NGF Community Blog

Drug Pricing, a Complex Issue Affecting the Rare Disease Community

As the public debate over healthcare costs rages on, the cost of prescription drugs continues to be a hot topic. Drug prices for many prescriptions are soaring, and Americans are increasingly unable to bear the cost of their medications.

Though the situation is difficult for everyone, people living with rare diseases, like Gaucher disease, are under even more pressure to find ways to pay for life-saving medications.

Before the Orphan Drug Act

In the early 1960s, after severe birth defects were linked to the anti-nausea drug thalidomide, Congress passed the Kefauver-Harris Amendments to the Food, Drug and Cosmetic Act. These amendments increased oversight of the drug development process, both to ensure public safety and to prove the effectiveness of new drugs.

But the Kefauver-Harris Amendments had unintended consequences. As part of the new legislation, pharmaceutical companies were required to undergo stringent drug testing through clinical trials and a lengthy approval process with the United States Food and Drug Administration (FDA).

Because of the costs associated with these new requirements, as well as the smaller number of people living with rare diseases, drug companies withdrew many orphan drugs (rare disease medications) from the market. They cited “low commercial priority” as a reason to halt development, focusing instead on the research and development of drugs that would benefit larger numbers of people.

As a result, drugs used to treat rare diseases came to market at a much slower pace than medications for more common conditions. But in the 1970s, people living with rare diseases started to take action.

Lobbying Efforts Focus Attention on Drugs for Rare Diseases

In the 1970s, patient advocates and other support groups encouraged Congress to act, ensuring drugs for rare diseases weren’t left behind. Special committees and task forces studied the issue and, toward the end of the decade, lawmakers attempted to pass legislation that would prioritize the research and development of drugs for rare diseases. Ultimately, this new legislation failed to pass.

Passing the Orphan Drug Act

The bill that would become the Orphan Drug Act (ODA) was originally introduced in 1981. During congressional deliberations, many people living with Gaucher disease testified before Congress, including the CEO of NGF, Brian Berman. Both patients and their advocates emphasized the importance of developing these life-saving drugs, uniting to become a driving force to get the bill passed.

Thanks to people living with and affected by rare diseases such as Gaucher disease, the Orphan Drug Act was passed in 1983. The Act incentivized the development of orphan drugs and as a result, the number of orphan drugs exploded. Initially, the ODA:

  • Provided a 50% tax credit for clinical testing expenses related to drug development
  • Allowed pharmaceutical companies to waive some of the cost of regulatory fees necessary for development
  • Provided grants to drug companies to help keep costs down

As a result, drug makers invested heavily in developing orphan drugs. Since the introduction of the ODA in 1983, more than 600 new orphan drugs have hit the market, including enzyme replacement therapy (ERT) and substrate replacement therapy (SRT) for Gaucher disease.

Orphan drugs are now helping the 30 million Americans who have a rare disease live healthier lives. However, the cost for patients can be high. Because the rare disease community is still relatively small, and people with rare diseases purchase a smaller percentage of the total amount of medications produced by pharmaceutical companies, orphan drug sales make up just 7.9% of total drug spending in the United States. Many medications, such as ERT and SRT, are expensive, as drug companies need to make back development costs.

Changes to the ODA – and What it Means for Drug Costs

Recent changes to the ODA, coupled with the turmoil surrounding America’s current healthcare system, leaves people wondering whether we’re potentially facing unprecedented increases in the cost of rare disease drugs. A bill passed earlier this year slashed the tax credit by half, substantially reducing financial incentives for companies to continue developing orphan drugs.

Claire Sachs, patient advocate and expert on the nuances of pharmaceutical pricing, says, “The orphan drugs we have aren’t going away. But changes to the ODA eliminated a major reason that pharmaceutical companies invested in these drugs in the first place, so we may see the production of existing orphan drugs slow down. Real investment in new orphan drug development is also going to take a hit — it’s a huge step backward in the treatment of rare diseases.”

Keeping drug costs affordable is essential to a healthy, productive society. Many worry that the United States healthcare system won’t be able to manage the burden of these costs. Part of the solution lies with people living with rare diseases, who must come together and share their stories to help influence change.

Drug Prices Reflect Costs of Bringing New Medications to Market

The drug development process is long and expensive, even for drugs that don’t target rare diseases. While it’s hard to pinpoint, recent estimates put the cost of developing new drugs anywhere from $648 million to more than $2.8 billion. For all that monetary investment, only 0.001% of new medications even make it to preclinical (non-human) testing—and only 20% of those drugs are approved for use in human clinical trials.

Each new drug must go through a lengthy process before it receives FDA approval:

  1. Research: The first step is research to discover compounds that may yield therapeutic effects.
  2. Testing: Pharmaceutical companies then complete a rigorous process involving years of research, testing, and monitoring patient outcomes.
  3. Review: The companies submit drug data to the United States Food and Drug Administration (FDA) for a thorough review.
  4. Approval: If the FDA determines the drug is safe and effective, they approve it for entrance into the market.

And though these drugs are created to help people, pharmaceutical companies are still for-profit businesses. In setting drug prices, these companies look at the:

  • Cost of existing therapies for diseases
  • Market need for new medicines
  • Company’s costs for the development of the new drug

Negotiating Drug Prices Isn’t Cut and Dry

After a newly developed drug receives FDA approval, pharmaceutical companies offer the drug to the market at a list price. While most people who receive the new drug don’t pay the full list price, the figure is used as a place to start negotiations for how much money the pharmaceutical company will receive for their product.

Factors affecting how much the patient pays:

Third-party payers

Third-party payers, including governmental agencies like Medicare and private insurance companies, often purchase drugs in bulk. Because of this, payers can usually negotiate lower prices for the new drug.

But even then, third-party payers only cover some of the cost of the medicine — the remaining cost is passed on to patients in the form of co-payments (co-pays) and other out-of-pocket expenses.

Sachs says, “The negotiated price for each new drug differs according to which third-party payer is paying for it. For Americans, this means the cost of a new drug can be vastly different depending on the type of insurance coverage they have — and most Americans don’t have the luxury of choosing their insurer.” The sticker price for treatments such as ERT reflects the combination of what insurers will pay and the patient’s responsibility.

Employers

Employers also have a say in the cost of prescription medications. Companies decide how much money to spend on each employee’s health insurance, including what percentage of premiums they cover.

Additionally, employers influence which medications are covered under specific insurance plans when they select plans to offer their employees. A new job, or losing a job, can result in changes to insurance coverage, dramatically influencing how much a person pays for the drugs they need.

Rarity of the disease

Finally, the rarity of certain diseases factors heavily into costs for drugs like ERT and SRT. Recouping research and development costs from a small patient population is harder compared to drugs developed for common conditions.

As a result, drugs for rare diseases, including Gaucher disease, are generally priced much higher than medications for common conditions. Pharmaceutical companies often help patients reduce their cost through coupons and rebates for these medications.

Reining in Drug Prices Starts with You

Even after the passage of the Affordable Care Act (ACA), there aren’t checks and balances to help keep drug costs down. But action and vigilance can help lower your out-of-pocket expenses as much as possible.

Sachs recommends:

  • Research: Thoroughly study your employer’s insurance policy to understand exactly which drugs are covered under your plan. If you’re concerned about which medications your insurance plan covers (or doesn’t cover), reach out to a Human Resources (HR) specialist familiar with your plan. If you know of others at work with similar medical issues or concerns, write down your concerns together and share them with your HR department or leadership within your company. While your manner should be calm and conciliatory, your words should accurately describe the real worries and impacts you’re all facing. The more support you gather for change, the more likely your organization’s administration will take notice.
  • Advocate: The goal is price transparency for all pharmaceutical medications. There is already a movement toward increased transparency for the costs of producing drugs, and some companies are publishing prices online. As drug costs become more visible, it’s easier to compare prices among pharmaceutical companies. Increased competition among drug makers could help drive costs down. You can take it one step further by joining patient advocacy organizations working to bring orphan drug costs down. The National Organization for Rare Disorders (NORD) and NGF connect people living with rare diseases from across the country. By adding more voices, the message to lower orphan drug costs grows stronger.
  • Act: Talk with state and federal lawmakers, stressing the importance of price transparency and lower prices for orphan drugs. “Tell your story. Lawmakers are eager to hear from their constituents because they want to take action for the people they work for. Expressing your concerns and voting for change are two huge steps you can take to help lower the costs of orphan drugs,” says Sachs.

It may seem isolating to live with a rare disease, but remember that you’re not alone. People living with Gaucher disease from across the United States are already pushing for greater attention to issues like high drug prices. As more people join forces, lawmakers, pharmaceutical companies, insurance companies, and individuals will have no choice but to work together to find an effective solution to drug prices that works for the benefit of everyone.

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