Orphan drugs target smaller populations with rare conditions

Key Points

APPROVALS FOR ORPHAN DRUGS-defined by the Food & Drug Administration (FDA) as medications treating a condition that affects fewer than 200,000 people nationwide-are making progress, albeit cautiously and methodically. It's managed care's challenge to review the scant evidence supporting the drugs' use and identify the members who would benefit from them.

The Orphan Drug Act provides incentives to drug companies to stimulate development, including federal tax credits to manufacturers and a seven-year marketing exclusivity period for the first sponsor of a designated orphan drug that receives FDA marketing approval. The credits are equal to half of the qualified clinical research costs for a designated product.

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Like the biologic drugs, orphan drugs typically carry a hefty price tag-a conundrum for health plans, says Randy Vogenberg, principal at the Institute for Integrated Healthcare, Sharon, Mass. He says that payers need to identify members with rare diseases, study the costs and build a budget based on risk.

"Larger national plans will be able to adapt more easily than smaller ones, but each organization will feel an impact despite its size," he says.

Vogenberg recommends that health plans consider benefit design innovation or a benefit carve-out to cover the growth of orphan drugs.

Despite the high costs of most orphan drugs, Matt Hosford, director of pharmacy for Wellmark Blue Cross and Blue Shield in Des Moines, Iowa, says orphan drugs are not the ones driving costs but instead, blockbusters like Lipitor are.

Hosford says that Wellmark determines placement of orphan drugs on formulary much like it does any other drug-by considering total value.

"Safety and effectiveness are starting places. The challenge is finding enough data to support these objectives," he says.

Jim Carlson, pharmacy director, heath plan services for Group Health Cooperative based in Seattle, says decisions also take comprehensive outcomes into consideration to determine if a drug truly holds value.

"A clinical trial may not produce evidence of benefits that is really meaningful," Carlson says. "The drug may prove to increase blood cell count-a lab result-but there is insufficient data to demonstrate improved quality of life for a patient or risk of disease."

He says the industry shouldn't focus its resources on areas where good evidence does not exist.

"As good stewards of resources, we do not want to prevent access to proven therapies but we do want to eliminate waste," he says.

Group Health does not support a specialty tier so orphan drugs, if included, would fall on the second or third tier.

"The development of drug and biological products for the treatment of orphan disorders presents many challenges for FDA and drug developers," says Sandy Walsh, an FDA spokesperson. "These challenges include the small numbers of patients with each disorder available for enrollment and evaluation in clinical trials and the wide clinical diversity of the disease manifestations represented within the disorders. Most of these drugs lack appropriate endpoints and outcomes measures to assess the effects of potential treatments."