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Orphan Drugs Can Crush Your Benefit Plan

If you are a business owner or benefit manager that has a vested interest in containing the cost of your group healthcare plan, you want to familiarize yourself with a category of drugs known as “orphan drugs”.

The Orphan Drug Act of 1983 created incentives for pharmaceutical companies to develop “orphan drugs” considered not financially viable because they treat rare diseases affecting fewer than 200,000 people.

Incentives for these companies included waivers on millions of dollars in fees, seven years of market exclusivity and tax breaks for research and development.

For purposes of this article, we will be examining the financial impact that these drugs can have on a group healthcare plan.

Obviously, the human element is critically important, and the fact is these drugs have saved many lives and served as a tremendous asset to public health.

In any group healthcare plan, there will always remain a balancing act between taking care of your members and ensuring that the company remains financially viable.

Let’s look at some of the issues pertaining to these drugs.

Since the law passed in 1983, over 450 orphan drugs have been approved with several hundred more in the pipeline pending approval.

In 2016, 41% of the new drugs approved by the FDA were orphan drugs and 2017 was on track to be a record year for new approvals.

According to EvaluatePharma, the top 100 orphan drugs in the U.S. cost an average of $140,442 per patient last year.

At Andus, we have personally seen orphan drugs with a price tag in excess of $1,000,000 per year.

Unfortunately, Pharma companies have found some loopholes in the system that they have exploited which has led to the current pricing crisis.

An investigation by Kaiser Health News found that about 1/3 of drugs given the FDA’s orphan status have either been repurposed mass market drugs or drugs that received multiple orphan approvals. Some examples of this include the drugs Crestor, Abilify and Humira (the world’s best-selling drug).

The good news is the FDA is reportedly examining the orphan drug market with its current pricing structure and approval process.

The bad news is this is a government agency so if positive results for the consumer are to be had, it may take several years.

Couple that with the size and lobby power of Big Pharma and we conclude that benefit managers need the tools and education to address this situation on their own and not rely on hope as a strategy.

So, what are the financial ramifications if one or multiple members of your benefit plan are taking an orphan drug? Simply put, it will make the 8-20% annual premium increases you’ve been receiving seem like a Sunday picnic.

For those companies that continue to remain fully insured or even self-insured where you have opted not to do an Rx Carve Out, thereby letting the insurance carrier control the pharmacy component, you may be missing a significant opportunity to better control your outcomes.

Building your own Formularies and participating in rebates on brand name drugs are just a few of the many benefits of an Rx Carve Out.

The conflicts of interest that exist between pharmaceutical companies, insurance carriers and PBM’s (Pharmacy Benefit Managers) are forces that are hard at work against you.

At Andus, we are strategically ahead of the curve with issues such as orphan drugs and proudly deliver to our client’s objectivity, transparency and long-term cost control over their benefit offerings.

Please contact us today if you are interested in learning more.

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