Re-Thinking Rare Disease
In the last days of July 2022, Germany’s cabinet passed a swathe of drug pricing measures designed to curb pharmaceutical spending and help plug a €17bn healthcare funding gap in 2023. (Also see “Germany: Leaked Pricing Measures Could Have ‘Drastic’ Consequences For Orphans” – Pink Sheet, 7 Jul, 2022.) Weeks later, US Congress passed a law allowing Medicare to negotiate the prices of some drugs, potentially saving $100 billion over a decade. (Also see “Medicare Price ‘Negotiation’ Process Gets Broad Brush Treatment In New Law” – Scrip, 16 Aug, 2022.) But while Germany’s new laws include a drastic squeeze on how orphan drugs are assessed and priced, the US law protects the category – and may even provoke higher launch prices.
Payers everywhere are concerned over the growing collective cost of rare diseases drugs. They account for over half of FDA approvals and 40% of the global pipeline, yet ultimately serve less than 10% of the population. Their median drug price approaches $170,000 and some one-time treatments cost over 20 times that. In 2026, each of the ten highest-selling orphans will be worth between $3bn and $13bn, according to Evaluate.
Hence long-standing questions over whether the 1983 US Orphan Drug Act and its European equivalent are still fit for purpose. These laws have worked extraordinarily well to incentivize R&D into rare conditions, using a suite of tax credits, extended market exclusivity periods and waived regulatory fees. Many orphan drugs also benefit from expedited approval pathways with lower evidence hurdles.
This landscape has resulted in important, often life-saving treatments for hundreds and thousands of patients. It has spawned dozens of rare-diseases-focused biopharma companies, including in now-crowded corners like gene and cell therapy that lend themselves to the rare-diseases approach. Big Pharma has been drawn in, too: orphans will make up almost 40% of Johnson & Johnson’s pharma sales by 2026.
There are no moves to tamper with the US Orphan Drug Act. A consultation on proposed changes to Europe’s orphan regulations – including shorter exclusivity periods – has not yet led to action either. The apparently divergent German and US pricing approaches add urgency to this debate. Are orphan drug incentives now backfiring, by pulling R&D dollars away from more widespread conditions that cost health systems and societies more dearly? Or does the innovation engine still need this orphan-focused fuel to keep running effectively?
Ultimately, a balance is needed, which, at first glance, neither nation appears to have achieved. In the meantime, the gap between orphan drug access in the US and Europe is likely to widen.
Abolished Privileges
Germany has moved decisively to re-set thresholds within its already strict rules-based approach to pricing and reimbursement. Orphan drugs, classified as those destined for fewer than five in 10,000 people in Europe (about 230,000 people), currently escape the normal added-benefit review that other new medicines are subjected to – unless and until they sell more than €50m a year. This loophole irked the country’s health technology assessment body, IQWiG. It found, in January 2022, that over half of orphans that did go on to be assessed failed to show any additional benefit. So, declared IQWiG director Juergen Windeler, “it’s time to abolish the privilege of fictitious added benefit for orphan drugs.”
His agency’s call for action was one important voice influencing the resulting GKV-Finanzstabilisierungsgesetz – public health insurance financial stability law ̶ which cuts the annual sales threshold to €20m. That will mean many more orphan drugs are assessed and receive a benefit rating. Few are likely to score highly, given the difficulties of generating adequate evidence from small patient numbers, and the frequent lack of appropriate comparators.
The law also tightens up the link between benefit rating and price – for instance, mandating that an “unproven” added benefit, as may be likely for orphans, must lead to a reimbursed price “reasonably lower” than the appropriate comparator therapy. (Also see “Germany To Honor Pledge To Cut Spending On Medicines” – Pink Sheet, 17 Mar, 2022.)
Overall, the changes will significantly impact orphan drug developers’ reward. The law “is a turning point” for research-based companies in Germany, says Germany’s association of research-based pharma companies, VFA. It warns that each of the “far-reaching” pricing changes outlined in the “short-sighted, innovation-hostile” bill will interact to have a “cumulative” negative effect on innovation and investment in the country. (See Box: Show Better, Or Price Lower)
Drug companies were already pulling out of Germany. bluebird bio left in 2021 after failing to achieve ‘value-recognition’ for its newly approved gene therapy Zynteglo for beta thalassemia. (Also see “Bluebird Exits Europe, Casting Clouds Over Gene Therapy Commercial Effort” – Scrip, 9 Aug, 2021.) The company has since priced the therapy at $2.8m in the US. Insmed Incorporated in September 2022 stopped direct supplies of Arikayce, approved for a small group of patients with a rare type of lung infection, after failing to agree a price with the German association of insurance funds (GKV). Discussions are ongoing, according to the company.
