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Perspectives on Orphan Drug Reimbursement (Pt. 2)

Posted by Matt Breese on Aug 25, 2016

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Earlier this week, we discussed our Perspectives on Orphan Drug Reimbursement. Today, we continue that discussion.

Reimbursement Concerns

Payers rarely deny access to orphan drugs for patients who have the corresponding orphan disease and the specific, approved indication(s). However, many industry experts expect increased scrutiny of orphan drug usage as:

  • More orphan drugs enter the pipeline
  • Usage grows beyond the initial indications to non-orphan diseases and off-label use
  • Spending on orphan drugs continues to climb
  • Payers and health plans focus on controlling drug costs

When it comes to orphan drugs, value-based decision making falls short. Due to their high cost and limited market, few orphan drugs meet the low-cost/high-benefit standard payers look for in determining cost effectiveness. Whereas payers are likely to reimburse the cost of an orphan drug when the physician is prescribing it for a rare disease that has no other treatment options, they may be less likely to do so when it is used in treatment plans for diseases that are less rare and that may have alternative, less-costly treatments. It is the latter case that has begun triggering more active payer management and a more complex decision-making process.

Payers and health plans in the United States may turn to Europe for guidance as they look for better ways to evaluate cost effectiveness, and develop supporting documentation to help manage access, clinical appropriateness and costs. In Europe, many payers use MultiCriteria Decision Analysis (MCDA) to evaluate orphan drugs. The list of criteria, which sustains a more thorough cost/benefit evaluation, includes:

  • Degree of rarity
  • Level of research needed for market authorization
  • Level of uncertainty
  • Manufacturing complexity
  • Disease severity
  • Available alternatives
  • Level of impact on disease modification
  • Whether the drug has a unique indication or several indications

The Future of Orphan Drug Reimbursement

The results of a 2014 Xcenda survey of 61 health plans shows that plan administrators are considering stricter management guidelines for orphan drugs. At the time of the survey, 40 percent of the plans carefully managed orphan drugs that were at or below $50,000. Another 20 percent took notice when the price was between  $50,001 and $75,000. The survey also found that at those thresholds:

  • 97 percent require prior authorization
  • 55 percent move the drug to a specialty tier
  • Nearly 27 percent require step edits in a treatment plan
  • 25 percent increase the patient’s cost share

As the use of orphan drug therapy expands beyond patients with orphan diseases, the public can expect to see:

  • More management of orphan drug utilization, possibly at a lower trigger point (e.g., beginning at less than $50,000)
  • Possible restrictions on the use of orphan drugs and potential denials when proposed for indications other than those originally approved or when other treatments are available
  • A greater burden for patients through a more complex authorization process, implementation of coinsurance or higher copays for orphan drugs, and annual or lifetime orphan-drug benefits.

While the market was small and limited to those who had no other treatment options, payers found it less onerous to reimburse for orphan drugs. Now that the market — and the cost — of orphan drugs is growing and controlling drug costs is a high priority, payers and health plans feel compelled to more closely manage the reimbursement decision matrix. This increased scrutiny is sure to affect pharma, providers and patients.


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Topics: Specialty, Industry Trends, Market Access, Payer