New Orphan Drug Playing Field Requires Change in Tactics for Pharma Companies

Orphan drugs make up a growing slice of the pharmaceutical pipeline, with a significant share of new drug approvals, and payers are taking notice of their increasing market numbers and ultra-expensive price tags. Precision’s Jeremy Schafer, PharmD, MBA, discusses how manufacturers may adjust their promotion of orphan drugs to ensure continued market access.

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New Orphan Drug Playing Field Requires Change in Tactics for Pharma Companies
by Jane Anderson
AIS Health

Orphan drugs make up a growing slice of the pharmaceutical pipeline, with a significant share of new drug approvals, and payers are taking notice of their increasing market numbers and ultra-expensive price tags. As a result, analysts say, manufacturers are finding they need to change the way they’ve traditionally promoted orphan drugs in order to ensure continued market access for new and established products. These new tactics should include more targeted total cost and treatment data, patient-assistance programs and innovative pricing, say the industry experts.

“I think part of the attraction of orphan drugs is that there is an assumption that competition will be limited, and pricing flexibility will be high,” says Jeremy Schafer, Pharm.D., director, access experience team, Precision for Value. “Unfortunately for many manufacturers, this is not the case.

Payers have learned that to manage these drugs, they need to be aggressive, even in managing products aimed at rare diseases, Schafer tells AIS Health. “The result has been strict controls, including drug exclusions in such rare but competitive diseases like hemophilia, hereditary angioedema and certain types of cancer,” he says. “Even without competition, payer barriers are growing with strict prior-authorization criteria and high patient cost share.”

There’s no question that rising costs associated with orphan drugs have gotten the attention of payers. For example, in an issue brief released in August 2019, the industry group America’s Health Insurance Plans (AHIP) looked at novel therapeutic drugs approved by the FDA between 1988 and 2017 and calculated the annual per-patient expenditure at each drug’s launch price, adjusted for inflation to 2017 prices.

Out of the 417 drugs studied, 35% were classified as orphan drugs, another 38% were traditional drugs, and 26% were specialty drugs. AHIP reported that the average annual per-patient expenditure at the launch price for all drugs in the sample was $55,560, but this masked significant variation: The average annual drug cost for traditional drugs was $4,961, and, in contrast, the average annual drug cost for orphan drugs was $123,543, some 25 times more expensive than traditional drugs. Specialty drugs fell in between, averaging $38,309 in annual costs.

Meanwhile, AHIP reports, the orphan drug share of new drug approvals has increased dramatically over the last 20 years, starting at 10% of all drug approvals in 1998 and rising to 44% in 2017. Traditional drug approvals have declined from 65% in 1998 to only 20% in 2017, while the share of specialty drugs has remained steady.

“Drugmakers’ shift towards the more expensive orphan drugs can explain some of the increase in the average annual drug costs,” AHIP said in its analysis. “Since orphan drugs were considerably more expensive than traditional drugs, the increasing share of orphan drugs has naturally led to the increasing average annual cost over the last 20 years.” Specialty drug costs — which frequently are cited as a reason for overall drug cost increases — have remained relatively stable over the last 20 years, AHIP said.

Orphan Drugs Have History of Support

The term “orphan disease” refers to a condition that affects fewer than 200,000 people in the United States. The National Institutes of Health (NIH) reports that some 10% of Americans — 30 million people — have one of the nearly 7,000 known rare diseases.

Federal lawmakers have a decades-long history of encouraging manufacturers to develop drugs for rare diseases, often following advocacy by patients and their families.

The U.S. Orphan Drug Act of 1983 provided manufacturers with several incentives to develop such drugs, including extended patent exclusivity, tax credits to apply to development costs, grants for drug development, fast-track approvals and expanded access to the Investigational New Drug Program. The law worked. From 1967 to 1983, only 34 drugs for orphan diseases were approved by the FDA. Since the legislation was approved in 1983, more than 770 medicines have been approved under the Orphan Drug Act, according to the Pharmaceutical Research and Manufacturers of America (PhRMA), and more than 560 medicines are in the current biopharmaceutical pipeline.

The 21st Century Cures Act, approved in December 2016, extended and built on the success of the Orphan Drug Act, according to the National Organization for Rare Disorders. Provisions in that law include a pediatric rare disease incentive program, streamlining of FDA approval for genetically targeted and protein variant therapies for rare diseases and $4.8 billion in NIH funding over 10 years to fund the Precision Medicine Initiative, BRAIN Initiative and the Cancer Moonshot.

“The 21st Century Cures Act removed some common barriers to [drug] approval, such as allowing manufacturers of genetically targeted technology to utilize data for the same or similar technology from previously approved applications,” says Dana Macher, head of Avalere’s commercialization and regulatory practice. “Additionally, analyses such as prospective or observational studies are now allowed in the drug approval process for rare conditions as a result of this act.”

All this, Macher tells AIS, has helped developers of orphan drug products.

Many Are Used in Nonrare Conditions

Still, AHIP pointed out in its report that an increasing number of orphan drugs are used to treat diseases that aren’t actually rare conditions.

For example, Remicade (infliximab) from Janssen Biotech, Inc., a Johnson & Johnson company, originally was approved to treat Crohn’s disease, a rare condition that allowed Remicade to receive orphan designation. Over time, Remicade was approved for common diseases, including rheumatoid arthritis, psoriatic arthritis and ulcerative colitis. Remicade was sixth in global sales in 2017, while AbbVie Inc.’s Humira (adalimumab), which also has an orphan drug designation, was No. 1 in sales in 2017 and 2018.

Directly below Humira’s top position of $19.9 million in 2018 global sales, orphan oncology therapies dominated the top-selling drug list for 2018, claiming spots two through seven. Celgene Corp.’s Revlimid (lenalidomide) for multiple myeloma held the No. 2 sales spot, with $9.7 million in global sales for 2018, according to the AHIP report. Merck Sharp & Dohme Corp.’s Keytruda (pembrolizumab) oncology immunotherapy was third, with $7.3 million in sales.

“Many orphan drugs have non-orphan indications in addition to their orphan indications. Furthermore many orphan drugs are used off-label, suggesting a larger market for the drugs than their approved indications may show,” AHIP concludes. “As a result, we are treating common diseases at orphan-high prices.”

Mesfin Tegenu, R.Ph., president of PerformRx, tells AIS Health that “orphan drugs now are more likely to be unique molecules like high-molecular weight biologics, gene therapies, cell therapies and tissue therapies.” Tegenu points out that “the overall number and general attention received by orphan drugs has increased, primarily due to the price tag associated with these medications.”

These days, orphan drugs are nowhere near rare in the pharma pipeline. “I think the overall quantity of orphan drugs has increased with specialty drugs now the dominant drug type in the pipeline,” Schafer says. “The types of diseases being treated are now much broader as well and include many ultra-rare genetic diseases that historically have had no treatment options.”

Orphan drugs in development also are more targeted, Schafer says, adding that “in some cases, the disease course is actually being modified, versus just alleviating symptoms. The most profound examples are undoubtedly the gene therapy drugs, which may, at least in the short term, be curative. But we have seen nongene therapy drugs that have had a significant impact on rare diseases as well.”

“Manufacturers have to find a way to assist in making the therapy available to patients.”

As precision medicine has taken a larger role in treatment planning, more manufacturers have invested in targeted drug therapies, which has caused greater competition and penetration in some therapeutic areas, Macher says.

However, greater competition means manufacturers need to take steps to stand out, she says: “Differentiation of a product’s clinical profile to current treatments such as a novel mechanism of action [MOA] or a decrease in adverse events is vital to communicate in a crowded market.”

It’s true that, in a rare disease area, many entrants will be “protected, either from a technical protected classes standpoint or in the sense that payers generally have an obligation to grant some level of access to products without a therapeutic equivalent, meaning they will have to be covered in some way by payers,” Macher says.

But payers can make access more difficult by requiring patients to receive generic or cheaper alternatives first before they are allowed to try a new therapy in the same class or a class that treats the indication, she says. “There are tradeoffs in this paradigm — while we would generally expect some level of coverage for novel MOAs, these are increasingly tied to companion or complementary diagnostics that payers can use to ‘gatekeep’ access. Given the high expense for many of these therapies, manufacturers have to find a way to assist in making the therapy available to patients, as high copays and out-of-pocket costs on a specialty tier can be unaffordable for many.”

Generally speaking, patient access to products intended to treat orphan diseases is better now than it’s been in the past, due to federal lawmakers’ efforts to expand access and a push by manufacturers to invest in some orphan conditions, Macher says.

Tegenu agrees. “In many ways, patient access has only improved due to new availability of orphan products,” he says. “Where there once were no treatment options, there now exists at least one product.”

However, there’s plenty more that drugmakers should be doing to aid patient access, Macher says. “In addition to engaging with advocacy groups and key opinion leaders, manufacturers need to invest in early-access programs, establish partnerships to close gaps in patients’ out-of-pocket costs and assist with the administrative hassle, which can lead to greater lag times between diagnosis and the start of the therapy,” she says.

Access depends on the disease state that the drug is targeted to treat, Tegenu says. “In some spaces, there are many therapeutic options and considerable competition, but even drugs coming out with competitive prices that can lower overall health care costs are having difficulty gaining access,” he says. “The question is, why?” Tegenu blames the system for drug rebates, saying the problem will persist until the industry adopts a different model.

Paying for orphan drugs involves “finding a strategy to cover an extremely high amount of money for a very small patient population,” Tegenu says, and few value-based payment contracts have been implemented despite “ample discussion.” Traditionally, manufacturers have offered rebates and maintained market exclusivity by way of product and patient life-cycle management, but “manufacturers are increasingly making lower net cost options — e.g., authorized generics — available and pursuing novel payment methods,” he adds.

Schafer notes that “patients certainly face some confusing and difficult barriers, including high cost share, restricted pharmacy channels and in-depth prior-authorization criteria. However, having a therapy available at all is far better than previously when no treatment was available.”

To improve access, manufacturers can discuss the value of their products to payers and provide guidance on appropriate criteria, Schafer says. “Manufacturers can also offer financial assistance programs. Payers can concentrate on implementing controls that help ensure cost-effective use of the product while avoiding onerous barriers whose only purpose is to impede payer access. Provider offices can be sure to ask patients questions around ability to afford a drug and can take time to become familiar with available assistance programs.”

The Academy of Managed Care Pharmacy has been working to gain access to new drug product information ahead of FDA approval, Tegenu says, which helps payers plan ahead for budgeting and evaluation for formulary placement. Some, but not all, manufacturers elect to participate in this preapproval exchange of “dossier” information, he says.

Launch Requires Value Proposition

Even if their product will be exclusive — and particularly if it’s not — orphan drugmakers need to check off numerous boxes to have a well-executed launch, experts say.

“Despite some removals of barriers to orphan drug development and launch, a successful launch still takes tactical and strategic planning, particularly in an area where manufacturers expect competition in the future,” Macher says. “Engagement with the patient community, tactical support and implementation of patient-access programs and investment in real-world data collection after launch are key components of a successful launch plan.”

It can be relatively straightforward to demonstrate evidence for the value of drugs for rare diseases to payers and patients, she says. “It may involve demonstrating either that there are no other treatments for a specific disease or genetic/molecular target of a disease, or, in a more complex case, that the new therapy is a substantial clinical improvement over existing therapy. The latter requires more investment.”

“In many ways, patient access has only improved due to new availability of orphan products.”

Improvements over existing therapy may be demonstrated through the design of a Phase III trial or through other comparative effectiveness research, Macher says, noting that Avalere is seeing increasing interest in the U.S. for real-world data to conduct CER for products that already are on the market.

Retrospective analyses using claims or electronic health records or prospective pragmatic clinical trials can decrease both cost and time for manufacturers as compared with randomized controlled trials, Macher says. “However, manufacturers should note that these require sophisticated trial designs to control for inherent biases, and also that these types of comparisons are rare prior to product launch,” she says.

A less-rare exception would be the use of real-world data as a comparator arm for a trial, she says, adding that this would likely not be sufficient for a pivotal trial design for regulatory approval but “certainly is something that could be run in parallel.” It’s also “an excellent area for consideration” for a product that’s already on the market but has an orphan indication in development, Macher notes.

Schafer urges manufacturers to present a “more robust value proposition to payers than ever before. It is not enough to say that the disease is ‘rare’ and ‘too small to be worth a payer’s time.’ Payers expect information on the disease, detailed data on efficacy and safety, any costs or health resource utilization that will be avoided by using the treatment and how the payer’s budget will be impacted.”

Manufacturers delivering value propositions meeting these criteria may find access more in line with the FDA label, and sooner, Schafer says. “Manufacturers also need to invest in their hub programs and patient support. High-cost orphan drugs usually come with high patient cost-share, meaning that patients will need assistance or may not get treatment.” He adds, “I think payers are looking for how an orphan drug will impact the payer’s budget, as well as the total cost of care. As payers integrate, we are seeing fewer payers that care only about one specific area of the health care dollar. Integrated payers care about total spend. Some manufacturers are better at telling this story than others. However, to be fair, not all drugs have cost and health resource offsets, so that becomes a challenge.”

“Integrated payers care about total spend.”

Although true orphan indications, by their nature, don’t have a great deal of information available prior to launch on the treatment, “at a minimum, payers need and expect manufacturers to have appropriately sized and identified the patient population, as well as the budget impact,” Macher says.

Finally, manufacturers of established orphan disease products can’t rest on their approvals — they also need to work to maintain payer access and market share, Macher says. To do this, they need to collect real-world data to prove effectiveness, not just efficacy, she says. They also need to continue with strong communication and relationship building through their liaisons, as well as offering pricing incentives, she says.

“Given the high price of many of these therapies, as well as an increase in approvals, greater scrutiny of costs in the future is to be expected by payers and other third parties, such as the Institute for Clinical Economic Review (ICER),” Macher says.

View the AHIP issue brief at www.ahip.org/the-rise-of-orphan-drugs. Contact Schafer via spokesperson Tess Rollano at trollano@coynepr.com, Macher via spokesperson Liz Moore at lmoore@avalere.com and Tegenu at mtegenu@performrx.com.

by Jane Anderson

Precision Medicine Group is an integrated team of experts in fields from advanced lab sciences to translational informatics and regulatory affairs, payer insights to marketing communications. Together, we help our pharmaceutical and life-sciences clients conquer product development and commercialization challenges in a rapidly evolving environment.