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Orphan Drugs Are Driving Skyrocketing Drug Costs, AHIP Finds

Laura Joszt
As orphan drugs account for an increasing share of drugs approved, they are driving up the cost of drug launches and drug prices. In a new paper, America's Health Insurance Plans analyzes these rising costs and the use of orphan drugs and asserts that policy makers need to revisit the Orphan Drug Act.
The price of orphan drug medications is increasing at a far more rapid pace than that of other specialty and traditional drugs, according to a new report from America’s Health Insurance Plans (AHIP).

The new study has shown that the average annual cost for orphan drugs is 25 times more expensive than traditional drugs. Orphan drugs have also been a key driver behind the sharp increase in annual drug costs at launch, which have grown from $9781 in 1998 to $106,149 in 2017.

“Most efforts to contain skyrocketing drug costs focus on price increases for drugs already on the market,” according to the paper. “The laws are triggered only when a price significantly increases beyond the current price. What has received less attention is the fact that drugs are increasingly launched at higher prices.”

In addition, orphan drugs are making up more of the drug approvals each year. In 1998, orphan drugs were only 10% of new approvals, but that increased 4-fold to 44% in 2017. While the share of specialty drug approvals has stayed mostly steady over the last 20 years, the share of traditional drug approvals has declined from 65% in 1998 to 20% in 2017.

The fact that orphan drugs are accounting for a larger portion of drug approvals, while traditional drugs account for a smaller portion, accounts for some of the increase in the average annual drug costs, AHIP noted in the paper.

Further exacerbating the cost issue is the fact that orphan drugs, which are supposed to target rare diseases, are sometimes used to treat more common diseases. AHIP pointed to the examples of Remicade, which was approved as an orphan drug to treat Crohn disease but has since been approved to treat common diseases like rheumatoid arthritis, psoriatic arthritis, and ulcerative colitis. There are also instances of drugs approved to treat common diseases and later approved for an orphan indication, such as Enbrel and Humira.

While the pharmaceutical industry points to small patient populations with rare conditions to justify high prices on orphan drugs, AHIP has previously found that revenues generated by orphan drugs “primarily come from their non-orphan and off-label use.”

AHIP concluded the paper noting that since the target patient population for orphan drugs may not be as small as portrayed, these drugs do not have as limited of an impact on overall healthcare costs as some might think.

“Every patient deserves to get the medications they need at a cost they can afford, but drug makers are gaming well-intentioned legislation to generate outsized profits from drugs intended to treat a small population of patients with rare diseases,” Matt Eyles, president and chief executive officer of AHIP, said in a statement. “Now more than ever we need lawmakers to revisit the Orphan Drug Act. We must balance the incentives to develop new treatments for rare diseases while preventing drug makers from exploiting the system with launch prices that defy gravity, blocking competition, and increasing their prices on the same products year after year.”

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