An analysis of the U.S. Veterans Affairs (VA) list pricing (considered as the lowest prices in the U.S.) against list prices in six E.U. markets of orphan drugs showed that list prices at launch in the U.S. average 1.64 times higher than the E.U., varying from 1.46 times higher than Denmark to 2.11 times higher than Poland¹. Annual costs for orphan-designated drugs are often over $100,000¹, making these multipliers significant.

In this article we explore key factors influencing U.S. orphan drug list prices, the potential impact of new E.U. pharmaceutical legislation and how pressure to curb spiraling drug prices is falling on U.S. policymakers.

Analysis of list prices in Denmark, France, Germany, Greece, Poland and Spain showed that the pricing gap widens over time; pre-2015 FDA therapies were priced 1.81 times higher in the U.S. compared to the E.U., and 2015-2019 FDA therapies were 1.42 times higher, reflecting more assertive E.U. price renegotiations¹.

To further exacerbate this price differential, it is common practice in the E.U to establish confidential discounts and agree on a net price for orphan drugs. A major driver for this practice is the increased utilization of external reference pricing (ERP) in the E.U, which allows benchmarking to list prices in other countries. ERP incentivizes manufacturers to negotiate confidential agreements for their products, to protect the list price, resulting in a gross-to-net difference. Innovative contracting has been adopted by numerous markets and manufacturers as one mechanism to establish confidential pricing agreements. Could this be something the U.S. explores further for orphan & gene therapies?

Research has shown a growing gross-to-net difference in the major E.U markets, as a method to protect against increasing pharmaceutical expenditure². Looking specifically at orphan drugs, since 2020 average net discounts are estimated to be around 20% in Germany and ranging between 20% and 55% in Italy³. In the U.S. the gross-to-net difference is smaller and has remained stable. This means that even though the gap between U.S. and E.U. list prices is large, the differential between net prices are likely to be even greater.

Is this price gap between the US and EU sustainable?
Views from Verpora’s Payer Network

Gene therapies

Genetic mutations are the causative factor for ~85% of all rare diseases⁴. With the FDA predicting 10-20 gene therapy approvals per year by 2025⁵, many of which will be designated as orphan drugs. Verpora’s payer network has highlighted growing concerns around sustainability, with calls in the U.S. for population risk-pooling to protect smaller systems disproportionately impacted and decreasing availability & increasing costs of stop-loss insurance.

External reference pricing (ERP) in the US

Back in 2019, a report prepared by the Ways and Means Committee (U.S. House of Representative committee) highlighted the opportunity for $49 billion savings in Medicare Part D alone, through the introduction of ERP¹. Although routine in E.U. markets, implementation in the U.S. may pressure E.U. markets to increase the future list and net pricing of orphan drugs to compensate for lower U.S. list prices. Verpora believes this could extend delays in patient access to innovative therapies following E.U. authorization.

U.S. orphan drug pricing: Product characteristics that are driving the price differential

A U.S. focused study involving 257 new drugs, including 130 orphan therapies, identified the key factors influencing U.S. drug list prices at launch by calculating a median cost multiplier for treatments with specific attributes⁶.

The price reduction (list and net) often required versus the U.S. to secure access and reimbursement for an orphan product in the E.U. can be a surprise. Higher U.S. launch prices given for U.S.-manufactured therapies explains why we often see larger internal pricing barriers for U.S.-based clients who've already launched in the U.S. and are preparing for launch in other global markets. The findings within this article should assist in overcoming some of the internal barriers often faced.

Changes to EU pharmaceutical legislation

Currently, registration of orphan drugs is centralized via the European Medicines Agency (EMA), with reimbursement and pricing decisions remaining with the individual markets. But this could change, The European Commission is proposing an ambitious revision of legislation, with a primary objective to

‘ create a single market for medicines, ensuring that all patients across the E.U. have timely and equitable access to safe, effective, and affordable medicines’⁷

This revised legislation outlines the intention to roll out medicines across all E.U. markets within two years of market authorization to tackle the current disparity of access for orphan therapies across markets within the geography.

Additionally, market exclusivity would be cut from 10 to 8 years, which could further enhance the U.S. list and net price differential over time for orphan therapies, given that the E.U. appear to be more aggressive in price renegotiations.

If the E.U. can act as a single-payer for the second-largest market in the world (behind the U.S.) for pharmaceuticals holds negotiating power, so pricing decisions may soon be within remit; could this be how the E.U. protects against pressures to increase future orphan drug pricing (list and net), should the U.S. start to clamp down on spiralling drug costs.

Conclusion

List prices for medicines in the U.S. have dwarfed those of other global markets for years, with many factors driving this for orphan therapies. Verpora’s payer network has raised both growing sustainability concerns in the U.S. and highlighted key changes in the E.U. landscape that could affect future pricing processes for high-cost gene and orphan therapies.

Innovative contracting has been used by numerous manufacturers and E.U. markets to overcome barriers when agreeing on a price for these therapies, and the U.S. may look to explore this as a possible solution when tackling the spiralling drug prices in orphan and gene therapies.

If you'd like to find out what's been going on in innovative contracting, contact us about our global and U.S. trackers.

Contributors

Adam Buckler
MPharm, PGDip GPP, Senior Business Consultant Verpora
& Former Oncology Pharmacist, Royal Marsden Hospital, London
LinkedIn

Adam is an experienced pharmacist having worked in the UK NHS for over ten years in acute Trusts and an internationally renowned oncology/ haematology centre. Acting as the lead pharmacist for Electronic Prescribing & Medicines Administration (EPMA) and being responsible for the Education and Training of pharmacists, Adam developed a breadth of experience. With an expertise in healthcare data systems and capabilities, Adam is an expert in the field of electronic prescribing. At Verpora Adam leads Innovative Contracting consultancy projects and client contracting capability build programs. Adam is a certified member of the BHBIA & registered with the GPhC.

Sources

1. Comparison of US and EU Prices for Orphan Drugs in the Perspective of the Considered US Orphan Drugs Act Modifications and Discussed Price-Regulation Mechanisms Adjustments in US and European Union (nih.gov), Zelewski et al., 2022

2. Projecting Pharmaceutical Expenditure in EU5 to 2021: Adjusting for the Impact of Discounts and Rebates, Espin et. Al., 2018

3. The Evolution of Orphan PRMA Environment in the US, EU4, and the UK, Indegene 2021

4. National press foundation, rare diseases: small numbers, big problem, accessed Jan 2024

5. U.S. FDA, Statement from FDA Commissioner, Jan 15 2019, accessed Jan 2024

6. Disentangling the Cost of Orphan Drugs Marketed in the United States (nih.gov), Althobaiti et al., 2023

7. European Commission: Frequently Asked Questions: Revision of the Pharmaceutical legislation, accessed Jan 2024

Disclaimer  

Content in this article is based on secondary market research using externally sourced data available in the public domain. Opinions and commentary are those of the authors and do not reflect views of any commercial organisation or government body mentioned in the article. For any questions relating to the article please contact adam.meads@verpora.com.   

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