by Dr. Franco Mueller Partner/Medical Director, TFG Partners
We remain a bit skeptical of the studies mentioned in our previous post from KHN. Please look at the study dates, the data is from between 2007 and 2013. Many Pharma companies have boosted the price in the last two years and we are just seeing costs continue to skyrocket. There are more problems facing employers then just orphan drugs in the industry pipeline. The issues go much deeper into the pharmaceutical industry and orphan drugs are just one part of the horizon.
In our view, it is not necessarily the orphan drugs per se one has to be concerned about. With the future of treatment (new target therapies) individually drug market sizes will be much smaller and the question is what price point will the market bear. In this post blockbuster drug era, the drug markets will continue to be fragmented into condition market sizes. Currently the industry is making up the shortfall for reduced blockbuster income by increases of prices (on generics, brands and specialty), some of which are not sustainable. Big pharma is acquiring orphan drug developers to fill the blockbuster gap but this will be a transition period.
Think of a world were diabetes is not just Type I and Type II or Insulin and Non-Insulin dependent but 25 to 100 different diabetes conditions treated individually with targeted drugs each possibly of the market size of an orphan drug. And let’s also remember almost every new drug that enters the market is now specialty.
Therefore let’s drop labels such as Specialty and Orphan and just use Branded (New Drugs that are still protected by patent and exclusivity) and Generics when negotiating discounts and rebates. Using special terms such as orphan or Specialty creates incentives for higher prices. All drugs will be orphan Specialty. Therefore let’s drop the terms for pricing purposes and negotiate on total discounts and rebates. Alternative pricing model requested from a PBM: Guarantee that in next year my total drug cost for all my employees will not exceed 5% more than the consumer price index increase? Easy to measure and audit.