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In pricing debate, rare disease drugs pose unique challenge

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In pricing debate, rare disease drugs pose unique challenge

The number of rare disease drugs on the market has ballooned in recent years, bringing a bevy of often high-priced drugs to the U.S. at a time when healthcare costs are increasingly a top concern.

In its first quarter on the market, Biogen Inc.'s Spinraza, used to treat spinal muscular atrophy, reaped $47 million, beating analyst sales expectations out of the gate and promising strong future demand.

The drug, priced at $750,000 in its first year and $375,000 in subsequent years, had initially drawn criticism for its hefty price tag. However, with precious little on the market to treat SMA, a rare degenerative disease that affects about 9,000 infants and children in the U.S., payers do not have the leverage to turn away coverage.

The predicament is becoming familiar as more orphan drugs, or those designated for use against rare diseases, are coming to market than ever before, according to speakers at the Orphan Drug Assessment and Pricing Summit organized by price watch group Institute for Clinical and Economic Review.

In a presentation at the summit, authors of the institute's recent briefing report said that over 600 drugs have now been approved with an orphan designation.

The U.S. Food and Drug Administration gave orphan designations to 350 drugs in 2015, and 41% of the drugs the agency approved in 2016 had an orphan designation.

Products that the FDA deems orphan drugs — defined as those treating conditions present in less than 200,000 of the population — are afforded seven years of market exclusivity, 50% tax credit on research and development and access to research grants for early trials. They are also often are fast-tracked to approval.

Worldwide sales of orphan drugs first reached $100 billion in 2015, but are expected to more than double by 2022 and will represent more than one-fifth of all prescription drug sales by that time, according to ICER figures. The institute estimates that orphan drug list prices, or those before rebates and discounts, are 5x higher than non-orphan medications.

Though rare diseases treatments are typically covered by insurance companies, ICER's briefing paper suggested that the influx of orphan drug approvals in recent year has put pressure on the system.

Patrick Gleason, director of health outcomes for privately held pharmacy benefit manager Prime Therapeutics, argued that prices had gone well and beyond incentive levels, adding that a string of recent orphan drugs have had Spinraza-level prices.

This is the standard now, regardless of the cost to actually bring drugs to market, Gleason said. "That is the real number. There are no rebates, and the wholesale acquisition cost discount is minimal" he added, referring to negotiations commonly used between biopharma companies and pharmacy-benefit managers to bring costs down. To continue paying these prices is not scalable, he said, noting that potential reforms to Medicaid could further pressure the system.

Diane Berry, vice president for global health policy and government affairs at biotech company Sarepta Therapeutics Inc., cautioned against putting firm pricing restrictions in place, saying that many drugs in the orphan space come out of "decades of research and billions of dollars" meaning companies are not turning a profit for years.

"We need to be careful that we are not curbing innovation," she said.

Yet the briefing paper noted that some of these orphan drugs move on to much broader indications outside of rare diseases, and reap blockbuster revenue, or more than $1 billion annually. The potential paradox of orphan drug designations has led the Government Accountability Office to announce it would investigate uses of the designation.

Conversations around cost-effectiveness should start earlier in the drug development process, but rare disease pricing discussions can sometimes be held back by limited claims, insurance and health system data, said Matt Rousculp, GlaxoSmithKline PLC's director of comparative effectiveness research & health policy research.

For pharma companies themselves, pricing is about the burden of the disease and the benefit of the therapy, Rousculp added. "Should reimbursement cost be part of that discussion? No, but it is."

Kenneth Hobby, president of patient advocacy and support group Cure SMA, supported pricing as an incentive to bring more therapies to market, pointing out that a rare disease monopoly from one drug in the space would only further limit price controls.

"We want the second, third and fourth treatments [for SMA, following Spinraza] to come through. Our whole goal now is to have other therapies that come through other companies' investment, and frankly price is the incentive there too," he said. "Price has a role early in the process to bring those players in."