Although the priority should be to clarify society’s preferences regarding the treatment of rare diseases, attention also needs to be given to current pricing and reimbursement procedures. One of the strands in the current literature about the funding of orphan drugs is the suggestion that current prices may be ‘excessive’. Côté and Keating [5] point to the fact that the companies developing orphan drugs are often very profitable and that orphan drugs are viewed as a good business opportunity. Whilst it is important that orphan drugs are as profitable as non-orphans if society wants them, they should not be disproportionately more profitable. It has been estimated that the average cost of bringing a pharmaceutical product to market is approximately $1.3 billion USD, mostly distributed between different stages of clinical development [13]. It is possible that the cost of bringing an orphan drug to market is somewhat less, mainly because the expensive phase III clinical programme, where data on efficacy and safety are provided to the regulator, is more limited [14]. In 2007 Genzyme estimated the cost of developing their Pompe disease drug Myozyme to be around $500 million USD [15]. On the other hand some of the drugs with orphan designation, such as those for rare cancers, do have extensive phase III clinical studies [12].
The growing trend among payers towards paying for the value added by a drug, for example through ‘value-based pricing’ [16], as opposed to the cost of bringing the drug to market, circumvents the need to know the costs of clinical development. However, to the extent that orphan drugs are regarded as being ‘special’, it may not make sense to use cost-effectiveness alone as a basis for pricing. Other approaches such as multi-criteria decision-making (MCDA) have been proposed [17]. MCDA enables decision-makers to explicitly trade off various factors against each other, such as the seriousness of the condition and the lack of suitable treatment alternatives, alongside cost-effectiveness. It is particularly useful when conflicting priorities do not share a common unit of valuation and the EMAs have explored its use for regulatory decision-making [18] when different features of benefit and risk have to be prioritised. However, use of MCDA or other approaches to consider these additional factors may still not justify the high prices of most orphan drugs.
Therefore, it might be necessary to revert to one of the approaches that has fallen out of favour for conventional pharmaceuticals, such as ‘cost plus’ or ‘rate of return’ [19]. Although more research and discussion are required, a reasonable starting position would be that, with equivalent investment risks, society would not sanction higher rates of return from the development and production of orphan drugs than those from conventional medicines. Thus, if the prices for the majority of pharmaceutical products were being determined by value for money criteria, equivalent rates of return on orphan drugs might be a reasonable basis for establishing prices. Given what we currently know about the relative costs of research and the much smaller market for orphan drugs, this could provide some justification for higher prices. However, some of the problems with a rate-of-return approach to price regulation would need to be tackled, such as the difficulties in allocating shares of global R&D joint costs to particular products including accounting for the costs of those drugs that ‘fail’ during the clinical development process. The inability to solve these problems was one reason for this approach to fall out of favour in the past.
Another issue is that drugs with an orphan designation in one indication are often licensed for one or more other indications. If the justification for a higher price is dependent to a large extent on the notion that there are fewer patients available in order to recoup the investment in research, this is clearly undermined if some drugs with orphan designation have substantial sales in total. Additional indications do, of course, require additional clinical studies; however, in some cases the additional indications are not for small (orphan) populations. Côté and Keating [5] argue that companies may exploit payer willingness to accept higher prices for orphan drugs by launching first in an orphan indication in order to obtain a high price and hoping that this price will be maintained as another, larger, indication is added.
Whether this strategy is consciously employed by companies or not, it is clear that the view taken on the price of a given drug should reflect all its licensed indications. Nevertheless, how one would tackle this issue is unclear. In some of the value-based pricing schemes under discussion, prices would be determined by the value added by the drug in each of its indications [16]. Then, if a single overall price is required, this could be a weighted average of the sales in each indication. Orphan designation, and any consequent price premium, should be used to incentivise the development of drugs for patients with rare conditions. It should not be the prime basis for establishing the price for drugs that are widely used when all their licensed indications are considered.
Kanavos and Nicod [20] suggest that the legislative framework could be refined to define when an orphan treatment is ‘sufficiently profitable’. Thus, consideration could be given to developing rules for revoking orphan status in situations where the total patient population becomes substantial, although it would be important to retain incentives for companies to develop additional orphan indications, including for drugs that are already marketed or are expected to be marketed for a more common (non-orphan) condition. Marketing drugs for an additional orphan condition should not necessarily affect the drug’s orphan status. Revocation of orphan status would not take away any other forms of exclusivity or intellectual property (IP) protection, but would make competitive entry easier. It could also result in payers revising prices where these were linked to orphan status per se rather than to the characteristics of the disease, or the health gain achieved by use of the treatment.
It is likely that the current trend towards the use of technology assessment and economic evaluation will continue, whereby the reimbursement of any medical technology will depend on an evidence-based assessment of its clinical and cost-effectiveness. Setting aside the potential caveats on price, and the impact this will have on cost-effectiveness, there is no reason to suppose that orphan drugs should escape scrutiny by payers of evidence on effectiveness.
In this context the approach to assessment suggested the Province of Ontario is helpful [21]. Based on the principles of accountability for reasonableness [22], they propose a seven-step approach based on the notion that the level of evidence we could reasonably expect from a new drug depends partly on the potential size of the patient population, which has a major influence on the ability to conduct randomised controlled trials. This does not mean that we should definitely accept lower levels of evidence for orphan drugs. For example, the question of whether clinical trials should be of sufficient duration to measure final, as opposed to intermediate, endpoints is an issue that needs to be considered in relation to the epidemiology of the disease and the likely reliability of intermediate, or surrogate, outcomes, irrespective of whether the disease is rare or not. Therefore, in situations where the phase III clinical programme is limited, it will usually be important to consider post-launch data collection, for example by insisting that all patients receiving the therapy are entered into a registry. If there is uncertainty about longer term benefits, then consideration should be given to coverage with evidence development or pay-for-performance schemes—as in the case of non-orphan drugs.
Another current debate concerns whether there should be a separate process for orphan drug reimbursement, with a ring-fenced budget [23]. Various reviews of mechanisms for the pricing and reimbursement of orphan drugs demonstrate that a variety of approaches exist in different jurisdictions [24]. In the UK, orphan drugs that qualify as highly specialised treatments (HSTs), having previously been considered in a separate process, are now to be assessed by the NICE. To quality for HST status the prevalence has usually to be <500 patients in England [25]. These treatments were previously assessed by the Advisory Group for National Specialist Services (AGNSS). NICE is to modify the approach it applies to conventional therapies to cover these products recognising that “Given the very small numbers of patients living with these very rare conditions a simple utilitarian approach, in which the greatest gain for the greatest number is valued highly, is unlikely to produce guidance which would recognise the particular circumstances of these very rare conditions” (NICE, paragraph 36) [26].
It is clear therefore that the establishment of special arrangements only makes sense if, based on our understanding of societal preferences, orphan drugs (or a subcategory of “ultra orphans” or “highly specialised treatments”) are considered to be ‘special’. Whilst assessing all medicines within the same process would facilitate consistency in decision-making and minimise the potential for special pleading, evidence suggests that attempts to subject orphan drugs to the standard processes of HTA and value-for-money assessment are politically sensitive [27]. If it is known in advance that most of these drugs will not be cost-effective based on standard criteria, why undertake the assessments in the first place, unless there is the possibility that better value for money could be obtained if the drugs were better targeted? It might be better to acknowledge at the outset that high-priced orphan drugs will not be reimbursed, thereby avoiding wasting resources on their assessment.