Prices for Orphan Drugs Set to Skyrocket

The drama in February 2017 over the scheduled (and then paused) release of the Duchenne muscular dystrophy drug, Emflaza, brought renewed attention to the orphan drug category. (Orphan drugs are those medications that treat diseases affecting fewer than 200,000 people.)

Specialty drugs as a whole get plenty of attention these days, but the orphan drug subset of specialty drugs is not always well understood. The Orphan Drug Act of 1983 set up a system that gives manufacturers of drugs for this category enhanced patent protection and other benefits in order to incentivize drug development. Many large manufacturers are taking advantage of these rules to create a virtual monopoly in which they can set their own prices. As a result, orphan drug sales are on track to outpace the rest of the industry for the next five years, with more than $200 billion in annual sales expected in 2022.

Pharmacy benefit managers (PBMs) are already working to find ways to mitigate this expense through strategies such as formulary exclusions. Federal legislators are starting to look into how manufacturers may be manipulating the system to their benefit. In the meantime expect to see more reports of expensive new drugs designed to treat small populations.

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