What happens to orphan drugs when they lose market exclusivity? Do they face generic competition and price reductions like other drugs?
Post by Ischa Bruinsma, Consultant
The Dutch National Health Care Institute (Zorginstituut Nederland, ZIN) has recently published a report on research conducted on the prices and costs of reimbursed orphan drugs in the Netherlands. The report, titled “Monitor Orphan Drugs in Practice in 2020”, concluded that total expenditure for orphan drugs has increased. This is a trend that looks set to continue despite several orphan drugs approaching the end of their market exclusivity period. The key driver of this trend was the limited price decreases seen after orphan drug patent expiration. Other findings from the report include:
Total orphan drug reimbursement costs increased by 45% (from €235 million to €340 million per year) between 2015 and 2018/2019.
Only 7 out of 29 orphan drugs faced generic competition after their patent expiration.
At the end of their market exclusivity period, orphan drug prices tend to fall by an average of 1.5%.
The prices of orphan drugs for which there is a generic option have fallen by an average of 24%, while the prices of orphan drugs without a generic alternative have even increased by an average 5.5%.
The Dutch Appraisal Committee (Adviescommissie Pakket, ACP), which advises ZIN, has issued guidance that new regulations should be established for orphan drug prices to reduce the risk that they remain high after patent expiration. They suggest that price agreements for orphan drugs should include a requirement for the price to fall at loss of market exclusivity, regardless of whether a generic competitor enters the market. This raises the question of whether prices of orphan drugs remain high in other countries after their period of market exclusivity and what regulations are being used by other European countries to address pricing concerns after loss of exclusivity (LoE). In France, the Transparency Commission (CT) can review the reimbursement status of a given drug at any time and similarly the Pricing Committee (CEPS) can revise its price at any time. A review does not need to be prompted by a specific market event such as the entry of generic competitors. Price reductions are driven largely by market competition, a mandatory price reduction of 20% at generic launch, and formation of generic price groups. However, when there are no generics, there is no specific regulation for how much the price of orphan drugs should be reduced once they lose exclusivity. In situations where orphan drugs have faced generic competition, significantly higher price reductions are seen. For example, price reductions of 70-80% were observed for Revatio (sildenafil) and Tracleer (bosentan). On the other hand, when generic competitors have not launched, price reductions are very limited; both Exjade (deferosirox) and Ventavis (iloprost) saw their list price reduce by only ~10% after LoE. In Germany, once a drug loses patent protection the mandatory discount that it is subject to increases from 7% to 10%. An additional 6% discount is applied to non-reference priced off-patent branded orphan drugs. These discounts seek to attain a portion of the cost savings that would be realised if generic competitors entered the market, which would prompt the creation of an ATC5 level reference price group and apply a reimbursement limit to the branded orphan drug. Nevertheless, these discounts do not fully compensate for the cost savings that would otherwise be realised through generic competition. In Spain, orphan drugs are excluded from the reference price system but a compulsory discount of 15% must be granted on the public price of off-patent drugs that have been reimbursed for more than 10 years (or 11 years if a new indication has been approved) and for which there is no generic/biosimilar alternative. Again, these discounts generate cost savings, but they fall short of those possible with generic competition. In the UK, as in the Netherlands, there are no mandatory discounts for off-patent orphan drugs and there is no reference price system. Price reductions are driven by generic competition and tendering. It is possible that generic competition for orphan drugs remains limited due to difficult production processes and limited patient numbers (equating to limited financial return). To address this challenge European payers may look to build up price mechanisms to enable cost savings to be achieved after an orphan drug’s patent expires, rather than relying on competitive price pressures that are not guaranteed. What would be a fair price reduction for off-patent orphan drugs, irrespective of generic availability? Should a fixed percentage discount be applied such as in Germany and Spain, or is a tailored approach more appropriate? What would the individual agreements suggested in the Netherlands look like in practice? Could manufacturers play a role by proactively seeking agreements that work for all parties? Different solutions might work more or less effectively in different healthcare systems but this is certainly an area that payers may consider exploring. With increasing pressures on healthcare budgets due to ageing populations and the continued entry of high-cost innovative medicines, payers are likely to evaluate policies that have potential to drive cost savings.
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