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Orphan Drug Pricing: Going To New Heights

March 7, 2014

Orphan drugs historically have received the highest drug prices due to their small patient populations and high cost of development. Because most orphan drugs serve small populations and meet with few competitors compared to other indications, payers, such as commercial insurance companies, will cover these drugs with no pushback.

Payers are now taking a hard look at the category of orphan and specialty drugs and attempting new programs with the aim of lowering costs. Assuming that payers can’t deny coverage overall, it then comes down to a strategy by the payers to manage or control the costs in some way.

In the March 2014 issue of Medical Marketing & Media (MM&M), the publication discusses orphan and specialty drugs and what the future holds for this category of drugs in the United States. Per the article, as orphan and specialty drugs increase over the next few years along with drug prices for these medicines, insurers will need to find a way of minimizing the expense to both patients and to themselves. Also at issue, is the increase in the difficulty of obtaining these medicines for the patient.

One must understand the definition of both specialty and orphan drugs as used by the article. In the United States, an orphan drug is defined by the FDA as a drug developed for “a rare disease affecting fewer than 200,000 people”. An orphan drug can be a specialty drug, with specialty drugs focusing “on delivery rather than target.” Specialty drugs usually have complicated usage requirements (i.e. injectable). Specialty drugs often treat chronic conditions such as cancer, hemophilia, and HIV.

In January 2014, MM&M commissioned three surveys to find out the opinions, issues, and suggested solutions from the three stakeholder groups involved in the specialty and orphan drug space :

•   Patients
•   Physicians
•   Payers.

Some interesting statistics gathered from the article:

•   Specialty drugs are the fastest-growing segment of healthcare expenses

•   Specialty drugs are growing at an annual rate of 15% – 20%

•   In 2020, specialty drugs are expected to be 40% of total drug costs

•   In the United States, specialty drug spending is estimated to increase 67% by the end of 2015, while non-specialty drug spending is estimated to decrease 4%.

Patient Perspective

While the price of specialty and orphan drugs are forecast to steadily increase, the issues facing the patients are becoming more complex:

•   Distribution problems – getting the drugs to the patient in a timely manner

•   62% of patients said that they sometimes or often times have to deal with a “prior authorization” or “step edit” process required by insurance providers – insurers may ask patients to try less expensive medications.

Physician Perspective

Many of the physicians surveyed stated the same problems as their patients. Other results from the physician survey show that :

•   2/3 of the physicians expressed the opinion that patients should take an active role for improving access to the drugs

•   50% of the physicians who currently prescribe specialty or orphan drugs believe that patients should lobby legislators or agitate with payers.

Payer Perspective

As already mentioned, payers are requiring pre-authorization for these types of medications. According to the survey:

•   Currently, 50% of payers manage specialty and orphan drugs under pharmacy benefits & 50% manage these type of drugs under medical benefits.

Solving the Pricing Dilemma

How to solve the problem of payers covering the cost for patient treatments, providing better accessibility to the patient, reducing paperwork, and improving communication between the three groups of stakeholders are reviewed in the article. The article discusses and reviews several solutions, including the role of a “patient navigator” to help the three stakeholder groups navigate the cycle of prescribing, distribution,  and reimbursement.

Other Media Coverage

The topic of orphan drug pricing is in the news this past week, as the UK’s National Institute for Health and Care Excellence (NICE) issues a draft guidance, asking for additional information from Alexion Pharmaceuticals to explain the price of orphan drug Soliris (£340,200/ adult patient/year) for the treatment of the rare disease atypical Haemolytic Uraemic Syndrome (aHUS).

Please Note: “Kalymnos 2005 022” by David Bolius [CC By-SA 2.5] | Wikimedia Commons.

Copyright © 2012-2014, Orphan Druganaut Blog. All rights reserved.

  1. Great article Ann-Teresa, and very timely. Although a rare disease patient and a big fan of the orphan drug process, I am very worried that these prices are going to create backlash. The RARE community is creating tremendous momentum at the current time, buy with fiscal tightening across the globe there will be public resentment that so much is being spent to treat so few. The drugs are subsidized but ultimately it is the taxpayers who are paying. Insurance companies and other third-part payers will, I suspect, also get to to point where they say “enough is enough.” For one of my disorders, CVID, there is a war going on – Medicare and insurance companies are trying to cut IVIg theraoy for many patients; they are making access more and more difficult by tightening criteria this for a drug which “only” averages about $120,000/year. Something will be needed to bring the prices down, but that could take away the incentive of Pharma to invest in R&D for Orphan products. It’s quite worrying.

    • Hi Yoni – Thanks for visiting the Blog & your comments. I follow your Blog & amazing Tweets !! It seems like every couple of months, there is a flurry of media articles and discussion on specialty/orphan drug prices & then it fades away until another meeting or until another drug is approved (i.e. like the recent FDA approval of Vimizin). What some insurers are doing here in the US is that if there is no generic equivalent for an expensive drug, then the patient or subscriber has to contribute more $$ towards its purchase. It has been a gradual progression, especially over the last 5 years. Again, thanks for your contributions to the rare disease/orphan drug community & keep up the great work you are doing !! Thanks, Ann

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