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Orphan Drug Prices Under Siege in Austerity-Minded Europe

Photographer: Antoine Antoniol/Bloomberg

As more medicines win approval to treat diseases that affect no more than 5 in 10,000 people, austerity-conscious governments in Europe are applying the same pressure to so-called orphan drugs that they do to widely prescribed medicines for heart disease and diabetes. Close

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Photographer: Antoine Antoniol/Bloomberg

As more medicines win approval to treat diseases that affect no more than 5 in 10,000 people, austerity-conscious governments in Europe are applying the same pressure to so-called orphan drugs that they do to widely prescribed medicines for heart disease and diabetes.

Treatments for rare diseases are hot properties for drugmakers, who covet the medicines for their exclusive markets, tax breaks and through-the-roof prices. Now that’s changing.

This year, the Netherlands demanded cuts in the prices of enzyme-replacement therapies including Sanofi (SAN)’s Myozyme, which costs 700,000 euros ($909,000). Ireland won a “significant” reduction in the cost of Vertex Pharmaceuticals Inc. (VRTX)’s Kalydeco for cystic fibrosis, and the U.K. rejected a recommendation to expand the use of Alexion Pharmaceuticals Inc. (ALXN)’s drug Soliris, which is prescribed for two blood disorders.

As more medicines win approval to treat diseases that affect no more than 5 in 10,000 people, austerity-conscious governments in Europe are applying the same pressure to so- called orphan drugs that they do to widely prescribed medicines for heart disease and diabetes. That’s putting the brakes on an $86 billion sector of the pharmaceutical industry that’s been expanding twice as fast as the market as a whole.

“The price of orphan medicinal products is under much more debate,” said Yann Le Cam, the chief executive officer of Eurordis, a Paris-based group that represents patients with rare diseases. “We have seen countries which were providing good access to orphan medicinal products now questioning the continuation of reimbursement.”

The U.S. may be next to join the orphan drug price-cutting push as government and private insurers search for savings, said Mary Dunkle, vice president of communications for the National Organization for Rare Disorders, a patient-advocacy group based in Danbury, Connecticut.

Expanding Sales

“It’s a growing area of concern,” Dunkle said in a telephone interview. “The word ‘sustainability’ is something that we hear quite a bit now.”

The size and scope of price cuts, while closely guarded, are considered significant in several countries. Global orphan drug sales increased at almost 10 percent a year between 2005 and 2011 to $86 billion, compared with 4.8 percent for the top 40 companies which had $583 billion in sales in 2011, according to Datamonitor Plc, a London-based market researcher. That advantage may narrow, as sales of drugs for rare diseases will probably expand at 0.7 percent a year between 2011 and 2017, compared with 0.6 percent growth in total sales for the top 40 drugmakers, forecasts Datamonitor.

More than 70 therapies for rare diseases have been approved in Europe since 2000, when the European Commission introduced financial incentives to encourage their development. Those measures followed similar legislation in the U.S., where more than 400 such products have been approved in the last 30 years, according to the Food and Drug Administration.

Advancing Science

“The science of rare diseases is advancing very quickly now,” Dunkle said. “We want to see that being translated into treatments for these people who currently don’t have any. We also understand there are economic forces at work now and we want to see pricing established and maintained at a level that’s going to be sustainable so that everybody can benefit.”

The incentives for companies have helped make orphan medicines sought-after assets for drugmakers seeking to sustain earnings as mass-market pills such as Pfizer Inc. (PFE)’s Lipitor lose patent protection. Between 6,000 and 7,000 rare ailments affect as many as 30 million Americans, NORD said, citing the U.S. National Institutes of Health.

The $20.1 billion acquisition of Genzyme in 2011 gave Paris-based Sanofi a clutch of orphan drugs that reaped 2.8 billion euros ($3.6 billion) last year, more than the blood thinner Plavix, which lost U.S. patent protection in May.

Still Attractive

“These drugs as a rule tend to be transformative, tend to be potentially life-saving,” said David Meeker, chief executive of the Genzyme unit. “The unmet need in the orphan-disease space is enormous.”

The increased attention to prices in Europe isn’t diminishing the attractiveness of orphan drugs, Meeker said.

“The number of assets out there is increasing,” he said in a telephone interview. “Those that have some success, there is certainly more attention, and therefore the competition for these assets has gone up.”

NPS Pharmaceuticals Inc. (NPSP), the Bedminster, New Jersey-based developer of a treatment for short bowel syndrome that won FDA approval in December, priced the drug, Gattex, at $295,000 a year for a disease that afflicts as many as 5,000 people in the U.S.

“In the U.S., if you truly go after an indication that is small, then yes, you can still take higher prices, and you get away with it,” Michael Leuchten, an analyst at Barclays Plc in London, said in a telephone interview.

European Scrutiny

European payers are a different story, he said.

“They’ve started looking at how much money some of these companies are making,” he said. “If you make more than a billion dollars out of a product, at some point somebody’s going to wake up and say, ’Hang on a second, clearly you’ve recouped your R&D substantially, and you’ve made an economic return that’s healthy, and we will have to go after you in terms of price because otherwise it’s unfair.’”

While the European Commission approves drugs for all 27 members of the European Union, each nation is responsible for deciding whether and what it will pay for them.

Dutch Health Minister Edith Schippers said in January that Sanofi and Shire Plc (SHP) must cut prices for drugs against two rare genetic disorders, Pompe and Fabry diseases, to “acceptable levels” to remain in the nation’s basic insurance package covered by all health insurers.

‘Dramatically Less’

Karin IJzendoorn, a spokeswoman for Schippers, declined to say what the minister meant by “acceptable levels,” and said the ministry doesn’t comment on ongoing negotiations. Fabry patients in the Netherlands pay as much as 300,000 euros a year for treatment, while drugs against Pompe cost as much as 700,000 euros a year, IJzendoorn said in an e-mail. Sanofi’s Myozyme is the only medicine for Pompe.

“We don’t charge these prices because we can get away with it,” Sylvie Gregoire, the then-head of Shire’s orphan-drug business, said in an interview in February. “The cost of development of these drugs is no different, and the risk is no different. The number of patients in which it will be utilized is dramatically less.”

In January, Ireland’s National Centre for Pharmacoeconomics recommended against the government paying for Vertex’s cystic fibrosis drug Kalydeco, because the Cambridge, Massachusetts- based drugmaker couldn’t demonstrate cost-effectiveness at its price of 234,804 euros per patient per year. The drug won recommendation less than two weeks later after an agreement with Vertex “significantly reducing the budget impact of the drug,” according to a statement on the NCPE’s website.

Confidential Terms

The terms of the agreement in Ireland are confidential, Megan Goulart, a spokeswoman for Vertex, said in a telephone interview.

Alexion, the Cheshire, Connecticut-based maker of Soliris, said in January that the U.K. government decided not to follow the recommendation of an advisory group that the drug be used in patients with atypical hemolytic uremic syndrome. The government referred the matter to the National Institute for Health and Care Excellence, which takes over the assessment of drugs for ultra-rare diseases from the Advisory Group for National Specialised Services this month.

Assessments of these drugs probably won’t be based solely on quality-life years, Phil Ranson, a NICE spokesman, said in an e-mail. He declined to comment on what criteria NICE will consider.

Uneven Patchwork

“There is a lot of anxiety, particularly among patient groups, that by focusing on the cost of the drug, rather than the cost of the condition, there will be a reduced likelihood of patients with very rare conditions being able to get access to innovative therapies that have a high cost per patient,” said Alastair Kent, director of Genetic Alliance UK, which represents patients with rare diseases.

With different countries applying different criteria for deciding what represents value for money, an uneven patchwork of access and prices has developed across the region.

“There is pressure on price, but that’s not the biggest problem,” said Richard Bergstrom, director of the European Federation of Pharmaceutical Industries and Associations. “It’s blockage on volume.”

About one-third of patients in the European Union who need an orphan drug either can’t get it or have difficulty gaining access to it, according to Eurordis, the patient advocacy group.

While drugs such as Novartis AG (NOVN)’s iron-controlling medicine Exjade are widely available, patients have limited access to treatments such as Shire’s Elaprase for a genetic disorder called Hunter syndrome. Others, including EpiCept Corp. (EPCT)’s leukemia drug Ceplene, are “scarcely available,” according to Eurordis.

Different Prices

“Why is it that Romanian patients with a rare disease don’t get these medicines? Because they don’t have as much money,” Bergstrom said. “Well then, we have to start talking about paying different prices.”

The European Commission, with 13 EU countries including France, Italy, Spain and Sweden, is weighing a plan to collaborate on assessments of the value that orphan drugs represent, a step that Bergstrom said may lead to increased use across Europe. Under the plan, value would be weighed against criteria such as the rarity of the disease, the availability of alternative treatments, the effectiveness of the drug, the response rate and the degree of certainty.

The report of a working group developing the plan may be endorsed by an EU committee this month, Catherine Berens, a policy officer at the European Commission, said in an e-mail. Differential pricing has only been “marginally mentioned” in the group, she said.

“What it’s going to mean for my members is yes, there may be lower prices in certain countries, but with that comes greater access and higher volumes,” Bergstrom said. “Bottom line, maybe we’re not going to make much more profit, but we’re going to make profit while even more people benefit.”

To contact the reporter on this story: Simeon Bennett in Geneva at sbennett9@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

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