Although approvals for orphan drugs have increased at a blistering pace in the U.S. and Europe, the cost of those drugs represents a growing challenge for patients and payers, according to a study conducted by the Center for the Study of Drug Development (CSDD) at Tufts University. Patient cost-sharing is higher in the U.S. – where many rare disease firms initially set their sights – compared to Europe, raising the prospect of noncompliance even as more effective drugs usher in a new standard of care.
During the 14-year period from 2000 to 2013, 86 orphan drugs were approved in the U.S., up from 65 during the previous 18-year period, according to the Tufts CSDD data. Nine orphan drugs were approved in the U.S. in 2013, although the record was 11 new approvals in 2011, according to Joshua Cohen, assistant professor at Tufts CSDD, who conducted the analysis.
In Europe, 96 orphan drugs were approved between 2000 and 2013, more than double the 44 approved in the earlier period, according to Tufts CSDD.
In its study, the CSDD defined orphan drugs as those developed for rare diseases affecting fewer than 200,000 people in the U.S. or five per 10,000 or fewer people in the European Union (EU).
"The encouraging news is that more orphan drugs are in development today than ever before, with more getting marketing approval," Cohen said. "But the high cost of these medicines is leading insurers to reassess their reimbursement policies, which likely will mean more out-of-pocket costs for patients."
The pace of orphan drug approval has been quicker in the U.S. than in Europe, with more drugs coming to market sooner, Cohen said. Since 1983, 7 percent more orphan drugs have been approved in the U.S. compared to Europe. (See Figure 1.)
Though the EU and individual European countries often have higher barriers to approval and more restricted coverage than in the U.S., drugs approved for reimbursement have little or no copay, compared with the U.S. In part, those differences have led to staggering prices in the U.S. for the 11 most expensive orphan drugs. (See Figure 2.)
And changes have come quickly. Ten years ago, the cost of orphan drugs was not a major issue for payers because the few approved drugs targeted very small populations.
"Payers didn't care that much if they had, say, 10 or 15 patients who had a very expensive disease to treat," Cohen explained, noting that the cost of orphan drugs was considered "manageable." Today, however, the growth of orphan drugs is ballooning, with approximately 10 therapies approved each year. Those drugs now are priced at $40,000 to more than $500,000 per patient per year, and the indications are expanding. For example, Cohen cited Gleevec (imatinib, Novartis AG), which initially was approved to treat patients with chronic myeloid leukemia in the accelerated phase of blast crisis or in chronic phase after failure of interferon-alpha treatment. More than a decade later, the drug is approved to treat so many cancers that it no longer qualifies as an orphan drug, and its price tag has risen from $35,000 to $90,000 per patient per year, Cohen said.
MOST COST-EFFECTIVE NOT NECESSARILY THE CHEAPEST
But cost alone tells only part of the story, and Cohen acknowledged that payers often fail to examine the full bandwidth of health care expenses when singling out the cost of orphan drugs.
"Sometimes [payers] use what I would call a 'silo mentality,'" he told BioWorld Today. "They're looking at a pharmacy budget without looking at the fact that there are other silos, such as inpatient and physician costs, which have risen dramatically, as well."
Effective orphan drugs offset or even replace other costs in the health care system, Cohen said. He cited Kalydeco (ivacaftor, Vertex Pharmaceuticals Inc.) as a drug that helps to manage the care of cystic fibrosis patients with the G551D mutation, offsetting inpatient, emergency department and physician costs.
The key in examining orphan drug costs is value, Cohen added.
"Ultimately, one wants to have the most cost-effective medications, and that does not necessarily mean the cheapest," he said. "It means those that produce the most value for the money that's spent. That value should be measured across health care sectors."
In the meantime, the out-of-pocket costs of orphan drugs deserve attention and debate in the U.S., where health care costs represent the number one reason for personal bankruptcy, according to Cohen. That point was made poignantly Tuesday in a Senate Finance Committee meeting addressing the unmet needs of patients with chronic illnesses, where two witnesses – a patient with multiple chronic illnesses and the caregiver of a spouse with Alzheimer's disease – testified they had lost their homes.
Although drug developers promote the availability of patient access programs, those programs have little transparency and are rarely available to individuals with public or private insurance coverage, Cohen said.
Long term, the cost of orphan drugs is not likely to drop in the U.S. until small-molecule therapies lose patent protection and are replaced by generics – a trend just beginning to affect some early therapies – or biosimilars begin to appear in the U.S. as an alternative to novel biologics. The health care culture in U.S. emphasizes access, Cohen said, while the culture in Europe emphasizes affordability. Despite pushback from payers, there's been little support in the U.S. to reduce drug prices by restricting access.
"Some countries, like France, impose price ceilings," he explained. "We don't do that in the U.S., nor do I expect we will. We have a relatively free market, and that means that whatever price is out there is subject to market forces. If some payer, somewhere in the system, is willing to pay that huge amount of money, others are likely to follow suit."
That's not to say drugmakers deserve a blank check, Cohen added, noting that negotiation with payers is standard operating procedure during commercialization. But for orphan drugs targeting rare conditions – especially therapies that represent entirely new drug classes – the concept of "inelastic demand" results in customers who are not as sensitive to price "because they don't have any other choice," he said.