Abstract
Pricing and reimbursement of orphan drugs are an issue of high priority for policy makers, legislators, health care professionals, industry leaders, academics and patients. This study aims to conduct a literature review to provide insight into the drivers of orphan drug pricing and reimbursement.Although orphan drug pricing follows the same economic logic as drug pricing in general, the monopolistic power of orphan drugs results in high prices: a) orphan drugs benefit from a period of marketing exclusivity; b) few alternative health technologies are available; c) third-party payers and patients have limited negotiating power; d) manufacturers attempt to maximise orphan drug prices within the constraints of domestic pricing and reimbursement policies; and e) substantial R&D costs need to be recouped from a small number of patients.Although these conditions apply to some orphan drugs, they do not apply to all orphan drugs. Indeed, the small number of patients treated with an orphan drug and the limited economic viability of orphan drugs can be questioned in a number of cases. Additionally, manufacturers have an incentive to game the system by artificially creating monopolistic market conditions.Given their high price for an often modest effectiveness, orphan drugs are unlikely to provide value for money. However, additional criteria are used to inform reimbursement decisions in some countries. These criteria may include: the seriousness of the disease; the availability of other therapies to treat the disease; and the cost to the patient if the medicine is not reimbursed. Therefore, the maximum cost per unit of outcome that a health care payer is willing to pay for a drug could be set higher for orphan drugs to which society attaches a high social value.There is a need for a transparent and evidence-based approach towards orphan drug pricing and reimbursement. Such an approach should be targeted at demonstrating the relative effectiveness, cost-effectiveness and economic viability of orphan drugs with a view to informing pricing and reimbursement decisions.
Highlights
A rare disease is a disease with a very low prevalence
The European Union (EU) defines an orphan drug as either a medicinal product intended for a life-threatening or chronically debilitating rare disease or a medicinal product that would not be developed without incentives because its sales are unlikely to generate sufficient return on investment
Manufacturers that have an orphan designation for a medicinal product benefit from: a) protocol assistance; b) direct access to the European Drugs Agency (EMA) Centralised Procedure with respect to registration; c) ten-year marketing exclusivity starting from the date of marketing authorization; and d) financial incentives
Summary
The EU implemented specific policies in 2000 to stimulate innovation in the field of orphan drugs [1]. The authors argued that biopharmaceutical prices may be less regulated and higher than those of chemicallyderived drugs given that: a) some countries exclude biopharmaceuticals used in hospital from price regulation; b) price comparisons with other products in a therapeutic class are less likely to occur for biopharmaceuticals with a novel mechanism of action or indication; c) informal cost-effectiveness thresholds may be higher for biopharmaceuticals that address unmet clinical needs or that treat rare diseases; and d) some countries have in place industrial policies to support the development of biopharmaceuticals. Some concerns with this scheme have recently been identified [37] and some have argued that the money should be better allocated to funding a randomized controlled trial of interferon beta [27]
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