Orphan drugs and their exorbitant price tags constantly make headlines around the world. The ground-breaking Orphan Drug Act (ODA) approved by the U.S. Congress in 1983 was once hailed as a great success. It propagated the pharmaceutical industry to venture into orphan diseases: rare conditions that affect so few patients that there was virtually no incentive to develop orphan drugs purely based on market demand by then.

Nonetheless, critics today protest that many pharmaceutical companies exploited loopholes in the ODA to reap disproportionate profits; they also cry for reforms of the ODA. Here we examine this controversial topic to decide if orphan drugs are truly worth their price, and how they impact healthcare.

The Orphan Drug Act of 1983

The ODA is a culmination of lobbying efforts from the National Organization for Rare Disorders (NORD). It provides many benefits to the pharmaceutical industry, including the generous amount of research grants, tax credits and exemptions from fees, and most importantly, 7 years of market exclusivity where the orphan drug inventor will be the sole supplier.

Collectively, the orphan drug legislation and its resultant programme have benefited more than 12 million Americans and with more than 1,800 medications receiving the orphan drug designation.

Critics were quick to point out that "markets with no competition" were vulnerable to exploitation. Pharmaceutical companies with the marketing authorisation hold tremendous power over drug prices when patients have no other alternatives. In addition, research indicated that the prices of these orphan drugs rose steeply when the patient population shrunk. In other words, the rarer the condition, the more expensive the orphan drug would cost.

Similar situations had happened in Europe where manufacturers had the incentive to charge the maximum price the market is willing to bear. The monopolistic nature of the orphan drug market meant that patients had little choices over their treatment options, and woefully, over the monetary price they had to pay.

How did it go wrong?

Professor Steven Simeons, a health economist at Katholieke Universiteit Leuven in Belgium, wrote that manufacturers have the tendency to perform "salami-slicing" where they split a disease into multiple sub-diseases as these disease subsets have a higher chance to qualify as an orphan disease.

Most commonly, this practice is achieved by employing pharmacogenomic analytical techniques. In addition, the companies also tend to save a tremendous amount of money from lower marketing expenses as they can focus their advertisement targets to fewer medical specialists. Marketing exclusivity in smaller markets also discourages the emergence of generic drugs.

The ever increasing prices of orphan drug bring devastating effects onto those patients who rely on them for survival, and put a heavy strain onto the healthcare payers such as the NHS of the United Kingdom or individual health insurers in Malaysia. Typically, these healthcare payers have little negotiating power and are frequently forced to accept whatever prices the manufacturing companies offer. The continuous upward spiral of drug prices is not sustainable, but the situation is not expected to improve in the near future.

Conventional pharmacoeconomic evaluations may not be applicable when it comes to assessing the cost-benefit ratios of orphan drugs, as these expensive drugs often only provide a moderate clinical benefit to patients. Nonetheless, societies often attach a higher value to saving patients with grave conditions and these may need to be taken into consideration.

All human lives matter, regardless if the person is suffering from a rare or a common disease. There is a need for a more balanced and transparent pricing of orphan drugs where precious healthcare resources can be optimised for the good of our patients. MIMS

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1. Cote T. Breakthrough Business Models. National Academies Press; 2009. p. 12–8.
2. https://www.optum.com/resources/library/world-of-orphan-drugs.html
3. Simoens S. Pricing and reimbursement of orphan drugs: the need for more transparency. Orphanet J Rare Dis. 2011;6(1):42.