Managing Rare Disease and Orphan Drug Costs

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The cost to treat rare disease can be extraordinary.

The cost to treat rare disease can be extraordinary. Several orphan drugs which were just approved this year, ranged from $150,000 at the low-end, to as much as $300,000 or more annually. The high costs of these drugs raise questions as to the sustainability of such treatments, and whether or not the healthcare system might absorb these costs, or how payers will make coverage decisions.

Although orphan drugs account for a small percentage of prescription drug costs, a recent survey finds that three quarters of all pharmacy directors are moderately to extremely concerned about the impact these drugs have on overall spending, and most of those same directors are seeking a way to mitigate projected costs. The survey, which was conducted by the healthcare-focused investment bank Leerink Swann, analyzed 34 pharmacy directors who work at insurers or pharmacy benefit managers responsible for $46 billion in medical spending and who cover 123 million consumers.

Additional survey findings showed that directors could not accurately determine the number of patients using orphan drugs, that 40% did not use metrics to measure impact usage has on spending, and only 30% anticipated policy changes by 2015 towards these medications. Joseph Schwartz, an analyst at Leerink Swann, also said that the pharmacy directors estimated 6.4% of pharmacy-benefit spending and 4.1% of medical benefit spending was on orphan drugs. Conversely, the Centers for Medicaid & Medicare Services reports that orphan drugs account for less than half a percent of US healthcare spending.

“We continue to believe that a distinction between sticker shock and budget impact deserves to be drawn,” Mr Schwartz stated.


The survey suggests that by 2015, almost all of the polled directors expect orphan drugs to be considered a medical benefit, to make greater use of prior authorization, and to make better use of formularies and preferred drug lists. By 2019, the pharmacy directors predict even larger changes in pricing and access of orphan drugs.

Mr Schwartz says that patient advocacy groups remain vigilant in lobbying for continued research and coverage of orphan drugs. “Their influence should not be underestimated,” he wrote. “We believe payers realize how carefully they must tread in this area, so most changes to orphan drug coverage (and) access are likely to be evolutionary, rather than revolutionary, in our view.”

As the future of medical care calls for more personalized medicine delivery, the treatment of rare disease remains of special interest. However, the surveyed directors felt that managing costs for drugs used to treat cancer, chronic disease, or other conditions like diabetes and multiple sclerosis were more important than orphan drugs.

“It is estimated that over 7000 rare diseases have been identified today, affecting over 25 million Americans. Unfortunately, while rare diseases are often chronically debilitating, life limiting—and in some cases life threatening—they’re still frequently undermanaged and underdiagnosed,” Peter Saldo, MD, professor of medicine and anesthesiology at Columbia University said in a recent AJMCtv Peer Exchange. “Policy and regulatory changes have helped to pave a thriving foundation for further clinical research and development leading to the development of novel drug agents that utilize genetic and cellular components.”

Continued policy and regulatory changes may be necessary in order to maintain the sustainability of producing orphan drugs for those with rare disease.

Around the Web

Sticker Shock: Will Orphan Drug Reimbursement Remain Stable? [Forbes]

Recognizing Rare Diseases in the United States [AJMC]

Recognizing Rare Diseases in the United States