High Orphan Drug Prices Persist Despite Market Exclusivity Expiration

The article “Rare disease drug prices remain high due to lack of competition” published on ZIN’s site highlights a critical concern in the European pharmaceutical market regarding orphan drug prices—the costs associated with medications for rare diseases. A study by researchers from Amsterdam UMC, FAST, and the Netherlands Healthcare Institute reveals that orphan drug prices stay high even years after market exclusivity ends, with little competition from generics.

Findings on Orphan Drug Pricing Dynamics

The research illustrates key insights into orphan drug pricing:

Limited Competition After Exclusivity

• Even years after the 10-year market exclusivity period ends, orphan drug prices remain elevated, and competition is scarce.
• For orphan biologicals, biosimilar competition is often absent despite expired exclusivity.
• Generic alternatives emerge after an average of 14 years—longer than non-orphan drugs (11-13 years)—and reduce prices by only about one-third.

Small Molecules vs. Biologicals

• The study identifies differences between small molecule and biological orphan drugs:
  • Only 39% of small molecule and 11% of biological orphan drugs faced generic/biosimilar competition in the Netherlands post-exclusivity.
  • Generic entry is likelier for small molecule drugs with larger revenues, while biologicals face barriers regardless of market size.

Price Trends

• The median price of orphan drugs post-exclusivity stays at 81% of initial price, ranging from 11% to 104%.
• Orphan drugs with competition drop to 66% of initial price, while those without competition remain at 88%.
• Non-orphan drugs typically decline to 10-30% of original price within 1-3 years post-exclusivity.

Contextual Landscape

These findings align with broader concerns about pharmaceutical pricing in Europe. The European Orphan Drug Regulation aimed to boost rare disease treatments through exclusivity incentives, expecting prices to fall with competition. However, this model fails to ensure affordability.

Lonneke Timmers, secretary of the Scientific Advisory Board of Zorginstituut Nederland and study co-investigator, noted: “Society accepts high prices for medicines for small patient groups, but prices must drop over time. This is needed to fund innovations. If prices stay high, affordability suffers.”

Dutch research shows orphan drug reimbursement costs rose 45% from €235 million to €340 million yearly between 2015 and 2019.

Toward a Sustainable Healthcare Future

The research has major implications for health economics and market access:

Market Failure and Policy Reform

• The findings suggest market failure in the orphan drug sector, requiring policy action. The Dutch Appraisal Committee proposes new rules to lower orphan drug prices post-patent expiration, even without competition.

Barriers to Competition

• For small molecule orphan drugs, limited market size creates monopolies, as development costs outweigh revenues.
• Biological orphan drugs face higher registration and manufacturing costs, deterring biosimilars.

Proposed Policy Solutions

• Mandate price reductions after exclusivity, especially for biological orphan drugs.
• Introduce “guaranteed margin” systems, paying generic firms fixed fees above production costs.
• Consider “tiered pricing,” linking maximum generic prices to competitor numbers.

Balancing Affordability and Innovation

• Policies must balance affordability with ensuring orphan drug access.
• Overly aggressive pricing may deter market participation and innovation.

The research highlights a tension in pharmaceutical policy: high initial orphan drug prices may justify rare disease treatment development, but sustained high prices post-exclusivity threaten healthcare sustainability and patient access. For more, see the Netherlands Healthcare Institute.