Is orphan drug pricing blowing a bubble? The unique situation of orphan drugs and why high prices will likely persist

Abstract

The Food and Drug Administration (FDA) data show that there are a growing number of applications and approvals for orphan drugs every year. Newer orphan drugs are generally sold at high prices, which has raised the question about the sustainability of the orphan drug market and the possibility of a bubble. As more orphan drugs enter the market, reimbursement policies from payers could shift away from full reimbursement. But the orphan drug market is not a free market. It is open only to specifically indicated drugs for few numbers of patients. The orphan drug market is unique with its value to patients, comparative costs to hospital stays, time of development, high monetary risk, high entry standards (the FDA marketing approval for orphan drugs), small markets, willing payers and strong patient advocates. Here, we examine classical definitions of bubble assets, and look at specific examples of orphan drugs that seem to be overpriced compared to cost estimates. Currently, there is no evidence for bubble formation in orphan drug pricing.