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Cost of Care: Rare diseases expose need to revamp US drug pricing policy

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Cost of Care: Rare diseases expose need to revamp US drug pricing policy

This is a recurring column about the cost of U.S. healthcare, including drug pricing policy, regulatory decisions, investment in research and development and more.

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Experts, lawmakers and industry leaders used a global summit to explore ways of reining in the untenable costs of rare disease drugs without pouring water on the biopharmaceutical industry's innovation engine.

About 15.5 million people in the U.S. with 379 rare diseases resulted in total estimated medical, nonmedical and lost productivity costs of $966 billion in 2019, according to an Oct. 20 report by the U.S. Government Accountability Office.

The issue of rare disease drug pricing made headlines in 2019 when Zolgensma, a gene therapy manufactured by Novartis AG to treat a rare pediatric disease called spinal muscular atrophy, became the world's most expensive drug with a $2.5 million price tag for the single dose required.

People with rare diseases "are more likely than any other patient to have no therapy, no preventive medicine ... and they are also likely to pay a very high price for their drugs," Kay Holcombe, board chair of patient advocacy group the National Organization for Rare Disorders, or NORD, told the organization's summit Oct. 18.

However, developing more effective treatments for patients with no other options while also keeping costs down will require a balancing act with no clear solution, experts said. Bills introduced in U.S. Congress seek to mitigate some costs to prescription drugs by, in part, giving Medicare the power to negotiate prices and capping price increases, but the legislation has been met with skepticism from industry executives and investors.

The advantage currently lies with large companies that can game the market exclusivity that comes with drugs that have been granted an orphan designation by the U.S. Food and Drug Administration, Anna Kaltenboeck, senior health adviser for the U.S. Senate Committee on Finance, said at the NORD summit. Orphan drug designation is granted to medicines that treat rare diseases affecting fewer than 200,000 people in the U.S.

"There's this relationship, this knot that's very difficult to untie," Kaltenboeck added. "The question is how to create a system of incentives where you do encourage these smaller companies and continue to protect them without also keeping monopolistic and anticompetitive behavior and protecting that — you have this tension always in that system."

Kaltenboeck said — to agreeing nods from the rest of the panel — that some components of U.S. prescription drug coverage are "fundamentally broken."

"There are things happening in that [system] that improve the bottom lines of the supply chain participants without improving the bottom line for the lives of patients," Kaltenboeck said. "And I think that needs to be stopped — at the end of the day, [Medicare] redesign is a critical part of that and we need to bring all these incentives back in line."

Some experts are worried that federal price controls could change the way biopharmaceutical companies approach decisions about which disease areas to invest time and capital in researching and developing, which would disproportionately impact patients with rare diseases, said Kirsten Axelsen, consultant for consultancy firm Charles River Associates. This could result in companies avoiding attracting attention with big swings at rare disease targets, Axelsen told S&P Global Market Intelligence.

"You're going to see the industry looking at incremental innovation in the interest of staying under the radar, as opposed to what you currently have as an incentive to develop the biggest, highest impact therapeutic with the biggest market share," Axelsen said. "You're going to see a whole lot more money and effort go into market access schemes as opposed to money and effort going into science."

In the current system for funding drug research, the best intentions to incentivize the development of drugs for rare diseases can backfire, according to Kaltenboeck. Setting certain goals for a return on investment can leave some promising treatments without the necessary funding.

"We can improve patient lives, but if we put out there these price points that create return on investment based on meeting a certain metric of how much R&D you put in for a certain type of drug a rare disease drug, for example you end up potentially disincentivizing the development of things that are actually straightforward to do," Kaltenboeck said. "We are potentially missing the mark on that ... and lowering prices does not necessarily mean less innovation."

Ryan Long, senior policy adviser of the Office of the Republican Leader, also told the summit that changing the incentives and potential returns for rare disease drug development could discourage innovation by smaller companies. "Once we go down that path, if five years down the road, or more like 10 years down the road, we realize our mistake, once you've dismantled the infrastructure, it's basically impossible to recreate that," Long said.

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Head of Sanofi U.S. and Sanofi Genzyme External Affairs Adam Gluck

Source: Sanofi

Sanofi's solution

French drugmaker Sanofi offered its own solution to this thorny issue, pointing out that its rare disease arm, Genzyme, has developed a framework for keeping prices at affordable rates, including value-based list prices, limited increases and transparency around pricing decisions.

"While this has become a very highly politicized issue over many years ... our company and our industry have an important role to play in making the system work better for patients," Adam Gluck, head of Sanofi U.S. and Sanofi Genzyme External Affairs, told the summit.

The goals for industry-driven pricing principles should be three-pronged, Gluck said: balancing policy decisions with contributions throughout the supply chain; protecting the scientific ecosystem to continue creating new treatments; and employing savings generated by policy reform to ensure patients are the ultimate beneficiaries.

"There are a lot of ideas out there on how to address policy reform and how to address the issue of drug pricing, and I hope we can stay focused on how to make the system work better for patients and keeping their experience at the center of what policymakers do," Gluck said.

A case study presented at the summit by the state of California and the Rady Children's Institute for Genomic Medicine offered another approach to reducing rare disease healthcare costs. The initiative, dubbed Project Baby Bear, provides rapid whole-genome sequencing for infants hospitalized in intensive care, resulting in earlier diagnoses, shorter hospital stays, fewer unnecessary procedures and better outcomes, the institute's senior medical director, David Dimmock, said.

The testing saved approximately $2.5 million in estimated medical costs over 18 months by avoiding a lengthy and expensive diagnosing process, Dimmock told the summit. The program was originally designed to improve outcomes and save lives, meaning the cost savings had been a pleasant surprise.

"We get to a point where there are barriers to implementing new things in medicine and everyone's worried about where the money is going to come from," Dimmock said. "And so it's nice that we have this thing that really is improving outcomes of kids, where we don't have to make such a strong argument for where the money is going to come from."