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Orphan drugs have become a lucrative business opportunity for drug makers. Pharmaceutical companies are seeking “orphan” status to develop blockbuster drugs used to treat other common medical conditions. They reap the benefits of orphan status – subsidies, tax credits, and waivers – while generating billions of dollars in profits.
Humira, which treats numerous conditions like arthritis and psoriasis, costs more than $69,295 a year for just one patient in 2017. Despite its orphan drug price tag, more than 90% of Humira prescriptions are for non-orphan use.
Remicade, which treats numerous conditions like rheumatoid arthritis and colitis, costs more than $31,531 a year for just one patient in 2017. Despite its orphan drug price tag, more than 93% of Remicade prescriptions are for non-orphan use.
Orphan drugs are being approved – and entering the market – at higher rates than ever before. They’re also prescribed in increasing numbers – often for conditions that aren’t even orphan conditions and already have cheaper treatments available. Drug makers are taking advantage of the hope for cures and gaming the orphan drug system – driving up prescription drug prices for everyone.
The Orphan Drug Act passed in 1983 to encourage pharmaceutical companies to invest in treatments for rare diseases – so-called “orphan diseases” that had been ignored because their small patient populations made them unprofitable.
The intent was that through incentives included in the Orphan Drug Act, drug makers could break even or possibly post modest profits for developing and manufacturing drugs to treat orphan diseases.
Increasing Orphan Drugs Prices
Orphan drugs made prescription drugs more expensive, on average, as orphan drugs were launched at an increasing rate and with increasingly higher prices. In our sample, though the average annual drug cost has increased across all drug types, orphan drugs experienced the highest increase. The average annual drug cost for both traditional and specialty drugs has roughly doubled in the 20-year period. In contrast, the average annual cost for orphan drugs has skyrocketed from $7,136 in 1997 to $186,758 in 2017 – a 26-fold increase
Drug launch prices have increased substantially over the past 20 years. The average annual drug cost has seen a 10-fold increase from 1998 to 2017. Much of this increase was driven by orphan drugs. First, the orphan drugs’ share of all new drug approvals has increased more than 4-fold over the study period. The increased share came at the expense of cheaper traditional drugs.
The share of specialty drugs was steady through the study period. Second, orphan drugs became more expensive over time. Average annual drug costs have increased across all drug types, but orphan drugs experienced the greatest increase. While average drug costs for traditional and specialty drugs have doubled in the 20-year period, average orphan drug cost saw a 26-fold increase. The pharmaceutical industry points to small patient populations in order to justify exceptionally high prices on orphan drugs. Yet, the argument fails to explain the extraordinary year-over-year launch price increases for orphan drugs. Further, since orphan drugs throughout the study period address many of the same diseases, small target population cannot explain the continuous increases in orphan drug launch prices.
It may be tempting to dismiss the growth in the share and launch prices of orphan drugs as having only a limited impact on the overall health care costs. However, the target patient population for orphan drugs may not be as small as portrayed by the pharmaceutical industry. Many orphan drugs have non-orphan indications in addition to their orphan indications. Furthermore, many orphan drugs are used off-label, suggesting a larger market for the drugs than their approved indications may show. Not surprisingly, the list of top 10 best-selling drugs in 2017 included 7 drugs with orphan indications. As a result, we are treating common diseases at orphan-high prices. The skyrocketing drug prices add to the urgency for lawmakers to revisit and revise the Orphan Drug Act.
Lawmakers must ensure that the Act serves its original purpose to incentivize the development of treatments for rare diseases – not as a gateway to premium pricing and blockbuster sales beyond orphan indications.
