Rare disease pricing – is it sustainable?

Doug Paul

Medical Marketing Economics (MME), LLC

Doug Paul was asked by Siren Interactive to write the fourth of five articles discussing rare disease and orphan drug issues. Pricing is one of the biggest challenges for any pharma company at the moment. Here, Doug takes a look at the history of the Orphan Drug Act and the reimbursement of orphan drug development.

(Continued from “Patient registries and why they are essential for rare diseases”)

Before assessing the future, let us first make sure we understand an important element of the past. In the United States, in the late 1970s and early 1980s, advocates were motivated by the belief (referred to as “the belief” in this article) that patients suffering from a rare disease deserve the same access to therapies as those with more common diseases. In order to make this belief a market reality, one path was to have a regulatory / patent path that encouraged orphan drug development. In 1983, the Orphan Drug Act was signed. It worked (and it also worked in other countries across the globe that adopted similar policies). Treatments for rare diseases were being researched…and then came Ceredase.

Genzyme’s Ceredase pushed the edge of the envelope with an ultra-orphan annual price greater than US $200,000 – $57,980 to $54,6000 under the Office of Technology Assessment’s (OTA) projections1. And beyond almost everyone’s imagination, were successful in maintaining this price frame across the globe. The rumor is their pricing consultants’ (not MME nor myself) final recommendation for the US price was $60,000 / year.

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“Several of the commonly asked questions in the rare disease community are centered on the sustainability of these pricing levels.”

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Ceredase and Cerezyme, changed the lives of Gaucher disease patients, but the Ceredase price has changed the lives beyond Gaucher patients. It was proof of a viable business model. That $200,000 price level has enabled therapies to exist that are mathematically impossible at $60,000.

Several of the commonly asked questions in the rare disease community are centered on the sustainability of these pricing levels. Before supporting my belief that the future is still bright (at least bright enough to continue to attack these rare diseases), let’s flip the questions as suggested by Greg Simon at a Centric Health Resources’ 2012 Ultra Orphan Conference. How can we not continue to press forward? With &lt,400 orphan drugs to treat the 7,000 rare diseases, less than 6%, are we done? “Rare and genetic diseases affect 1 in 10 Americans, 30 million people in the United States, and 350 million people globally.2 So as a society, what do we tell the other 94% rare diseases without an orphan drug?

Measuring value now and in the future

Many in the industry discuss the reimbursement hurdle as being at least as daunting as the regulatory approval hurdle. Thus, drug approval is more of a beginning or middle than an end. Health technology assessments (HTAs), which inform the payers’ reimbursement decisions, continue to grow in use and sophistication around the globe, including the US. HTAs are models that essentially calculate the economic value of a drug and compare it against a payer’s threshold for what a therapy “should” be worth. For example in the UK, NICE’s general rule for drugs is that the cost per quality adjusted life year should not normally exceed £30,000.

So should this assessment for blockbusters drugs treating millions of patients be the same for those drugs treating hundreds of patients, or even a country’s handful of individuals? In 2005, NICE wrote a white paper discussing the virtual impossibility of these ultra-orphan drugs with their higher prices ever being able to meet the threshold. In summary, they suggested no longer evaluating these ultra-orphan therapies because the ultimate decision to cover these drugs would not be an economic policy, but a health policy (recall “the belief”). In reviews of health technology assessments of ultra-orphan drugs across the globe, it is easy to find “modifiers” in their calculations for ultra-orphan therapies. These “modifiers” adjust the numbers so that is possible for a high-priced rare disease drug to meet the threshold. These “modifiers” are the mathematical manifestation of “the belief” and enable access in a system influenced by HTA. Thus, despite the objective characteristics of the HTA that looks to be built solely on economic policy, it is and can be heavily influenced by health policy. Even NICE continues to evolve on this issue at this time.

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“Given recent failures of non-orphan products or the lack of great uptake of potential blockbuster therapies, is there not room for orphan drugs that change lives?”

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Prices going down for all rare diseases?

External forces are likely to push prices down in the future, for both common and rare disease therapies. However, the magnitude of the pressure is not such that it universally eliminates any reward for developing therapies for rare diseases. One should also not assume the pressure is equal for all orphan drugs. The “bucket” of orphan drugs is just as heterogeneous as the diseases they treat. Note that ~50% of orphan drug research is driven by oncology. Will the next liposomal storage disorder therapy that virtually eliminates any morbidity and mortality induced by a disease receive the same scrutiny as an oncology therapy incrementally adding a few months of poor quality of life? Very soon, the world will be making decisions on the reimbursement of “one and done” therapies (i.e. gene therapies that are administered in a single injection that may “turn-off” the disease or may only require a booster every 5 years). Will the same evaluation occur for the following two products?

1) A “one and done” used to treat a pediatric disease with no options and nearly 100% mortality by age 5.

2) A “one and done” that essentially cures a disease that is already well controlled by therapeutic options with a defined cost.

It is difficult for many to foresee absolute pricing devastation across the board for orphan drugs. History has shown systems often morph in order to accept and reimburse valuable therapies.

Be careful of the availability bias

The availability bias occurs when our judgment of an event’s likelihood is skewed by the ease to think of an example of the event. In the last 12 months or so, there have been at least five drugs approved in the US that cost more than $150,000 per year. These products are top of mind. The term ‘orphan’ is used constantly and 50% of the time is arguably synonymous with oncology. Before one comes to the conclusion that orphan drugs are everywhere and there is no budget for them in the system, should we not actually measure the budget they will likely take and the available budget? Especially for non-oncology orphan drugs? Remember when systemic psoriasis was supposed to be a multi-billion dollar market? Given recent failures of non-orphan products or the lack of great uptake of potential blockbuster therapies, is there not room for orphan drugs that change lives? Shouldn’t we be careful about what we think and how it shapes the future? Therapies are at risk. Lives are at risk.

References

1. Ceredase low-dose regimen could reduce patient cost to $58,000 yearly. The pink sheet. Oct. 12, 1992

2. Http://globalgenes.org/who-we-are-2/ (Accessed 1/30/2013)

Read the last Siren article here

Economist-pharma-summit-2013

About the author:

Douglas Paul, PharmD, PhD – MME Vice President &amp, Partner

Doug has worked on a variety of initiatives for pharmaceutical and medical technology companies, including marketing strategy, pricing strategy, pricing research, management / analysis of forecasts, market assessments, and the identification and evaluation of potential products for acquisition, joint marketing, and licensure. His recent research and consulting work has included orphan / biologic drug pricing and perceptions of off-label prescribing. Prior to joining MME, he served as Vice President of Marketing for a medical device firm. He has been active at the national level with various pharmacy associations and played a key role in the development of the American College of Veterinary Pharmacists. He received a PharmD and an MS in pharmaceutical marketing from the University of Mississippi and a PhD in pharmaceutical marketing and management.

Contact information:

Medical Marketing Economics (MME), LLC

1200 Jefferson Ave., Suite 200

Oxford, MS 38655

Office: +1-662-281-0502 ext. 112

www.m2econ.com

How can pharma sustain rare disease pricing?