The Big Beautiful Bill – What Drug Manufacturers Need to Know
Executive Summary
The One Big Beautiful Bill Act (OBBBA), signed in July 2025 (Public Law 119-21), reshapes drug pricing and Medicaid access through three major changes:
• Inflation Reduction Act (IRA) Relief: Expanded orphan-drug exemption shields rare disease drugs from Medicare negotiation longer
• Most Favored Nation (MFN) Pricing: International reference pricing is intended to apply to all drugs (White House Executive Order, May 2025)
• Medicaid Cuts: 10 million people projected to lose coverage by 2034 (KFF Analysis)
Net effect: Oncology and rare disease assets gain pricing protection, but manufacturers face international price ceilings and major Medicaid volume loss.
What Manufacturers Gain
1. IRA Drug Negotiation Relief
The OBBBA widens the IRA orphan-drug exemption. Drugs with one or more rare-disease indications remain outside Medicare negotiation even across multiple orphan designations.
Impact: Longer pricing exclusivity for oncology and rare disease portfolios.
2. Direct-to-Consumer Cash-Pay Channel
The law enables government-facilitated manufacturer DTC programs, allowing drugs to be sold at MFN prices. It is widely assumed that TrumpRx will serve as a repository for DTC cash prices.
Impact: Creates an official, government-backed cash-pay channel for high-deductible and uninsured patients—partially offsetting Medicaid losses.
What Manufacturers Lose/Trade-offs
1. MFN Pricing Applies to Drugs
The May 2025 Executive Order establishes MFN pricing as the standard for prescription drugs and biologics and directs HHS to implement this across products.
Impact: Downward pressure on list and net prices, but expanded volume opportunity through DTC cash-pay channel and potentially broader coverage at lower price points. Net revenue impact depends on price elasticity and market access gains.
2. Medicaid Access Crisis
a) Enrollment Shrinks
Funding cuts and stricter eligibility rules—including roughly 80 hours/month community engagement and 6-month eligibility checks—are expected to reduce Medicaid enrollment by 10 million by 2034 (KFF).
Impact: Large loss of covered lives and prescription volume.
b) Mandatory Copays Create New Barriers
Up to $35/service for certain expansion adults, depending on income and service type (Public Law 119-21).
Impact: New cost-sharing where none existed may lead to higher abandonment risk.
c) Coverage Churn Intensifies
Frequent re-verification means patients may lose coverage if they fail to provide necessary documentation.
Impact: Disrupted therapy initiation and continuity.
3. PBM Transparency Tightens Utilization Controls (Medicaid)
The law bans spread pricing for PBMs in Medicaid managed care and requires transparent “ingredient cost + dispensing fee” models (Public Law 119-21).
Impact: While pricing becomes more predictable, PBMs are expected to offset lost spread-pricing margin by tightening access controls—more prior authorizations, stricter step therapy, and narrower formularies for specialty drugs. This is limited to Medicaid; Medicare Part D and commercial markets remain unchanged.
Strategic Implications for Manufacturers
1. Invest in Hub Services for Eligibility & Retention
Coverage instability requires high-touch support:
• Re-enrollment support every 6 months
• Tools to document 80 hours/month community engagement
• Prior authorization navigation support (as PBMs tighten utilization controls)
ROI: Reduces drop-off and supports treatment continuity.
2. Expand Copay Assistance Programs
Mandatory copays create abandonment risk.
Regulatory note: Assistance is likely consistent with existing safe harbors because copays are mandated in statute; manufacturers should confirm with counsel.
Action: Expand support for low-income patients, especially in specialty categories.
3. Build Evidence to Counter Prior Authorization Pressure
As PBMs tighten utilization controls in Medicaid, manufacturers should proactively generate clinical and economic evidence demonstrating:
• Outcomes superiority vs. step therapy alternatives
• Total cost of care savings (e.g., reduced hospitalizations, ER visits)
• Real-world adherence and effectiveness data
ROI: Negotiate PA removal or “preferred” formulary status with Medicaid managed care plans.
Sources
Public Law 119-21 (OBBBA)
https://www.congress.gov/119/plaws/publ21/PLAW-119publ21.pdf
White House Executive Order
KFF Analysis