Because they often are the only available option to treat a disease, some orphan drugs are considered to have high value and, as such, benefit from high prices on national markets, making them an attractive market for pharmaceutical companies.
Orphan drugs (OD) are medicines used in the treatment of life-threatening or chronic diseases affecting a threshold of five out of 10,000 people in Europe. The threshold that defines an orphan disease varies from one country to another: from 7.5 per 10,000 in the US to 4 per 10,000 in Japan. With regards to this, a small-sized target population, and therefore small market size offer little incentive for a manufacturer.(1)
Regulations and incentives to encourage pharmaceutical companies to develop ODs were implemented in 2000. The European regulation number 141/2000 came into effect to respond to the risky and costly OD related research and development (R&D). Still, when a new OD is developed, high cost remains a major concern to both payers and manufacturers. Manufacturers aim to recoup their R&D expenditures whereas payers remain bounded by scarce resources.
Incentives brought by this regulation include: provision of a 10-year market-exclusivity, tax exemptions, grants for R&D, assistance with application file, and accelerated marketing procedure.
From April 2000 until October 2010, 720 drugs received orphan drug designation from the European Medicines Agency (EMA), of which 63 had been granted marketing authorisation,(2) generating annual sales of more than $6 billion. Since then, there has been a steady increase in applications for orphan designation with the Committee for Orphan Medicinal Products (COMP), averaging ten positive recommendations per month.(3)
In the US, from the implementation of the Orphan Drugs Act in 1983 until May 2010, 2116 compounds were granted orphan designation, of which 353 were approved; this allowed 200 orphan diseases out of approximately 7000 to become treatable.(4)
In the EU, and despite the EMA centralised regulation, the OD market appears to be characterised by an unequal access to ODs. This is related to labelling and reimbursement being determined at national levels.
The most reliable indication of the accessibility of an authorised OD is its presence in the patient’s home country.(5) Drug affordability is linked to early access, national incentives and OD pricing and reimbursement policies.
Compassionate use and/or nominative base patients are modalities that some European countries carry out to offer their patients early access to ODs. These modalities are present in Austria, Belgium, Denmark, Finland, Greece, Ireland, The Netherlands, UK, Portugal and Spain. Early access is also possible via temporary use authorisation (TUA), as seen in France and Italy.(1)
Most EU countries have developed national incentives to promote access of OD to their own local market. These incentives are based on tax exemptions, assistance and scientific advice and national frameworks.
Bulgaria and the Netherlands are examples of countries where incentives are based on tax exemption. Denmark and Finland offer rather scientific advice whereas Portugal and Spain adopt national frameworks. France is an example of affording all of these incentives.(1)
Figure 1 shows the number of available orphan drugs in some European countries in 2011. In Spain, the availability of ODs is the highest in the EU because 62 ODs approved by the EMA are authorised by the Spanish authorities and are included in the National Health System.
Spain is followed by Portugal, where authorised drugs are mainly exempt only from the hospital (59 OD)s. Special Use Authorisation allows the purchase of 18 of these drugs; France and The Netherlands come in third position. In France, four drugs out of 58 have valid market authorisation without mention of commercialisation. The Greek Institute of Pharmaceutical Research and Technology made it possible to import 11 more drugs in an effort to improve OD national access. In Italy, 42 orphan drugs approved by the EMA are available and, of the remaining drugs, ten have still a pending request at the Italian Medicines Agency.(1)
Reimbursement of ODs
ODs that follow the centralised marketing authorisation procedures are systematically reimbursed in Bulgaria, Finland, Germany, Italy and Spain without further requirements. However, in Germany, since January 2011, new regulations mandate that all new drugs with patented substances are subject to a comparative efficacy analysis followed by a price negotiation if additional benefit to comparator is acknowledged by relevant authority (GBA). However, GBA could provide an exemption to benefit assessment according to the expected product turnover. In the UK, ODs are fully reimbursed by the National Health Service (NHS); however, they must meet stringent cost effectiveness criteria.
In The Netherlands, 39 ODs are reimbursed. An additional 14 ODs are available when ordered by a physician or a pharmacist, either through a hospital budget or on a named-patient basis.
In 2008, the Czech Republic established a cap to the co-payment by patients of €187 per year for prescription medicines.
In Denmark, there is no specific reimbursement for ODs and, in most cases, ODs are restricted to hospitals.(1)
Despite these hurdles, these drugs still generate high revenues, with seven ODs generating more than $6 billion in 2010, among which etanercept (Amgen, Pfizer, Takeda), adalimumab (Abbott, Eisai) and bevacizumab (Roche) generated $7.3 billion, $6.7 billion and $6.2 billion, respectively.(6)
Pricing of ODs
Negotiations by social security institutions on OD prices are necessary in most EU countries. Moreover, health economic evaluation is carried out in Finland and Germany before negotiations. In Portugal, OD pricing falls directly under the responsibility of the Ministry of Health, whereas in Denmark, manufacturers and importers freely set prices, as ODs are mostly hospital-only products and are bought by public procurement. In the UK, prices are also set freely by the marketing authorisation holder but have to meet profit control criteria.(1)
The new countries of the EU 25, as well as Greece and Ireland, have prices that are not among the lowest in Europe. Spain and Portugal have retained their position as countries where medicine prices are the lowest.(5)
There is currently an increasingly cost-conscious environment and some European countries are attempting to contain the high prices and limit reimbursement of ODs.(7)
Belgium, Greece and Italy have imposed price controls on ODs distributed through the hospital pharmacy. Spain has cut the price of orphan drugs by 4% since August 2010 whereas Belgium, France, Italy and The Netherlands compare the price requested by the pharmaceutical company with the price in other countries in an effort to control the price of ODs.
Cost effectiveness is not adapted to the evaluation of ODs because it does not take into account the number of patients eligible to receive treatment. In the UK, pharmaceutical companies are turning towards patient access agreements in order to gain market access. These agreements reduce the risk for payers of funding treatments with uncertain benefits while allowing manufacturers to achieve reimbursement without the need for price reductions. This prevents the international reference pricing to impact drug price in other countries while accepting a price reduction. By contrast, they also allow patients access to novel and expensive treatments that they would otherwise be denied. UK Patient Access agreements will be replaced by a new value-based pricing system in 2014 when manufacturers will negotiate a price directly with the Department of Health.(1)
As expressed by Davies et al, manufacturers believe these utilitarian approaches to drug pricing and reimbursement, in addition to causing individual injustices, inhibit therapeutic improvement over time.(8) While there is clear evidence that European and US incentives have attracted a number of large and medium-size pharmaceutical companies, the question of how should, and how far, more adapted policies maintain this and prevent incurring huge costs on national health insurance remains.
In the US, prices are freely negotiated between insurers and the manufacturers. The monopolistic position of manufacturer led to historically very high prices compared with Europe. There is a clear trend for more similar prices. In the US, the high prices were associated with very limited access. As most of those diseases were chronic and disabling, many patients lose their employment and their insurance plan cover as a result. Companies have established a number of programs to provide indirect funding to limit adverse publicity related to restricted access to a vulnerable population often poorly serviced.
Identifying the target population and expanding the indications for ODs has become the way for successful market access for some companies.
To ensure better opportunities to access the OD market, accurate identification of the target population is crucial. The focus of ODs in cancer therapy offers the possibility of identifying the ‘niche’ indication through biomarkers. These do not only identify the population that requires treatment the most but also allow for determining how far this population could benefit from this treatment, therefore allowing a premium price because results are provided.
Once the target population is identified, an interesting approach of targeting multiple indications through examples of OD successful marketing is possible. This overcomes the small market size through broadening the small target population. This can be achieved through one of the following strategies:(1)
Expanding orphan indication to a non-orphan disease to grant a non-orphan drug market access.
Following orphan drug approval, expansion into non-orphan diseases offers greatest opportunity for revenue generation.
An example of this is infliximab. whose leading position is attributed to a successful indication expansion strategy. Janssen-Cilag first launched infliximab in 1998 for the treatment of Crohn’s disease (orphan indication), and later the brand was gradually approved for non-orphan indications in rheumatoid arthritis, ankylosing spondylitis, psoriatic arthritis, ulcerative colitis and plaque psoriasis, achieving $8.1billion globally in 2010.(2)
Multiple orphan drug indications allow a manufacturer to ensure a drug’s market exclusivity within a therapeutic area, and thus maximise the targeted patient population. Manufacturers also have the opportunity to re-price their drugs at a higher price.
This is illustrated by Genzyme’s orphan drug, alemtuzumab, which is in phase III clinical development for multiple sclerosis (MS). Alemtuzumab is already available for the treatment of chronic lymphocytic leukaemia, priced at $30,000 per year. Genzyme will probably price alemtuzumab (re-branded) for the treatment of MS similar to that for other disease-modifying MS drugs. Free provision of this drug to cancer patients is a possibility Genzyme might consider to justify a higher price point for MS.(9) At this stage, this is only speculation, as alemtuzumab is not yet approved.
Imatinib is an additional example of multiple indications. This multiple-indication strategy did provide an expansion of the target patient population, leading to increased drug sales. Imatinib has the most OD approvals (seven) from the FDA and has become Novartis’ best-selling brand, generating $4.3billion sales in 2010 globally.
Awareness concerning OD development and marketing is growing in the US and Europe. There is a trend whereby regulatory incentives related to orphan designation become counter-balanced by a more stringent market access. One could, on the one hand, appreciate that these incentives have been successful in the light of the number of designated and approved products as well as the associated revenue generated. It could be questioned whether some products, such as imatinib, for example, would not have reached the market even if the incentive did not exist. Those incentives aim at helping new products reach the market that otherwise would remain shelved without such incentives. Obviously, new policies being developed under restricted budgets will integrate the high level of sales of some ODs. The regulation will obviously continue to support the development of ODs for equity reason. The definition of ODs might shift toward a lower threshold of prevalence, such as ultra ODs as defined in UK. The more attractive price regulation might also be revisited to secure a lower impact of drug budget on payers.
The EU commission has shown a level of concern about the disparity of access of ODs despite efforts to improve it. The EU commission is looking for new roles that might allow commissioning at a central level for these specific drugs. Discussions are ongoing, and it is likely, in the short term, that new policies might impact pricing and distribution of orphan drugs in Europe. Until then, the growing OD market still offers opportunities for pharma to enjoy returns and pursue the development of new orphan-designated products globally.
- DM-Orphan Drug Trends. Maximizing the commercial potential of orphan drugs. Reference Code: HC00143-001;November 2011.
- European Commission (Directorate General Health & Consumers). Register of designated orphan medicinal products. http://ec.europa.eu/health/documents/community-register/html/orphreg.htm (accessed 30 August 2012).
- Reportlinker. Orphan drug markets in Europe. September 201. www.reportlinker.com/p0716672/Orphan-Drug-Markets-in Europe.html#utm_source=prnewswire&utm_medium=pr&utm_campaign=Drug_and_Medication (accessed 30 August 2012).
- Armstrong W. ‘Pharma’s Orphans’. Pharmaceutical Executive; May 2010.
- de Varax A, Letellier M, Börtlein G. Study on orphan drugs: Phase I: overview of the conditions for marketing orphan drugs in Europe. Alcimed, Paris.
- PR Newswire. Humira to assume Lipitor’s crown as Pfizer feels the heat from Sanofi and Novartis. www.prnewswire.com/news-releases/humira-to-assume-lipitors-crown-as-pfizer-feels-the-heat-from-sanofi-and-novartis-124638723.html (accessed 30 August 2012).
- Simoens S. Pricing and reimbursement of orphan drugs: the need for more transparency. Orphanet J Rare Dis 2011; 6:42.
- Davies E, Neidle S, Taylor DG. Developing and paying for medicines for orphan indications in oncology: utilitarian regulation vs equitable care? Br J Cancer 2012;106(1):14–17.
- Staton T. Genzyme mulls Campath giveaway for cancer patients. www.fiercepharma.com/story/genzyme-mulls-campath-giveaway-cancer-patients/2010-11-01 (accessed 30 August 2012).