July 2025 brought a flicker of hope for people with serious health needs: Congress exempted drugs with multiple orphan indications from the Inflation Reduction Act (IRA)’s Medicare Drug Price “Negotiation” Program. This means that medicines developed for multiple orphan diseases (each of which affects fewer than 200,000 people) will not be subject to price regulation in Medicare. While some expressed concerns about the cost of the exemption, others believe that Congress corrected a flaw, representing a part of a broader debate around the tradeoffs of encouraging investment in drug development while not over-stressing federal budgets.

In this setting, accurately modeling drug development and estimating the impacts of price regulation on drug development is critical. Given the continuing discussion around the Congressional Budget Office’s (CBO) drug development model, we build off our prior post and consider the implications of a flaw in the CBO model: the omission of post-market development.  

Clinical Study Post-Approval Matters

The initial approval of a new drug application (NDA) represents a “first pass” of the scope of activity of a new pharmaceutical product, often representing the most rapid way that a developer can demonstrate safety and efficacy to its product regulator and achieve market access, providing ongoing revenue for further development. In 2024, FDA approved 50 new molecular entities, representing only one of 10 types of NDAs. The FDA approves multiple other NDA types, including prescription to over the counter switches (two in 2023), follow-on clinical indications (over 200 in 2024), and others.

Continued product development post-initial launch can help unlock new uses for existing drugs to treat or ameliorate other diseases, uncover uses in other populations, or increase competition in other areas, with lifecycle product management a focus of FDA across product centers.  Researchers, policymakers, and investors recognize the value of post-market studies, particularly in the treatment of cancer and rare diseases.

Prescribers can use medicine “off-label” based on other evidence or their experience. However, without FDA labeling, the full value of the medicine is often unrealized. In informal off-label use, evidence generation is not systematically collected and may not be integrated into clinical guidelines. Payers may not cover off-label use even if clinical practice supports it, making the medication less accessible and creating friction at the point of care.

Post-Approval Research Drives Clinical Care

The CBO model ignores post-approval research and follow-on indications, despite data demonstrating that FDA approves five times as many efficacy supplements for new indications and populations as it does novel drug products. Post-approval research resulting in follow-on indications for drugs drives much of modern American clinical practice.

Consider that oncology drugs often receive initial FDA approval for advanced cancer treatment, where the alternative outcome—death—is clear. Research indicates that many oncology products subsequently undergo further post-market development.  Of the 86 oncology drugs approved between 2008 and 2018, 56 had at least one subsequent indication, 34 for a new cancer, 16 for a new stage, and nine for a new population.  

Other common conditions tell a similar lifecycle development story. A review of 65 FDA-approved drugs (1995–2021) initially marketed for the treatment of cardiovascular and antithrombotic conditions, demonstrated that half of all total product indications were awarded post-initial approval, with half of the small molecule post-approval clinical trials ending nine or more years after original approval. With small molecules facing IRA price regulation after nine years, drug developers face a direct financial incentive to conduct post-approval research, an assertion confirmed by research policy research.

Post-approval research expands therapeutic use to new populations and conditions. The FDA approved the small molecule drug losartan for the treatment of hypertension in adults in 1995, with further post-approval study in a 175 patient trial supporting a 2001expanded indication for pediatric hypertension. Further evidence generation in a randomized, double blind study of 1,513 patients provided evidence that losartan reduced the incidence of doubling of serum creatinine (a measure of chronic kidney disease) and occurrence of end-stage renal disease by one-quarter, resulting in an additional FDA indication and integration into routine clinical use. The health consequences for this type of development (or lack thereof) are meaningful: diabetic nephropathy occurs in up to 50 percent of diabetics, and is responsible for half of all cases of kidney failure warranting dialysis or transplantation.

Concluding Thoughts

Post-approval research answers important clinical questions with longer study times and larger populations, an undertaking impractical in a pre-market setting. Unfortunately, the CBO’s model disregards post-approval indications, which expand pharmaceutical use to new populations and diseases as part of widespread real-world clinical practice. Consequently, estimates of innovation harms from the IRA are underestimated. While we believe that drug price regulation is the wrong approach, regardless of our perspective and recognizing that many policymakers have interest in drug price regulation, the CBO should update its model to account for post-approval development.