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Orphan Drug Pricing: Dispelling Myths and Misinformation and Fact Checking NPR and Kaiser Health News

3.2 from 14 votes
Saturday, September 16, 2017

Significant sensationalism and misinformation has led to myths and misunderstanding of the Orphan Drug Act and the guidelines and incentives it offers for developing orphan drugs. A panel at the Rare Diseases and Orphan Drug Americas conference helped de-myth many of the current issues.

The panel directed its focus on reports coming from Kaiser Health News and NPR in particular. Kaiser Health News is financially supported by the Kaiser Foundation, which is primarily funded by Kaiser Permanente, a healthcare insurer with a financial interest to keep prices of medicine as low as possible.

Both NPR and Kaiser Health News have received grants from the Arnold Foundation, which has dedicated over USD 100 million to attacking orphan drug pricing.

The conference organizers noted that they invited Kaiser Health News to participate on the panel, but received no response to emails and telephone calls.

The panel started off outlining the above information for transparency and to start the discussion of the panelists and the audience.

“When you read what has been written and you see who is behind it, it is obvious it is politically motivated,” noted Dr. Doug Paul, Partner at Medical Marketing Economics, whose company works on pricing and reimbursement, in particular for orphan products.

Dr. Paul’s comments are substantiated by the fact that Kaiser Health News and NPR delivered a report to Congress, which based on the misinformation, formed a committee that deemed it was necessary for FDA to perform an analysis of orphan drug submissions and the Orphan Drug Act.

Exclusivity Equals Monopoly

One of the first points discussed was the claim that orphan drugs provide companies with a “monopoly.” The reference comes from one part of the Orphan Drug Act that provides companies with seven years of market exclusivity if the product is approved.

“The notion that the seven year market exclusivity provides a monopoly is an absolute myth,” said Dr. Paul. “You just need to read the FDA’s guidance.”

The authors of the Kaiser article and some of the commentators that provided quotes for their article notably overlooked or neglected those statues that the FDA has provided:

  • The public policy objective of the Orphan Drug Act is to stimulate innovation in developing treatments for patients with rare diseases and conditions and to foster the prompt availability of therapeutically superior drugs. Accordingly, the orphan drug regulations attempt to ensure that orphan drug exclusivity approval does not preclude significant improvements in treating rare diseases.
  • Office of Orphan Product Development may grant orphan drug designation to a drug that is otherwise the same drug as a drug already approved in the U.S. for the same rare disease or condition only if the sponsor can present a plausible hypothesis that its drug may be “clinically superior” to the previously approved drug. Clinical superiority may be established by means of greater effectiveness, greater safety in a substantial portion of the target populations, or in unusual cases a major contribution to patient care (MC-to-PC).
  • Further, if orphan drug designation is granted, and if the drug receives marketing approval for the designated use, in order for the drug to receive orphan drug exclusive approval for this use, the sponsor must demonstrate that the drug is actually clinically superior to any previously approved same drug for the same use.
  • Any claim for clinical superiority could require a head-to-head trial.


Thus FDA’s position on ensuring that exclusivity does not provide a monopoly is quite clear.

Continuing the conversation on monopolies, Dr. Paul explain, “You have to understand that the majority of companies have a drug that is patented, just like all pharmaceutical products do. And that patent extends much longer than seven years.”

“Often companies have 10-15 years left on their patent protection when their product reaches the market so the seven year exclusivity is a non-issue.”

Dr. John Doux, a dermatologist and partner at Palo Alto Investors added, “The seven year exclusivity does not prevent another company from bringing another product for the same rare disease that is superior or is equally effective but safer.”

Commenting on Dr. Doux’s explanation, Dr. Paul emphasized, “That is exactly right and Gaucher disease is a great example, where we have 6 different products that have received orphan status, thus providing ample competition.”

“A similar landscape exists for homozygous familial hypercholesterolemia. There are three products on the market, all of whom received orphan status.”

“Gaming the System”

The products for homozygous familial hypercholesterolemia provided an inlay for another topic of the Kaiser Health News articles. The authors claimed that companies are “gaming the system” by first developing a product for large diseases, and then come back and develop the same product for a rare disease or multiple rare diseases.

One example Kaiser Health News and NPR provided was Crestor, which is used to treat high cholesterol and costs about USD 30,000 for a year’s treatment. The makers of Crestor then pursued clinical testing and developed Crestor for homozygous familial hypercholesterolemia, which had two previous products on the market that costed around USD 350,000-400,000 a year for the treatment.

When Crestor was approved, its price remained around USD 30,000, thus providing an alternative option to the higher priced products.

“That is a good thing,” explained Dr. Paul, when asked if companies should be allowed to pursue smaller diseases for an orphan drug status after having produced the same product for larger diseases.

Adding to Dr. Paul’s comments, Dr. Daniel Tuden, a market research and pricing expert explained, “Once a company develops a product for a large indication and establishes a price, that price is not going to change when the product did not change. Payers know that,” where his reference to payers refers to health insurance providers like Kaiser Permanente.

Thus despite two existing products that cost 10 times as much as Crestor, the makers of Crestor are locked in at the current price which averages around USD 3000 for a year’s treatment. Thus shedding light and understanding to misinformation provided by Kaiser Health News and NPR to both the claim that orphan drug prices are “astronomical” and that they benefit from having a “monopoly.”

The authors of the Kaiser articles also noted, “What’s more, manufacturers can return to the FDA with the same drug again and again, each time testing the drug against a new rare disease.”

“So if people are concerned that orphan drug prices are too, high, they definitely should not be complaining about companies first pursing a product for a large indication and then adding one more orphan indications on after because it will ensure a lower price than the average orphan drug price,” explained Dr. Tuden.

Wearing two hats, Dr. Doux explained, “When I look at this from an investor standpoint, you have to realize that each time a product is tested, just because it worked once does not mean it is going to work for the next rare disease and it is difficult to develop a drug for a rare disease. There are very few patients, which makes it difficult to find people for a clinical trial, there are few specialist, there are no patient organization or very unorganized and small organizations and that makes orphan drug development more difficult.”

“From a physician perspective, I want to have treatments for my patients and that is what the Orphan Drug Act is facilitating and if it means having tested, effective and safe products for patients that previously did not have a treatment – that is a win for patients.”

“That is not ‘gaming the system.’ That is providing a benefit to patients who are very much in need of a solution.”

“Drugmakers Can Charge Whatever They Want”

The authors of the Kaiser further claimed: “But the exclusivity is a potent pricing tool. Drugmakers can charge whatever they want by shielding their medicine from competition. The market exclusivity granted by the Orphan Drug Act can be a vital part of the protective shield that companies create…It is difficult to say exactly how or if orphan exclusivity affects the price of Humira, which is a complex biologic drug and also has been protected by numerous patents. The drug has long been AbbVie’s top seller, accounting for 63 percent of its revenues, according to its most recent financial filing.”

Humira was initially produced for arthritis, with specific testing and approvals for psoriatic and rheumatoid arthritis. Additional large indications included ankylosing spondylitis, adult Crohn’s disease, plaque psoriasis, and ulcerative colitis. It was then later developed for pediatric Crohn’s disease and juvenile idiopathic arthritis, both of which are rare diseases that allowed the maker of Humira to pursue orphan status.

 “This is a myth I have seen perpetuated, where orphan drug status automatically means high pricing and that is absolutely false,” said Dr. Tuden. “In the case of Humira, the price was already established by its previous large indications. The subsequent orphan indications did not allow the price of Humira to change.”

 “And more important, orphan drug status does not determine the price of a product. A product’s efficacy, safety, health outcomes, value, the number of patients that can be treated, the cost to test, develop, produce and distribute the product all come into play along with other factors.”

“And what is often overlooked is pricing is referenced, because payers will look at existing treatments for similar sized diseases and base what they are willing to pay off those existing prices,” explained Dr. Paul.

Despite the interest in the topic, time was limited and a full analysis of the misinformation provided by Kaiser Health News and NPR could not be addressed. However, CheckOrphan will publish follow on articles that further examine the misinformation and myths that Kaiser Health News, NPR and other news agencies continue to propagate due to a lack of understanding of how development occurs and how pricing is actually determined, especially in the rare disease space.

Disclaimer: CheckOrphan is a recognized 501c3 nonprofit and an independent news agency and this article is not funded by any third parties.

Author: Robert Derham
Source: CheckOrphan
3.2 from 14 votes
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