate with drug companies for the price of some high-spending drugs that have been on the market for several years without competition, with the goal of lowering Medicare drug spending and helping to reduce out-of-pocket costs for people with Medicare. The law that established the negotiation program, the Inflation Reduction Act of 2022, excluded certain types of drugs from negotiation, including orphan drugs approved to treat a single rare disease or condition. The new tax and budget reconciliation law passed by Congressional Republicans and signed by President Trump in July 2025 modifies the orphan drug exclusion in ways that will lead to higher Medicare spending – an additional $8.8 billion, according to a recently-updated Congressional Budget Office (CBO) estimate, up from its original estimate of $4.9 billion, which did not fully account for all the drugs that will likely be affected – and higher costs for beneficiaries who take these medications. Continue reading here…

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