Most insurers unfazed by high price of orphan drugs

Despite turmoil over the rising price tags for prescription drugs, the cost for orphan drugs — medicines that target rare diseases and sometimes cost hundreds of thousands of dollars annually — is not deterring most payers.

A new survey of 36 payers that cover more than 74 million patients in the United States found that their coverage policies are unlikely to change much over the next six years. For instance, there was only a 19 percent chance that policies would tighten by 2018, a 25 percent chance that such a change would occur by 2020, and a 33 percent probability of a policy change by 2022.

Interestingly, the chances were much higher a year ago — 25 percent, 36 percent, and 46 percent, respectively — that payers believed they would move to tighten access to orphan drugs, according to analysts at Leerink, who track the pharmaceutical industry and commissioned the survey that was released on Tuesday. Orphan diseases, by the way, are defined as affecting 200,000 or fewer people.

“We believe this shift supports that either sufficient changes have been implemented recently [toward coverage] and/or payers have become more complacent regarding orphan drug pricing,” they wrote in an investor note discussing the results. They noted that only 22 percent reported that they are “extremely concerned” about expenses for orphan drugs.

The analysts also noted that payers seem “more focused on larger categories where there is more need to manage costs,” including cancer, diabetes, and hepatitis drugs. To wit, only 17 percent of the payers reported aggressively managing orphan drug costs and do not plan to do so in the foreseeable future. And only 6 percent are working on new ways to more aggressively manage orphan drug spending.

In fact, for the payers that were able to estimate — about half of the sample — orphan drugs are a “very” small part of their current budgets, comprising about 4 percent to 6 percent of spending.

This seems to coincide with the findings in a recent study in Health Affairs, which concluded that “the overall impact of orphan drugs on payer drug budgets is modest.” Total US spending on orphan drugs last year was estimated to be $33.5 billion and is forecast to rise to $44.2 billion in 2018, while orphan drug spending is expected to remain fairly stable as a proportion of overall drug spending, according to the study.

However, the analysts also pointed to data showing orphan drug sales will increase at a 12 percent compounded annual growth rate, according to EvaluatePharma, a research firm.

It is also worth noting, however, that the Health Affairs study pointed out concerns with some orphan drugs for which the US Food and Drug Administration also approved non-orphan indications. “These reach a larger patient population than orphan drugs with only orphan indications,” the study explained.

So what might all this mean for pricing for orphan drugs? The Leerink analysts, who refer to the study in their analysis of the survey results, wrote that they believe “pricing premiums for orphan drugs will continue to be a viable option for [drug makers] as long as newly approved drugs fulfill a great unmet need and/or serve a small patient population.”

And they point to the newly approved Sarepta Therapeutics drug for Duchenne muscular dystrophy as a likely example. The net annual cost of the drug, which is called Exondys 51, is expected to be about $300,000, but could almost double, depending upon patient weight.

In fact, Cigna is going to cover the drug, but only for boys who have a specific genetic mutation, which represents about 13 percent of the Duchenne patient population. “We will continue to follow the clinical trials of Exondys 51 to ensure that this new drug is delivering value to Cigna’s customers and clients for the money they are spending,” a Cigna spokeswoman wrote us.