Q1 CONGRESSIONAL OUTLOOK

DATE: JANUARY 8, 2025

MEMO: Q1 CONGRESSIONAL OUTLOOK

Congressional State of Play – Q1
FY26 Federal Funding and Extenders

As the second session of the 119th Congress begins, nearly all eyes are on the January 30 funding deadline set by the Continuing Resolution (CR) agreement that ended the Fall 2025 shutdown. The FDA-Agriculture, Military Construction and Veterans Affairs (MilCon-VA), and Legislative Branch full FY2026 funding bills were part of the November CR and therefore are not in play going into the funding deadline. Furthermore, Senate text was released on January 5 for
a minibus package containing the FY 2026 Energy-Water, Interior, and Commerce-Justice- Science funding agreements, indicating these issues will be resolved in advance of the deadline.

This still leaves six appropriations bills to be negotiated before January 30 including the Labor-HHS bill which governs nearly all non-FDA health policy priorities. It’s possible that the Labor-HHS and the Defense funding bills are paired together in a future minibus (as the Senatewas contemplating at the end of 2025); however, this could be a tough sell in the House. Congress may need more time to address these funding bills as part of a third minibus, which
could either result in a short-term CR at the end of January or a longer-term (September 30,
2026) CR if congressional leaders do not see a path to an agreement.

Several health policies could potentially “ride” on a funding agreement, including PRV reauthorization, pharmacy benefit manager (PBM) reforms, public health extenders, and Medicare telehealth coverage. These policies have languished for several years now, and health care-focused policymakers and Committees believe it is necessary to clear the decks beforemoving to additional health care policies,s including additional PBM, 340B, Medicare Advantage,
and other coverage/reimbursement reforms. There is additional pressure to finalize policies given the scheduled congressional prescription drug user-fee (and other user-fee) negotiations later this year.

ACA Enhanced Premium Tax Credits

Apart from the funding deadline and health extenders, the now-lapsed ACA Enhanced Premium Tax Credits and premium increases/health care affordability generally are driving much of the conversation around health care in DC.

The House voted on and passed the three-year clean extension of the Enhanced ACA Premium Tax Credits Thursday as a result of the successful discharge petition at the end of 2025, when 4
GOP House Members joined every Democrat in signing. However, this bill is likely DOA in the Senate.

A bipartisan group of Senators has continued to meet on addressing the lapse of the enhanced tax credits and Majority Leader Thune has indicated a willingness/optimism in the Senate to address this policy issue in some way, but has said he views the end of January as a deadline.
However, both parties seem far apart in terms of potential solutions, and it seems increasingly unlikely that a deal is reached before the end of the month. The one wildcard here is if President Trump decides to heavily weigh in on the debate surrounding the extension.

Potential Reconciliation Part II

Health care affordability is going to continue to be a main topic of debate in Q1 and Q2, especially if no deal is reached on the ACA tax credits. There will likely be a push from the White House, and some Congressional Leaders to address health care costs through a second reconciliation bill.
This would be an incredibly tough lift for Congress and the White House to pull off, especially given the razor-thin margin in the House with the passing of Rep. Doug LaMalfa (R-CA). It is also unclear what policies could be part of such a bill, outside of increasing access/usage of Health Savings Accounts (HSAs), given some GOP proposals, such as cost-sharing adjustments, have already been ruled out of order with the Byrd Rule during the first reconciliation.

Conversations around a second reconciliation bill have already been taking place, but there is
not a lot of certainty on what that bill could look like or even if a second push on reconciliation
will happen. We expect these conversations to escalate after January 30.

Additional Congressional Issues

• Health Care Oversight Activities: Vaccine Scheduling; Most Favored Nation (MFN);
  Pharmaceutical Supply Chain Integrity; Artificial Intelligence
• Foreign Affairs: Venezuela and Ukraine
• Crypto Market Structure and Other Banking Policy
• Congressional Stock Trading Ban
• Global Minimum Tax Deal
• April 20 expiration of Foreign Intelligence Surveillance Act (FISA) Section 702

Rare Disease Priorities State of Play – Q1
Mikaela Naylon Give Kids a Chance Act

The Mikaela Naylon Give Kids a Chance Act, which includes provisions to reauthorize the FDA Rare Pediatric Disease Priority Review Voucher Program until 2029, was passed by the House ofRepresentatives on December 1, 2025. Since its passage in the lower chamber of Congress, the rare disease community has advocated clearing the bill in the Senate through Unanimous Consent (UC). On December 18, Senator Markwayne Mullin (R-OK) went to the Senate floor to request UC on the bill, but it was blocked by Senator Bernie Sanders (D-VT) over concerns that stemmed from the collapse of the December 2024 health care package.
Currently, attempts to negotiate an agreement that would clear Sanders’ hold on the legislation through an amendment incorporating Community Health Center and/or some other combination of public health funding have slowed. The House GOP has started to negotiate a January 30 package with an initial offer that includes the legislation, and this now represents the most likely path forward for the legislation.

If neither approach is successful, the remainder of Q1 would likely be spent on a Senate floor strategy to secure passage of the bill. The prospects of this approach were recently bolstered by a January 6 letter sent from HHS Assistant Secretary for Legislation Gary Andres to the Senate Majority Leader Thune, urging the passage of the Act.

Proposed MFN Models

On December 19, 2025, the Centers for Medicare & Medicaid Services (CMS) released its MFN pricing proposals for certain pharmaceutical treatments in the Medicare Part B and Medicare Part D markets. The GLOBE demonstration outlines how MFN would be applied to qualifying drugs and biologics in Medicare Part B, while the GUARD demonstration model outlines MFN applicability to similar products in Medicare Part D.

Unfortunately, neither of the proposed models included an exemption for orphan drugs, although the GLOBE Model did note that CMS will consider the exclusion of cell and gene therapy products before finalizing that demonstration.

The proposed models remain open for comment until February 23, 2025. Following the receiptof comments, it typically takes CMS several months to finalize the rule. However, as the proposed GLOBE model start date is October 1, 2026, the models could be finalized in early Q2. This timeline would allow CMS to avoid overlapping with most yearly Medicare payment rules.

Section 232 Tariffs
Section 232 tariffs remain a potential liability for rare disease manufacturers. Although the Section 232 Pharmaceutical Investigation Report was expected by December 27, 2025, the deadline was not met by the Department of Commerce. We still believe the report is likely to be released in Q1; however, the Trump Administration could be waiting for a final Supreme Court ruling on the legality of International Emergency Economic Powers Act (IEEPA) tariffs beforepublishing it as the basis for establishing new tariffs based on Section 232 authority.

Additionally, Secretary Lutnick noted during his December meeting with GOP House Ways & Means Committee Members that the Section 232 tariff strategy is not meant to target low-volume, small-batch treatments like rare disease drugs, so there could be exemptions for these in the Administration’s framework.