Orphan Drug Reimbursements Create Tough Situation for South Korean Public Budget

June 12, 2020

A data analysis of real-world data found that the rise of orphan drugs (ODs) in the Republic of Korea has not solved all patient accessibility issues as budget concerns can make it difficult to justify reimbursements.

Although orphan drug (ODs) use in the Republic of Korea has risen, high drug prices and a low number of treated patients present challenges as the government looks to allocate the portion of its budget for reimbursement of such drugs, said investigators of a long-term real-world data analysis on the subject.

The Republic of Korea, which has a system of national health coverage, implemented a health technology assessment (HTA) system in 2007.

Investigators found that OD designations, approvals and reimbursements have increased from 2007 to 2019. During this period, there were 165 OD designations and 156 approvals, but the rate of reimbursement dropped to 45% during 2015-2019, as it can take 1-3 years to obtain reimbursement. By 2019, only 54.4% of ODs were reimbursed (88 out of 156).

Lack of reimbursement can be a barrier to OD accessibility and “even if marketing approval is successful by making a lot of effort, failure of reimbursement can result in social losses, as patients lose treatment opportunities and pharmaceutical companies fail to retrieve [research and development] costs,” said investigators.

In 2016, the government tried to improve patient accessibility of ODs by enacting the Rare Disease Management Act, which managed the tasks and treatments of patients with rare diseases. Other measures included tax incentives for research and developments, accelerated approval, data submission exemptions, and extensions for market exclusivity periods.

The government also attempted to expedite the route for ODs to obtain reimbursements, which has helped accessibility but made the budget impact more substantial.

Payers may have unfavorable views on spending large amounts of money on a small number of patients. “Stakeholders related to reimbursement are struggling to adequately accept the conflict issues on efficient allocation of limited resources along with social obligations and ethical issues on patients in need of proper treatment,” investigators noted.

When prices are high and the number of patients is low, payers may face high pharmaceutical expenditures per patient, but a low budget impact based on individual ODs. However, as the number of OD products and their impact begin to increase, policy makers are forced to make difficult decisions concerning reimbursement and pricing.

“If only very few patients are treated with high-priced OD, this has a significant financial impact; if the number of patients increases for any reason, budget risk is inevitable, therefore the impact of ODs must be monitored continuously,” said investigators.

The study found that the average annual treatment costs of the 88 reimbursed OD products was $27,000-$47,000, with a maximum value of $260,000-$560,000, suggesting that some products have high annual costs and that a large amount of the drug budgets are spent on patients treated with those ODs.

The number of patients with rare diseases in the Republic of Korea has gone up annually, increasing from 2589 patients to 520,970 by 2016. The number of patients taking ODs has increased by 36% annually from 2010 to 2019.

As a result, total expenditure on ODs also increased annually to account for 1.44% of the total pharmaceutical spending for the country ($213.5 million out of $14.8 billion). The average annual OD expenditure per patient increased by 8.7% per year.

Although the growth of patients treated with ODs was expected, the growth in OD expenditure was 11 times higher than total pharmaceutical spending. However, the total amount in OD expenditure is rather small, which could be why the growth rate is so high, noted investigators.

“As the rapid increase in OD expenditure can be a potential threat to the national insurance budget, budget management such as post-reimbursement monitoring of OD expenditure should be included,” said investigators.

Most rare diseases are characterized by high severity, low prevalence, and no alternative treatments, which can make it difficult to prove the safety and efficacy of ODs as it requires a longer time and higher research and development cost for clinical trials.

Reference

Lee SH, Yoo SL, Bang JS, Lee JH. Patient accessibility and budget impact of orphan drugs in South Korea: Long-term and real-world data analysis (2007—2019). Int. J. Environ. Res. Public Health. 2020.17(9);2991; doi: 10.3390/ijerph17092991