AHIP Report Cites Reference Biologics as Examples of Orphan Drug Gaming

A recent report from America’s Health Insurance Plans (AHIP) uses the examples of etanercept, infliximab, and adalimumab to illustrate what it says has gone wrong with drug pricing in the years since the Orphan Drug Act passed in 1983.

While acknowledging the role that the act had in incentivizing drug companies to develop treatments for small populations suffering from rare diseases, AHIP says pharmaceutical companies are using orphan drug status to create blockbuster drugs that are then used to treat other common medical conditions.

Reference infliximab, sold under the name Remicade, treats numerous conditions, and more than 93% of the prescriptions are for nonorphan use, despite the fact that in 2017, it cost more than $31,531 a year. Remicade was originally approved for Crohn, which is rare, but a year later, it was cleared for rheumatoid arthritis, which is not rare. Likewise, reference etanercept, sold under brand Enbrel, cost more than $69,295 annually in 2017, and more than 90% prescriptions are also for nonorphan use.

Enbrel, and then reference adalimumab, sold under the name Humira, received orphan drug designations a year after their original approvals. Humira, Remicade, and Enbrel are among the top 10 best-selling drugs, with worldwide sales of $18.4 billion, $5.8 billion, and $5.4 billion respectively.

Orphan drug approvals have soared from 10% of all drug approvals in 1998 to 44% in 2017, when 7 of the 10 top-selling drugs had orphan indications. Meanwhile, the share of traditional drug approvals has declined from 65% in 1998 to 20% in 2017.

The fact that orphan drugs are accounting for a larger portion of drug approvals, while traditional drugs account for a smaller portion, accounts for some of the increase in the average annual drug costs, AHIP says. Orphan drugs have also been a key driver behind the sharp increase in annual drug costs at launch, which have grown from $9781 in 1998 to $106,149 in 2017. AHIP said these higher launch prices make any cost containment difficult.

AHIP claims the pharmaceutical industry average gross profit margin is 16%, while the gross profit margin for the rare disease industry is over 80%.

Drug makers are gaming the system, AHIP says, using the incentives to create blockbuster products: 7-year market exclusivity from the date of orphan designation approval, a 50% tax credit for expenses incurred during clinical testing, and a waiver of the New Drug Application fee.

For its part, pharma, through the innovator drug lobbying group the Pharmaceutical Research Manufacturers of America, credits the Orphan Drug Act for spurring innovation, saying 95% of rare diseases still do not have a treatment and represent a significant unmet need. The incentives available under the Orphan Drug Act are aimed at “medicines for diseases for which there was no reasonable expectation that sales of the drug in the United States could support the development of the drug.”

Looking ahead, by 2024, orphan drugs are expected to reach $242 billion in sales and capture one-fifth of worldwide prescription sales. A previous report says that the US median price differential decreased between orphan and nonorphan drugs by almost 50% in the last 4 years, but the mean orphan drug cost per patient of the top 100 US orphan drugs was almost 4.5 times greater than the nonorphan drug cost last year. The mean cost per patient per year of the top 100 orphan products was $150,854 in 2018 compared with $33,654 for nonorphan drugs.