The Price and Value of Orphan Drugs

September 22, 2017

How do you put a price tag on a drug that offers life-altering results – but for a small group of patients? The question is becoming increasingly relevant with the rise of innovative, targeted medicine. And it’s at the heart of current debate about how the Institute for Clinical and Economic Review’s value framework applies to orphan drugs.

ICER, as it’s called, is a drug price analysis group. Using its trademark value framework, it assigns drugs a value benchmark price based upon long-term cost effectiveness and short-term budget impact. Recent ICER reports have generated price points for drugs that treat rheumatoid arthritis, chronic pain and other conditions.

This summer ICER released a proposal on how it might alter its framework when evaluating drugs for “ultra-rare” conditions. ICER defines the term as a disease impacting fewer than 10,000 people. Small populations make generating comprehensive clinical trials data difficult, ICER concedes. That requires the organization to tweak how it approaches these therapies.

Following an initial white paper release, ICER held a May stakeholder meeting to discuss the topic. There, the patient community called for ICER to weigh “broader ethical and contextual considerations” for especially severe diseases and drugs that can significantly improve or extend patients’ lives.

In an updated document, ICER acknowledges those concerns. And its proposed modifications do attempt a more contextualized approach. ICER plans, in certain circumstances, to adjust the metrics used in weighing cost effectiveness. It will use a broader range, $50,000 to $500,000, for considering cost per quality-adjusted-life-year in “a potential major advance for a serious ultra-rare condition.”

But it’s up to ICER to define values such as “major advance” and “major gain,” which are the determining factors in when the group will use an adjusted approach. That leaves some patient advocates uneasy. Moreover, ICER will still derive a single price point, as with drugs for common conditions, rather than proposing an acceptable range.

Some advocates have expressed concern that ICER’s work may undermine the efforts of the 1983 Orphan Drug Act. The legislation has incentivized manufacturers to innovate for small patient populations in recent decades. Notably, it defines a rare disease as one that affects fewer than 200,000 patients. By using a different definition and considering framework modifications for only “ultra rare” diseases, ICER signals its plan to evaluate most orphan drugs in the same manner as therapies for common conditions.

When ICER determines that a drug’s price exceeds its threshold, health plans may feel justified in applying utilization management tactics to limit its use. The experience is unfortunate for any group of patients, but particularly for those with rare diseases that have historically had few treatment options.

As the public comment period for ICER’s modifications document draws to a close, patients with rare and ultra-rare diseases are left to wonder. The Orphan Drug Act succeeded in encouraging innovation that’s improved the lives of rare disease patients worldwide. Will ICER’s cost-effectiveness methodology now allow health plans to put these treatments beyond patients’ reach?

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