Value questions are expected to be asked by payers and others as larger pharma companies enter the orphan drug space and more treatments debut targeting rare diseases.

It is a price the sector will pay for the increased growth and competition, in part from large pharma companies. More demands are expected to be placed on market players, making it more difficult to establish a presence there.

Yet Pfizer, among those large pharmas boosting its rare disease presence, said innovation will create value, which will be followed by reimbursement.

Julie Smith, chief commercial officer for Enobia Pharma, said payers are getting more involved with rare disease drugs as more cross the $100,000 annual cost threshold, but the reimbursement environment should remain favorable.

“I think particularly as cancer drugs, which are typically given for terminal care, have forced … a discussion about value and performance, I think we’re going to start to see that bleed over into the even more highly priced ultra-premium priced products where it used to be able to be enough to save a life and convert a lethal condition into one where patients could live a normal life,” Smith said during a session at the Biotechnology Industry Organization’s recent International Convention.

“I think now they will require more even from smaller companies with regard to longer-term patient outcomes and really being able to track performance in the drug’s efficacy over time.”

That could mean more long-term clinical trials, especially in the post-marketing setting, to demonstrate efficacy or determine subpopulations where a product may work best. For Pfizer, which already works in the mainstream drug market, that is a typical requirement, said Andrew Callos, Pfizer VP, commercial development, hematology, renal, transplant, specialty neuroscience and endocrinology, specialty care unit.

“We’re used to doing post-approval commitments and we’re used to doing company-sponsored trials for most of our medicines so this isn’t something that’s kind of new to us,” Callos said in an Aug. 11 interview.

Much has been made about big pharma’s entry into the orphan drug space. Companies were attracted by the prospects for marketing exclusivity and a history of unchallenged reimbursement decisions.

Recent events, however, may have signaled changes could be coming, including more scrutiny over price. Outrage over the pricing of KV Pharmaceuticals’ pre-term delivery drug Makena (hydroxyprogesterone caproate), and FDA’s decision not to enforce rules that would bar compounding pharmacies from making cheaper versions, drew more attention to orphan drugs from legislators and others (Also see "FDA Steps Into Makena Pricing Dispute In The Name Of "Access"" - Pink Sheet, 4 April, 2011.).

Efforts to cut health care costs in the U.S. and Europe also likely will shed more light on orphan drug pricing as pressure mounts on payers to reign in reimbursement rates.

Reimbursement will depend in part on the value to the patient. Value can be created by finding treatments to conditions where there is no therapy, Callos said.

“We certainly want to price these things appropriately that payers look at that value and provide reimbursement because they also see the value,” Callos said. “As long as we’re focused on … creating new therapies, especially in the rare disease space, that don’t have existing therapies, then … you are inherently creating value, and the model we’ve seen is that payers will reimburse for that value.”

The National Organization for Rare Disorders, a leading advocate for rare disease patients, is among the groups signaling concerns about drug pricing. NORD’s president said during the National Institutes of Health’s 2011 Rare Disease Day that some drug prices were increasing beyond control and the group was looking at ways to deal with the problem.

The group eventually decided pushing for Orphan Drug Act changes was not necessary, but still planned to advocate for improvements (Also see "NORD Says Orphan Drug Act Is Fine As Is, Wants To Work For Improvements Within System" - Pink Sheet, 29 June, 2011.).

Researcher Says Pricing Transparency Needed

In an article published June 17 in the Orphanet Journal of Rare Diseases, Steven Simoens, professor of pharmaco-economics at Katholieke Universiteit Leuven, Belgium, argued for more transparency and an evidence-based approach to orphan drug pricing and reimbursement.

Using mostly European orphan drug data, Simoens argued orphan drug pricing uses the same economic principles as general drug pricing, but the monopolistic power of marketing exclusivity and lack of alternative therapies pushes costs up.

The issue does not apply to all orphan drugs. The small number of patients to be treated by an orphan drug also limits the viability of some of the products and changes the thinking about pricing, Simoens wrote.

He argued orphan drugs should be assessed individually by looking at current and planned indications, the availability of alternative treatments, R&D costs and patient counts to determine whether a high price is warranted.

“Health care payers could impose the requirement to justify the price based on detailed information about the R&D costs and return on investment at a global level,” Simoens wrote in the article.

While companies like GlaxoSmithKline and Pfizer are making big pushes into the space, they are being forced to outline pricing philosophies amid fears patients could be left behind.

A GSK executive said recently the company plans to price highly efficacious drugs “appropriately” to ensure patients have access to them and likely would not “ruin” the market (Also see "Who's Afraid Of Big Pharma? Perhaps The Rare Disease Community" - Pink Sheet, 14 April, 2011.).

Is Pricing Easier For Small Firms?

Callos told the Rare Disease Leadership Summit July 13 there will be a dialogue that continues where the company will be looking to determine prices that are right and fair.

Marc Beer, CEO of Aegerion Pharmaceuticals, said pricing is a very common concern in the orphan space and he hoped it remained because he wanted his company to maintain its independence.

“I think there’s a lot of value for ultra orphan commercialization to maintain their independence on how we think about pricing and how we think about getting the product out to patients on a world-wide basis,” he said at the BIO convention. “I think the pharma model is a very different model.”

Callos said during the interview that Pfizer recognizes there is a difference between rare disease and mainstream pharma operations. He said the specialty care unit has several specialized groups, including a research unit focused on orphan and genetic disorders.

Callos said it will allow “end-to-end development and commercialization capabilities devoted to rare disease.”

“Each one of these [diseases] has to be handled uniquely and each one of these has to be looked at in terms of what is needed in that patient population, how strong is the advocacy in that patient population, and make sure that we don’t even in rare disease have a one-size-fits-all [approach],” he said.

Relationship Building Imperative

Several small biotech companies and others in the orphan drug community have raised concerns about the effects large pharma could have on the rare disease sector.

Long-time players are arguing orphan product launches will require care and responsibility so they are not perceived as taking advantage of the rare disease community or raise the ire of payers.

Beer said the next five years will require companies in the space to act delicately and not appear to be taking advantage of patients in the orphan space.

Beer said large pharma likely will view the orphan space differently than the small biotechs that traditionally have developed orphan drugs.

“The evolution in the next five years is about doing very responsible commercialization of these products and not screwing up the last two decades of a lot of hard work … because it truly is a social question on whether we reimburse these products,” Beer said.

“And I want that social question to continue to be, ‘yes.’ We think that these patients deserve these products and we’re going to get therapy to them.”

Douglas Paul, VP and partner at Medical Marketing Economics, said he is cautiously optimistic about the role big pharma could play. He told the Rare Disease Leadership Summit big pharma’s distribution capabilities, skills and resources make their entry a good thing.

But he was worried those companies could hurt the sometimes personal relationships rare disease drug companies have with patients and advocates.

Callos said during the interview Pfizer has heard that reaction anecdotally, but not formally from the rare disease community. He said the company is concerned with addressing criticism, but has not focused on calming fears.

“I think there’s always going to be reaction to the largest pharma entering any space,” Callos said. “We always want to understand criticisms … but at the same time I think our focus really is on those patients who don’t have therapy so we haven’t spent a ton of time on that in terms of focus.”

By Derrick Gingery

Pricing Rare Disease Drugs Requires Care As Payers Increase Scrutiny

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