Orphan Assets Still Hot as Pricing Debate Rages
November 22, 2018 | Opinion & Analysis
LEO Pharma’s November 2018 deal with rare disease play PellePharm, worth up to $760 million, is just one recent example of the value that orphan drug assets can command. PellePharm’s lead candidate, patidegib, treats a little-known skin disease called Gorlin Syndrome that affects just a few thousand patients. Yet for dermatology-focused LEO, this was a strategic move into rare skin conditions – where treatments can be priced far higher, and enjoy a faster regulatory pathway and more lenient reimbursement conditions, than most drugs for more common diseases. Patidegib has orphan drug designation and Breakthrough Therapy status from FDA.
Orphan drug approvals have surged since the Orphan Drug Act was introduced in the US over 20 years ago, followed by similar incentive packages across Europe and Japan. A law designed to encourage investment into treatments for rare and under-served conditions has been used – and many say, abused – well beyond expectations. Individual conditions may be small, but the sales generated by orphan drugs as a class have doubled in the last decade, with some predicting that the category will command a fifth of all prescription drug sales by 2022.
Historically, orphan drugs escaped pricing scrutiny due to the limited number of patients involved. That is changing. They are now front and center in the wider payer backlash against excessive drug prices. One reason is that drug manufacturers have taken advantage of orphan benefits by assembling multiple, orphan-sized indications for the same drug – so-called ‘salami slicing’. This has resulted in huge overall sales for individual products: Celgene’s Revlimid (lenalidomide) sold over $8 billion in 2017, and is expected to top $12 billion by 2022. Even AbbVie’s Humira, the world’s largest-selling drug ever, has a couple of orphan indications.
Another reason orphans are now in the payer spotlight is that many of the newest treatment modalities, including gene therapy and CAR-T cell therapies, are orphan drugs. And some of these are intended as one-time treatments, with price tags to match. Spark Therapeutics’ Luxturna, the first US-approved gene therapy for an inherited retinal disease, is one example. It costs $425,000 per eye. Novartis’ CAR-T therapy Kymriah (tisagenlecleucel) is another; it is priced at $475,000.
These therapies have forced manufacturers and payers to explore new payment mechanisms. Outcomes-linked payments are a logical way forward: Spark and Novartis are among those that have engaged in such deals. But they are not easy to implement. A pilot program at the US government’s Centers for Medicare and Medicaid Services (CMS) exploring value-linked pricing for Kymriah was abandoned earlier this year, though deals with individual treatment centers remain in place, Novartis says. Spark reports “advancing discussions” with CMS on an installment payment option for Luxturna, and in early November said the first two patients had been treated under its outcomes-based contracting model with commercial payers.
With multiple new orphan drugs in the pipeline (many cancer drugs are orphans) and with drug pricing still firmly in politicians’ cross-hairs, these reimbursement discussions and experiments must continue. Luxturna was recently recommended for European approval, triggering payer engagement there, too.
LEO Pharma may be joining the rare diseases party just as the music starts to fade a little. But orphan drugs are still a critical – and growing – treatment category.
For a fuller account of the latest trends in orphan drug pricing and reimbursement, including country-by-country analysis of orphan reimbursement, case studies and approval figures, see “Latest Trends in Orphan Drug Pricing and Reimbursement,” published by Datamonitor Healthcare.
- March, 20 2020