Is the increasing cost of treating rare diseases sustainable?

Keywords::

• budget impact
• cost-effectiveness
• orphan drugs
• reimbursement

Historically, high costs associated with bringing a drug to market and limited potential for revenue discouraged sponsors from developing products for diseases impacting small numbers of patients. Rare disease populations were therefore ‘orphaned’ by pharmaceutical companies and given relatively few approved treatment options. In order to address this public health need, in 1983 the US federal government passed the Orphan Drug Act (ODA) [1]. With its promise of 7-year market exclusivity, development tax credits, and a shorter FDA approval period, the ODA lowers barriers to innovation and fosters development of treatments for diseases affecting fewer than 200,000 individuals. As such, the law has been an unequivocal success. To illustrate, in the decade prior to 1983 only 34 orphan products were launched, whereas between 1983 and 2009 FDA approved a rather astounding 275 orphan drugs for 337 orphan indications [2]. In fact, during the 2000s, orphan products comprised 22% of all new molecular entities (NMEs) and 26% of all biologics receiving FDA approval [2,3]. In 2000, the European Medicines Agency enacted similar orphan drug regulations, with a 10-year period of marketing exclusivity, which also led to a significant proliferation of orphan product approvals [4]. Global orphan drug sales have increased at about 10% per year between 2005 and 2011, and are now approaching $100 billion annually [5].

Extended market exclusivity for orphan products is a particularly powerful feature of the ODA because it creates an effective monopoly over a 7-year period against a potential competitor with the same drug for the same use, unless the competitor can prove it as clinically superior, or the exclusivity holder cannot meet demand, that is, a drug shortage exists. This enables companies to establish and maintain relatively high prices, subject to little if any market competition from competitor products. In turn, this facilitates generation of sufficient revenue in a small market to recoup the costs of research and development and earn a profit [6].

Market availability does not, however, guarantee that patients will have access. The drugs have to be prescribed and paid for. Generally, patients cannot afford the full cost of most orphan drugs. Therefore, access to orphan drugs depends on payer reimbursement policies. With few if any alternative therapies available, payers have restricted negotiating power in terms of pricing and formulary inclusion. In conjunction with relatively limited cost exposure in orphan disease markets (reflecting the small number of patients with orphan diseases covered by any given payer), this means that patient access is rarely denied [7,8]. However, orphan drugs are not immune to payer utilization management. For example, in recent years, with respect to patient cost-sharing, for almost all orphan drugs US payers have shifted from co-payments to ‘co-insurance.’ That is, the patient's out-of-pocket expenses are calculated as a percentage of the drug's cost. This shift was designed to control prescription utilization and spending [9]. Co-insurance percentages have risen, on average, from about 15 to 28% in the past 10 years [10,11]. Given the level of prices of many orphan drugs, this represents a significant shift of the cost burden onto the patient.

The economics of orphan disease treatment presents a paradox. On one hand, without the ODA and the ability to sell a drug at a price corresponding to what the market will bear there would be little incentive to develop new orphan drugs. On the other hand, in the absence of a competitive market there is effectively no price ceiling.

Worldwide payers are taking a close look at high-priced orphan drugs. Table 1 shows a select group of high-priced orphan drugs. Above we mentioned that US payers are responding with higher patient cost-sharing. Also, in therapeutic classes with multiple options, such as colorectal cancer and chronic myeloid leukemia, US payers are granting preferred formulary status to certain drugs. In other cases, payers are adding prior authorization as a condition prior to reimbursement, or requesting clinical diagnostic tests prior to prescribing [11]. In Europe, orphan drug prices are under substantial pressure from health authorities. Reimbursement agencies are asking drug manufacturers to voluntarily reduce prices to ‘acceptable’ price levels [12]. In the UK, in particular, the National Institute for Health and Clinical Excellence is reviewing the ‘very high price of drugs for people who suffer from rare conditions’ in an apparent attempt to force manufacturers to agree to price reductions in case drugs do not perform as predicted [12]. In Europe, under pressure from patient advocacy groups, a number of health authorities have allocated earmarked resources to the pharmaceutical treatment of certain rare diseases to ensure patient access. Other health authorities have set the maximum cost per unit of health outcome that they are willing to pay for a drug higher for certain orphan drugs [13].

Table 1. Nine orphan drugs with annual costs of > $200,000 per patient.

Orphan drug (trade name)	Indication	Annual cost per patient, US$
Agalsidase beta (Fabrazyme)	Fabry disease	239,000
Lomitapide (Juxtapid)	Homozygous familial hypercholesterolemia	250,000
Teduglutide (Gattex)	Short bowel syndrome	295,000
Idursulfase (Elaprase)	Mucopolysaccharidosis I and II	300,000
Alglucosidase alfa (Myozyme)	Pompe disease	300,000
Galsulfase (Naglazyme)	Mucopolysaccharidosis VI	441,000
Imiglucerase (Cerezyme)	Type 1 Gaucher disease	442,000
Eculizumab (Soliris)	Paroxysmal nocturnal hemoglobinuria	486,000
C1 esterase inhibitor (Cinryze)	Hereditary angioedema prophylaxis	487,000

Annual costs per patient are high, but because disease prevalence for all eight diseases is low the budget impact for an individual payer is correspondingly low.

Compiled from Herper [14], Hyde and Dobrovolny [17], and Tilles et al. [18].

However, fears that growth in orphan drug expenditures will be unsustainable do not appear to be justified, in large part due to limited budget impact from an individual payer's perspective [14,15]. The orphan drugs in Table 1 are very expensive in terms of per-unit price. Nevertheless, the total number of patients prescribed these drugs is quite low. In some cases only a few hundred people in the US and Europe are affected by the disease in question; for example, mucopolysaccharidosis I, III, and VI. In others, such as Fabry disease, homozygous familial hypercholesterolemia, and type 1 Gaucher's disease only a few thousand individuals in the US and Europe are impacted. Annual costs per patient vary considerably depending on prevalence, according to several European analyses, from over €200,000 when the number of patients in a given country approached zero, to < €50,000 when prevalence rose above 0.5/10,000 [16]. Costs also vary significantly based on the availability of therapeutic options, as demonstrated in a US study, in which the annual cost per patient for nine orphan drugs ranged from $12,000 to $600,000, but on average was 2.6 times higher when the orphan drug in question was the only therapeutic option available [17].

In conclusion, in our view it does not make economic sense to single out orphan drugs based on their per-unit price. Surely, orphan drugs should be subjected to the same types of clinical-, cost-effectiveness, and budget impact analyses as non-orphan drugs. In other words, the fact that a drug is an orphan product or has a high per-unit price per se should not imply a special kind of evaluation by payers. At the same time, disease severity and availability of treatment alternatives or the level of unmet medical need are criteria that justifiably may be taken into account in prescribing and reimbursement decisions for orphan drugs [12].

Declaration of interest

The authors state no conflict of interest and have received no payment in preparation of this manuscript.