February 09, 2013 | By Márcio Barra
The final part of my article on the orphan drug market.
The price question
The answer to the question is that the patient doesn’t pay for the drug. First, it’s worth noting that these drugs have a different commercial circuit than normal drugs. They are usually only prescribed at hospitals, under the management of physicians that participated in the trials for the orphan drug.
In the case of the European Union, member states evaluate the drug to decide if their national health systems reimburse the drug. The pricing of the drug itself follows the same logic as drug pricing in general: the price of the orphan drug is set up by the manufacturer in an attempt to recoup R&D costs, while attaining some profit margin. Additionally, the price is also influenced by the drug medical value, market conditions, and the reimbursement conditions established by each country.
Countries that adhere to free market pharmaceutical pricing, like Germany, usually have higher prices for regular and orphan drugs, compared to countries like Portugal and Spain, which regulate their prices.
In the United Kingdom manufacturers are also free to price a drug as they see fit, but the guidelines of NICE exert downward pressure on the price of the drugs.
In some cases, the price of the orphan drug is agreed between the manufacturer and a hospital pharmacy(13).
This whole different pricing schemes and prices between EU countries can lead to some confusion. Europe has many procedures that are centralized, like the orphan drug designation and the marketing authorization through the centralized procedure, but the assessment of the clinical added value, health economics assessment and pricing and reimbursement is different for each country (14).
The 2010 Eurordis Survey concluded that the official price of an orphan drug is different in different countries, sometimes with a significant variance. These differences in prices can led to situations where the official prices is different from the real price of the drug, making difficult to draw comparisons between countries and evaluate the financial burden of the orphan drug to the social security systems. This also leds to uneven access to these drugs in some Member state, and fuels the question as whether the European Orphan Drug Regulation needs to be revised (15).
In the USA, commercial insurers pay a percentage of the cost of the drug, and ask the patient to co-pay another percentage of the drug price. This is known as a co-pay assistance program. For patients that are on Medicare, usually rare disease organizations help the patient pay the drug. To those that can’t pay the drug, as they are not insured, some companies provide the medicine for free (9).
So payers don’t really pay the price of the orphan drug. Their insurance or health system covers them. So another question arises. Will there ever be a breaking point where reimbursement and national health systems just say no more and kick the bucket? Especially when you consider that more and more orphan drugs are being developed(16).
Answers to this question are still hypothetical, and it could veer both ways. In one side, orphans will continue to be reimbursed when their high price is justified by the value that they add to the patient wellbeing, and if it replaces an existing, preferably more expensive, treatment. In the case of Gattex, priced at $295,000 per patient per year, the existing alternatives include parenteral nutrition, that on its own can reach $100,000 a year, plus additional expenses like home health aides and hospitalizations that can drive even higher the cost of caring for patients with short bowel syndrome (9).
So far, the diseases are rare enough that insurers and governments only need to pay for one or two patients, and so they are still willing to pay. As some treatments can be lifesaving, insurers are in a tough ethical position to say no.
Some doubts with ethical undertones can’t be avoided however. In a life threatening disease, how much is an additional month of life provided by an orphan drug worth. In a way, no one can really answer this question other than the patient who suffers the disease.
The sustainability issue is currently a hot topic. Many are the voices that say it’s a sustainable model, such as recent study published by the orphanet journal of rare diseases, stating that despite an increase in the number of approved orphan drugs in Europe, the overall growth in cost of these medicines as a proportion of total pharmaceutical expenditure is likely sustainable till 2020(17).
Others are not so positive, especially when Glybera, the world’s first gene therapy drug for lipoprotein lipase deficiency (LPLD), is likely to cost more than $1 million per patient when it launches in Europe this summer. It’s a onetime therapy so the high price is somewhat expected. But in the midst of an austerity-hit Europe, these prices may be a bit too much for insurers. Even more so when you consider that every year, the pharmaceutical industry shows increased profit margins, which could prompt authorities to ask the industry to cut the prices (18).
In short, the orphan drug market is here to stay, as it is currently showcasing itself as a profitable course for the industry, after the challenges of the patent cliff. Will it stay like this?