Rare Disease Report

Orphan Drugs and Drug Pricing in 2017

JUNE 15, 2017
Marlene E. Haffner, MD, MPH; Vice-Chair, BioPontis Board of Directors
The 1983 Orphan Drug Act stipulated that orphan products could not be profitable. This stipulation was changed in the 1984 amendments to the Orphan Drug Act for at least 2 reasons: 1) pharmaceutical companies and their stockholders wish for profits to follow FDA drug marketing approval; and 2) the IRS, who adjudicate the definition of "profitability" of a drug, could not agree on or define "profitability."

For example, does profitability include the cost of building a new facility in which to manufacture a new product; does profitability include raising the price of a product only by a small amount which causes an increased profit by a large amount? Profitability could not be defined, and so in the 1984 amendments to the Orphan Drug Act, the provision of lack of profitability was dropped, with Senator Orin Hatch ((R) Utah) indicating profitability was needed to encourage companies to develop orphan drug products.
However, has the need/desire for profitability gone too far?  We have recently seen prices of some new orphan drugs treating serious and life-shortening diseases reach what some would call stratospheric levels. Examples of some high priced orphan drugs are listed below:
  • $300,000 for Sarepta's Eteplirsen for Duchenne Muscular Dystrophy,
  • $375,000 – $700,000 for the BioMarin product Brineura to treat a rare subset of the rare Batten's disease.
  • $420,000 for Soliris of Alexion for hemoglobinuria
  • $750,000 for Biogen’s SMA drug Spinraza
  • $550,000 for Horizon Pharma’s urea cycle disorders drug Ravicti
Granted, these products treat very small numbers of patients. Developing drugs for small populations and getting them approved is expensive, so there is definite legitimacy to the economies of scale argument.
Since passage of the Orphan Drug Act, more than 600 new drugs have been FDA approved for marketing. In the aggregate, these 600 drugs treat not only the patient, but also the entire family who is significantly burdened by these serious diseases. While 600 new drugs is a small number in the scheme of the 7,000+ rare diseases, it is many times higher than the number of new orphan drugs in existence prior to the Orphan Drug Act.
I worry though. While there are certainly orphan drug products that are not expensive, have the prices of drugs in the US, orphan drugs in particular, become too expensive? In most Western nations, other than the US, payment for drug products is borne by the government and that government negotiates the price to be paid for a product. Such is not the case in the US. The pharmaceutical sponsor charges to some extent “what the market will bear.” Many times, I have heard pharmaceutical executives say a product could be “priced as an orphan.” Presumably what is meant, is that a product can be priced higher because it is an orphan product.
Will such pricing strategies trigger future changes to the Orphan Drug Act to protect consumers and our healthcare payment system from escalating drug prices, which could lead to diminished enthusiasm of pharmaceutical manufacturers who today are attracted to developing needed drugs for rare diseases? It could.
The current situation of escalating costs for these orphan drugs would tend to indicate that prices of some drugs may be reaching a breaking point. It is time to step back and evaluate what is a fair price for a drug for any illness, certainly for orphan/rare diseases. Let us not cause irreparable harm to a population of individuals who have been burdened with a disease which is uncommon, untreatable today, life-limiting, and mostly life-shortening. Companies have a responsibility to both their shareholders and to their customers, the patients they serve, to ensure that they can get affordable access. Pricing should meet both of these responsibilities.

Marlene E. Haffner, MD, MPH; Vice-Chair, BioPontis Board of Directors

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