BIO 2011 – Orphan drugs unlikely to escape pricing pressures

In a clear signal of the huge interest in orphan drugs and disorders BIO 2011 kicked off with a series of panels tackling issues facing the burgeoning field, with the sustainability of premium pricing a dominant theme.

Companies argue that orphan therapies require high prices to make the economics of their development viable. However, the view of those working in the field is that they will not be spared the wider pressures currently dampening global drug prices. As a result, companies are already thinking creatively about how to meet this challenge, including using performance-based payment schemes.

Progress

Significant progress and investment has been made in orphan indications over the last few years, helped in no small part by global regulators. The FDA and EMA have actively incentivised, encouraged and even funded the development of orphan drugs.

There are tax breaks for research in the field, to the tune of 73 cents in each dollar spent in the US, accelerated approval processes and longer periods of data exclusivity - seven years in the US and ten in Europe, compared with five for standard therapies. The FDA also awards research grants and runs workshops for companies working in the field.

Meanwhile, funding and partnering prospects for orphan drugs appear significantly brighter than many other therapeutic areas, a result of big pharma’s growing interest in the field over the last few years (Ultragenyx defies series A funding trends, June 22, 2011).

Yet to date, the FDA has approved just 375 orphan drugs, addressing around 200 of the estimated 7,000 rare diseases, according to Diane Dorman, vice president of public policy, National Organization for Rare Disorders.

“For all the advances and incentivisation schemes, approvals for orphan drugs have remained relatively flat in the last 10 years,” says Mike Diem, a director of business development in GlaxoSmithKline’s rare disease unit.

Glaxo, which set up the unit in early 2010, is one of many companies that believes a clear and significant unmet need remains for therapies addressing these niche illnesses (Glaxo attracted to rare diseases, October 13, 2010).

Pricing pressure inevitable

As to how viable it will be for even the smallest of companies to develop new therapeutics and diagnostics for many of these orphan diseases, a lot will depend on the future pricing and reimbursement environment.

Julie Anne Smith, chief commercial officer of Enobia Pharma, estimates there are now 17 or 18 drugs with an annual cost over $100,000 and most of these treat rare diseases (Alexion riding high on Soliris' potential, September 29, 2010)

“Payers are beginning to scrutinise this,” says Ms Smith, who believes there will be a greater shift towards patient-risk sharing, co-pays and prior authorisations. “Just as cancer drugs for terminally ill patients forced a discussion in the 1990s about value and performance, I think we’re going to start to see the same happen in the even more highly priced, ultra-premium products where it used to be enough to save a life and convert a lethal condition into one where a patient can lead a normal life, and charge in excess of $100,000,” she adds.

Enobia is currently conducting a phase II study of its lead candidate, ENB-0040, a bone targeted enzyme replacement therapy for adolescents and adults with hypophosphatasia, a serious and rare metabolic bone disorder.

Confirmed outcomes

Although Ms Smith maintains that the pricing and reimbursement environment for orphan drugs will remain attractive for some time, she admits that payers will require more from companies in terms of providing evidence of longer term patient outcomes and will want to track the performance of a drug’s efficacy over time.

Cyrus Mozayeni, senior director of business development at Bluebird Bio, agrees that pricing pressure, particularly within the relatively larger orphan indications, will be a challenge.

“We are having to think creatively about different pricing models”, says Mr Mozayeni. “One could contemplate the possibility of earned payouts over time, with an upfront payment followed by performance based reimbursement”.

Bluebird is developing gene therapies for severe genetic disorders, such as childhood cerebral adrenoleukodystrophy and beta-thalassaemia, with a phase I/II trial underway in the latter disorder.

Continuing debate

How pricing and reimbursement shifts in the next few years, particularly in cash-strapped Western countries, is a critical issues for all therapeutic areas, big or small. With orphan drugs the issue is potentially more pivotal, to guarantee continuing interest from investors and big pharma.

“Ultimately it comes down to a balance between meeting the needs of patients and expectations of our shareholders,” Glaxo’s Mr Diem says.

Of course this is just one of the many challenges facing companies working in this field. Other discussion points at BIO included the significant difficulties in assessing patient population sizes, and identifying suitable patients for clinical trials.

However, the sustainability of premium pricing and how companies can continue to justify this will be a major shaper of this field in the years to come. The industry might well have to accept that the impressive profit margins many of these orphan therapies generate will be eroded. The debate over how that is managed is set to continue.

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