Report: Orphan Drugs Represent a Small Share of US Prescription Drug Spending

While no one argues that orphan drugs that treat rare diseases can be expensive, the drugs’ reputation for being budget-busters is not borne out by a data presented in a recent report by Quintiles IMS Institute, “Orphan Drugs in the United States: Providing Context for Use and Cost.”

Between 25 million and 30 million Americans suffer from rare diseases—serious, chronic diseases affecting fewer than 200,000 people, which can become progressively disabling and limit life expectancy. There are approximately 7000 rare diseases, and children make up more than half of affected patients. A challenge faced by patients and caregivers in the rare disease community is the lack of treatments available: treatments exist for just 5% of an estimated 7000 rare diseases.

The Orphan Drug Act (ODA) of 1983 greatly advanced efforts to introduce more treatments for rare diseases. The ODA provides tax incentives and research grants for drug makers to develop therapies for these diseases, extends marketing exclusivity to patentable as well as unpatentable drugs, and exempts orphan drugs and biologics from submitting a new drug application (NDA) or paying user fees charged by FDA. The 449 approved orphan therapies for 549 orphan indications has led to small-molecule drugs and biologics to treat rare diseases across numerous therapeutic categories.

Of the 449 approved orphan drugs, 351 have only orphan indications, while 98 have both orphan and non-orphan indications. An example of a drug with both orphan and non-orphan approved indications is the biologic Humira (adalimumab), which was approved in 2002 for rheumatoid arthritis and then received 4 approvals for orphan-designated indications. Use in these indications accounts for only a small fraction of overall spending on Humira: use in rare diseases accounted for just 3.8% of the total US adalimumab use in 2016.

In fact, the report found that, in 2016, spending on orphan drugs and orphan indications represented only 7.9% ($36 billion) of the $450 billion spent on pharmaceuticals. Almost 60% of spending was for non-orphan traditional drugs and one-third was spent on non-orphan specialty drugs.

Additionally, though the number of orphan drugs approved in the last 5 years increased from 315 to 449, the share of spending on orphan drugs increased moderately:

• Only about 1% of orphan drugs cost more than $500,000 a year, and those drugs account for only 1.6% of total orphan drug sales
• 20% of orphan drugs cost less than $6000 per year
• While the median annual cost for an orphan drug in 2016 was over $32,000, each of the 10 orphan therapies used by the greatest number of patients (including therapies such as Avonex and Copaxone for multiple sclerosis, the oncology drug Gazyva, and the anti-infective Alinia) averaged $14,909 per year
• Specialty orphan drugs contributed less than 20% (approximately $15 billion of growth) to the $89 billion increase in US drug spending over the last 5 years, while non-orphan specialty drugs were responsible for $74 billion of growth
• Though there has been an increase in the number of orphan drugs available, reduced use of older orphan drugs has contributed to a decline in the volume of total orphan drugs used, so their share of the total volume of US pharmaceutical use has declined from a peak of 0.6% in 2003 to 0.3% in 2016