Drug costs to treat rare diseases skyrocket while Big Pharma makes record profits

Sept. 12, 2019
Average annual cost for orphan drugs – $123,543 – is 25x more expensive than traditional drugs

Out-of-control drug prices mean too many patients are forced to choose between paying for their prescription or paying their mortgage, asserted America’s Health Insurance Plans (AHIP) in a press announcement. The organization released a new report that show prices for drugs that treat rare medical conditions are 25 times more expensive than traditional drugs – a 26-fold increase in two decades.

The Orphan Drug Act was passed in 1983 to encourage pharmaceutical manufacturers to invest in treatments for rare diseases and conditions – so-called “orphan diseases” - that had been ignored because their small patient populations (fewer than 200,000 Americans) made them unprofitable. The intent was to create incentives to encourage drug makers to develop treatments for rare diseases by enabling them to realize a modest profit.

However, this latest study shows that orphan drugs are now entering the market at higher prices than ever before, ranging from tens-of-thousands to hundreds-of-thousands of dollars per patient.

AHIP says drug makers have responded by building lucrative business models that empower them to achieve a gross profit margin of more than 80 percent – compared to an average gross profit margin of 16 percent for the rest of the pharmaceutical industry.

“Every patient deserves to get the medications they need at a cost they can afford, but drug makers are gaming well-intentioned legislation to generate outsized profits from drugs intended to treat a small population of patients with rare diseases,” said Matt Eyles, President and CEO of AHIP. “Now more than ever we need lawmakers to revisit the Orphan Drug Act. We must balance the incentives to develop new treatments for rare diseases while preventing drug makers from exploiting the system with launch prices that defy gravity, blocking competition, and increasing their prices on the same products year after year.”

Here are the takeaways from the AHIP study:

·  From 1998 to 2017, the average per-patient annual cost for orphan drugs increased 26-fold, while the cost for specialty and traditional drugs merely doubled

· The average annual orphan drug cost rose from $7,136 in 1997 to $186,758 in 2017

· Orphan drugs are 25x more expensive than non-orphan drugs

· Today, 88 percent of orphan drugs cost more than $10,000 per year per patient

· In 2017, 7 out of 10 best-selling drugs had orphan indications

·  Among newly launched drugs, the share of orphan drugs increased more than 4-fold, from 10 percent to 44 percent, over a 20-year period