Which place for orphan drugs in the strategy of pharma companies and payers?

As the 7th Rare Disease Day will be held on February 28, ALCIMED, an innovation and new business consulting firm, takes a closer look at the orphan drugs market and opens the debate on the potential perspectives.

Currently available orphan drugs only cover less than 5% of known rare diseases. Their sales are constantly increasing and represent today more than 10% of the global pharmaceutical market. As most Big Pharmas have seized opportunities on this market, payers are more and more reluctant to grant the high prices which have once characterized orphan drugs.

A fast-growing market: 7% of annual growth rate to reach $127 billion in 2018

More than 30 million among the 505 million European citizens suffer from rare diseases. In December 1999, the European parliament adopted the Regulation 141/2000 related to orphan drugs, which defines the “orphan” status, the different incentives for pharmaceutical companies and the market exclusivity conditions. Since then, more than 1,000 drugs have received the “orphan designation” and among them, 74 have been commercialized, among which 15 in 2012 and 2013. This trend is also observed in the USA, where 35% of the drugs approved by the Food and Drug Administration in 2012 were orphan drugs. In 2012, orphan drugs sales reached $83 billion, ie, 13% of the global prescription market. The expected annual growth rate between 2012 and 2018 is 7.4% (13.6% between 2004 and 2011), to reach a value of $127 billion.

Growing interest from Big Pharmas

If in the beginning, most orphan drugs were developed and launched by biotech companies (Genzyme, Shire, Actelion, etc), Big Pharmas’ interest for orphan drugs has been steadily growing. Examples are numerous. Among them, one can mention Novartis (NOVN: VX), which is the current orphan drugs market leader both in terms of number of commercialized orphan drugs (seven) and in terms of sales ($10.9 billion in 2012); Sanofi (Euronext: SAN), which has taken a strategic position with the acquisition of Genzyme in 2011, and more recently by entering into a deal with Alnylam; Roche (ROG: SIX), which has acquired in 2013 the worldwide commercial rights on a drug indicated for the treatment of acromegaly: US biopharma company Chiasma’s Octreolin (octreotide acetate) in an up to $585 million deal (The Pharma Letter February 18, 2013).

Moreover, Novartis has adopted a translational research strategy aiming at developing proof of concepts on a reduced number of patients suffering from a disease, most often a rare disease, for which the molecular pathway is well-known. Once the proof of concept is established, the development is then extended to others indications which follow the same molecular pathway.

An increasingly controverted pricing

Historically, orphan drugs have been granted very high prices. These prices were justified by the therapeutic value of the drug as well as by the small number of targeted patients with regards to the required investment for the development of the molecule. Until recently, payers were relatively inclined to accept these prices. However, the situation has changed. Indeed, payers tend now to consider orphan drugs as specialty drugs, and only so-called “ultra-orphan” drugs seem to be able to target very high prices. Indeed, in several European countries, orphan drugs have to undergo medico-economic analysis and pharmaceutical companies often have to review their ambition and lower the price of their drug. This was notably the case of Vertex for its drug Kalydeco (ivacaftor), indicated for cystic fibrosis patients with a specific mutation.

Which future for the development of orphan drugs?

“If there is a need for an in-depth thinking on the level of price the society is able to accept for such drugs, it is also absolutely necessary to maintain a level of attractiveness sufficiently high to ensure that pharmaceutical companies pursue their efforts in the development of drugs targeting rare diseases, among which more than 95% are still not covered by a drug,” highlights Nadege Penhaleux, project director at ALCIMED.

To do so, payers should take into consideration orphan drugs’ specificities when assessing them. In that perspective, a project aiming at homogenizing the requirements of data used for orphan drugs’ assessment at the European level is currently underway. This would allow avoiding discrepancies in the assessment results from a country to another, as well as a smoother pricing and reimbursement process for companies developing orphan drugs.