Who'll Pay For Orphan Drugs?
Patients Few, Prices High; So Will Insurers Cover?
April 22, 2007
By JANICE PODSADA, Courant Staff Writer
Last fall, Wall Street analysts predicted that the price of Soliris, a brand new drug to treat a rare, life-threatening blood disorder, would fall somewhere between $100,000 and $300,000 for a year's supply.
Members of an online support group for people with the disorder, known as paroxysmal nocturnal hemoglobinuria, split the difference and guessed $200,000.
On March 26, 10 days after the U.S. Food and Drug Administration approved Soliris for the treatment of PNH, its developer, Cheshire-based Alexion Pharmaceuticals Inc., announced the wholesale price: $389,000 for a year's treatment.
Although the cost of Soliris is stunning, it's not the most expensive pharmaceutical on the market today. It's one of a group of drugs that have been developed to treat diseases that affect a relatively small number of people - in the case of PNH, just 10,000 worldwide.
For those with rare, debilitating diseases, the drugs are worth any price. But insurance companies - and by extension, their policyholders - are being asked to foot the bill at a time when health care costs are skyrocketing.
Why are such extraordinarily costly drugs being developed for so few potential customers?
For two reasons: the increasing influence of a federal law designed to promote the manufacture of such drugs, and the realization by smaller pharmaceutical companies that the drugs represent a lucrative entrepreneurial niche.
The development of so-called orphan drugs - those for disorders that affect fewer than 200,000 people - is one of the fastest growing areas in pharmaceuticals. The trend has developed in large part in response to the 1983 Orphan Drug Act, which offers tax breaks and guarantees of seven years of market exclusivity after FDA approval.
Before 1983, only 10 drugs for rare diseases had been developed in the previous 10 years, said Abbey Meyers, president of the Danbury-based National Organization for Rare Disorders Inc. Since then, more than 300 orphan drugs have been approved and 1,400 more are under development. The European Union, Japan and Taiwan have adopted similar orphan drug laws, Meyers said.
While relatively few people are affected by individual rare disorders, there are more than 6,000 such disorders that, taken together, affect more than 25 million Americans. Meyers, whose group was instrumental in the passage of the Orphan Drug Act, said people with rare disorders felt abandoned - orphaned - by the pharmaceutical companies.
"The drug industry felt that the size of the market related to how much profit they could make," she said.
But now, smaller pharmaceutical companies, particularly start-ups, are finding that developing drugs for rare disorders can pay off and help them compete with the much larger companies that dominate the industry.
One reason such drugs are so expensive, in addition to the small pool of potential customers, is because developing any new medication is a long, risky and costly undertaking. Only 30 percent of drugs ever receive FDA approval. So when it comes time to affix a price to an orphan drug, companies are eager to recoup their investment quickly.
Soliris, for instance, is Alexion's first FDA-approved drug and took 15 years and $800 million to develop, company officials said. The company said it now hopes to turn a profit in three to four years.
"We always understood these orphan drugs would be expensive," Meyers said, "but we never imagined the prices would go as high as they have."
First Drug For PNH
Once the sticker shock over Soliris subsided, analysts predicted that Alexion, a publicly traded company with 340 employees, was on track to reap $500 million annually from the drug's sale.
PNH sufferers were relieved that Soliris received FDA approval, but the question quickly became, could they afford it? Even if their health insurer was willing to pick up the tab, there was still a co-payment to contend with. At the typical 20 percent, it equaled a jaw-dropping $78,000 a year.
David Keiser, president and chief operating officer of Alexion, said the drug's benefits outweigh its cost.
"What's important to focus on is that Soliris is a drug that is making a dramatic difference in people's lives," he said.
Bill Sidford, 49, of Port Washington, N.Y., a participant in clinical trials for Soliris, said he experienced a transformation in September 2005. After a few treatments, Sidford's wrenching stomach pains ended, as did his regimen of monthly blood transfusions. The likelihood that he might die of a blood clot also decreased.
"I've lived 30 years with this disease," said Sidford. "I've gone almost two years feeling like I'm cured. The wear and tear on my body has ceased. I have my life back."
But his clinical trial ends soon. Sidford has three more free treatments before he's on his own. After that, he'll have to find a way to pay for Soliris, which he'll need every two weeks for the rest of his life.
For now, Sidford is depending on a team of patient advocates employed by Alexion to help him and others persuade his insurance company to pay for Soliris. "I'm waiting on that," he said.
Determining a new drug's price is a complex calculation that involves factoring in the cost of research and development, the rarity of the disease, whether it's disabling and life-threatening and how meaningful an effect the drug has, Keiser said.
Drug companies argue that the cost of developing a drug that treats 10,000 people is the same as for a drug that treats 1 million. The industry estimates the cost of developing a drug for FDA approval is $800 million, from inception to human clinical trials.
Elaprase, developed by Shire Pharmaceuticals Group PLC and approved by the FDA in 2006, is used to treat Hunter syndrome, a rare genetic disorder. Its price: $800,000 a year.
Myozyme, a product of Genzyme Corp. and also approved by the FDA in 2006, is used to treat Pompe disease, an often-fatal heart disorder. Its cost: $400,000 a year.
In the mid-1990s, one of the first pharmaceutical companies to set a lofty price for an orphan drug was Genzyme. After receiving FDA approval in1994, Genzyme set the price for its drug Cerezyme, which treats Gaucher's disease, at $200,000. Some people have to pay even more than that each year. Like PNH, Gaucher's affects about 10,000 people. In 2006, 4,800 people worldwide were receiving Cerezyme, earning Genzyme more than $1 billion in annual revenue, said Dan Quinn, a company spokesman.
Until the advent of Soliris there was no drug to treat PNH, which tends to strike young adults. The average survival rate after diagnosis is 10 to 15 years. The only available therapies involve blood transfusions or bone marrow transplants, with a 50 percent survival rate.
In PNH, both the red and white blood cells are deficient in a specific surface protein. Lacking that protein, the body's immune system attacks and destroys the blood cells. Soliris, derived from living cells rather than chemicals, works by blocking the part of the immune system that destroys blood cells.
"For patients who do well on this drug, it's like night and day," said Dr. David Araten, an assistant professor of hematology at the New York University School of Medicine who has treated more than 50 patients with PNH. "For them, it's going to be worth every penny ... and I am certainly hoping the insurance company will fully cover the cost of this drug."
Lucrative Or Excessive?
Some medical ethicists, including Paul T. Menzel, a philosophy professor at Pacific Lutheran University in Tacoma, Wash., and the author of "Medical Costs, Moral Choices," say the prices of many orphan drugs are excessive.
The rush for drug companies to recoup all their investment in a drug's development within a few years is wrong-headed, though the firms aren't entirely to blame, Menzel said.
"The fundamental issue here may be the ethics of people who invest in drug companies," Menzel said. "Investors ought to be willing to hang with the company for more years."
To be fair, the government should allow the same incentives for drugs that treat larger numbers while preserving incentives for drugs to treat rare disorders, Menzel said. "Drug companies have to be able to win big on some drugs and lose on others, and a drug that treats 10,000 people is a loser."
In terms of human value, a drug that treats 10 million people vs. 10,000 people represents a greater good, he said. That said, the reality is that for most people, the cost of orphan drugs is too high - "until it's your sister" who needs it, Menzel said. If costs are to come down, Menzel said, insurance companies will need to take a stand. "It's up to the insurance companies to say we won't pay $400,000 - we will pay $100,000, though."
And yet, not all drugs used to treat rare disorders were originally intended to do so.
When Dr. Leonard Bell, a Yale-trained cardiologist and molecular biologist, founded Alexion in1992, he hoped to develop a new anti-inflammatory drug that would block the actions of a specific part of the immune system, a drug that could be used to treat some very common disorders.
"We started out with a big list of diseases that this part of the immune system played a role in," Bell said. The roster included heart disease, arthritis, lupus and some rare diseases, including PNH.
Bell had hoped that Alexion's first experimental drug, pexelizumab, would help the 500,000 Americans who undergo coronary bypass surgery each year. In 2005, clinical tests revealed that the company's star candidate was safe, but didn't reduce heart attacks.
Alexion then turned its attention to eculizumab -Soliris - another experimental drug that had been under development for many years. It was originally hoped that Soliris would be effective in the treatment of arthritis or lupus, Bell said. But in tests of patients with arthritis and kidney disease, Soliris was found to be no more effective than some drugs already commercially available, Bell said.
Soliris was then tested on patients with PNH.
"Soliris was highly effective against PNH," Bell said. "It was the best key for the lock."
Who Will Pay?
This month, many PNH patients will receive their first dose of Soliris, which involves a 30-minute intravenous infusion.
"People are excited" said Sara Higgins, 29, who was diagnosed with PNH in 2003 and founded the online PNH Research and Support Foundation.
But their elation is tempered by the fear that they won't be able to pay for it, said Higgins, a post-doctoral fellow at Mount Sinai School of Medicine in New York who works with cancer patients.
"There's a lot of concern," Sidford, the trial participant, said. "Do you have to become indigent to afford it? Is it being priced so we can't receive it? Who has accessibility? Do you have to give up everything else to afford it? At this point, it's all conjecture."
Health insurers are in the early stages of evaluating their policy on Soliris.
"Whether or not a medication is categorized as an orphan drug does not determine our coverage policy," Lindsay Shearer, a spokeswoman for CIGNA HealthCare responded in an e-mail. "CIGNA covers FDA-approved medications consistent with their FDA labeling, according to the terms of the member's employer-sponsored health plan."
Jon Sandberg, a spokesman for Aetna, said Soliris would probably be covered under the company's medical policies.
Meyers said that because the price of orphan drugs is so high, it is the manufacturers' moral responsibility to create assistance programs so that anyone who needs the drug can get it. As a result, many firms that manufacture orphan drugs, including Alexion, employ patient advocates to do battle with the insurance companies, if need be.
"Each patient will have a case manager, a certified [registered nurse] to work with them to find solutions for any obstacle," Keiser said.
Alexion, has also set up a private charitable program, the Alexion Complement Foundation, for patients who qualify for Soliris but don't have access to insurance. Company officials say they are determined to make the drug available to anyone who needs it.
Such programs benefit patients, increase the likelihood that the drug company will be compensated, and protect against unwanted attention.
"The manufacturers don't want people going without," Meyers said. "They don't want people who need a drug going to the newspaper."
Even if insurers agree to pay for an orphan drug, the coverage is often limited since many insurance policies carry a $1 million lifetime cap. A patient with a $1 million cap probably has two years of coverage given a drug that costs $300,000 a year, plus doctors' visits, Meyers said. After that? "You can try to find a new job with health care coverage," Meyers said. Or you can file for Social Security disability benefits.
Higgins once feared that drug companies wouldn't pay attention to people with the disease.
Now that's been replaced by new worries - who will be able to get Soliris?
"When I founded the PNH Foundation," Higgins said, "I was afraid we would be overlooked by the pharmaceutical companies because we were such a small group." Now that there's a drug, she said, "People are saying: `Be patient. Let's see how the program from Alexion works.'"
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