1. Leeds Institute of
Health Sciences
Orphan Drugs & Cost Effectiveness
Dr Claire Hulme
Deputy Director
Academic Unit of Health Economics
c.t.hulme@leeds.ac.uk

2. Introduction : setting out the
problem
• Drugs for rare disease often deemed expensive to produce
• These drugs will, by definition, only benefit small numbers
of patients
• Under standard methods of health technology assessment
(HTA) incorporating economic evaluation few get close to
meeting cost effectiveness criteria
• This means that funding and patient access may be limited

3. Introduction: setting out the problem
• This has led to measures being put in place to safeguard
R&D; to encourage development of orphan drugs (e.g.
public funding for basic science, tax incentives, extended
patent protection, market exclusivity)
• But should a premium be paid for orphan drugs? Should a
special case be made for orphan and ultra orphan drugs
that don’t meet cost effectiveness criteria?
• We begin with the UK context

4. HTA process in England and Wales
• In England and Wales the National Institute of Health and
Clinical Effectiveness (NICE) issue guidelines based on
technology appraisals
• Technology appraisals are contracted out typically to
academic institutions
• Within the appraisal process we compare cost and
effectiveness of new therapy over existing therapy
(standard care) to produce incremental cost effectiveness
ratios (ICERs)
• The ICER gives a cost per quality adjusted life year (QALY).
NICE threshold for recommending a new technology is
£20/30K per QALY gain

5. UK context
• 2005 UK survey of orphan disease associations and
support groups
– Of 62 orphan conditions, some form of treatment was
available for 38 (69.1%)
– Where treatments were available 34.2% of them were
provided unconditionally by NHS
– A further 31.6% selectively available
– 34.2% no treatment was provided
(Reported in Drummond et al, 2007)

6. UK context
• In 2005 the Citizen’s Council of the National Institute for
Health and Clinical Effectiveness (NICE) were asked to
consider whether the NHS pay a premium for orphan drugs
• They recommended the NHS consider paying a premium
based on:
– Severity of disease
– Evidence of health gain
– Whether the disease is life threatening
• Following this consultation process, in 2006 NICE
submitted a proposal to the Department of Health for the
appraisal of orphan and ultra-orphan drugs

7. UK context
• NICE concluded that their existing methodology already
supports appraisal of these drugs and that no changes to its
processes were needed for orphan drugs with a prevalence
of 1 in 50,000 or more
• However, for ultra-orphan drugs (those with a prevalence of
less than 1 in 50,000), subject to a request from
government ministers, NICE would develop a process for
appraising cost effectiveness. To date NICE have not been
asked to implement this proposal

8. Should a premium be paid?
• Aim: To explore the justification for special status for rare
diseases and whether, within the cost effectiveness
framework, they should be treated differently from other
interventions
• Highlight some of the main reasons put forward for special
status and examine each within the cost effectiveness
framework: costs of R&D, feasibility of conventional
evidence; differential value of health care (for people with
rare diseases)

9. Development of drugs relative to small
market; high costs of treatment for each
patient
• The relationship between price and costs of production and
development has yet to be established beyond reasonable
doubt (Goozner, 2004; Relamn and Angell, 2002)
• The private sector will set price at the level they think the
market can bear; the budgetary impact may be an important
consideration in deciding how much to charge (correlation?)
• Some orphan drugs have proved to be highly profitable
under orphan drug legislation
• There is still the question of what will be forgone to pay for it
(costs and benefits)?

10. Orphan drugs will only have a small
budget impact
• Similarly within a decision making framework this doesn’t
provide insight into what it is displacing – what has been
foregone not just in terms of the costs but also the benefits
• This argument implies that lots of small cuts would have
less impact than one cut in the health care budget

11. It’s not possible to recruit adequate
sample sizes
• This comes down to uncertainty and level of evidence
• When considering resource allocation decision, evidence is
used from a range of sources; decisions should reflect the
quality of evidence taking account of uncertainty in
estimates of cost effectiveness
• The level of evidence required to support a decision should
depend on consequences of uncertainty – how much
society will lose in terms of resources and health outcomes
foregone

12. It’s not possible to recruit adequate
sample sizes
• The expected cost of uncertainty is largely determined by
the number of patients affected
• Existing frameworks for evaluation and appraisal will accept
lower levels of evidence for orphan drugs because the cost
of uncertainty is lower
• But is it necessarily true in all cases that it is not possible to
recruit adequate sample sizes?
• McCabe et al (2006, 2007) cite existence of large patient
registries created after drugs have been licensed e.g.
Gaucher’s disease

13. Ensuring access where no other
treatment exists
• This is not a defining characteristic of an orphan disease
(remember, the definition is based on rarity)
• In reality patients are not simply left with no medical
treatment at all; the comparison is best supportive care vs.
disease modifying care
• Best supportive care may have a greater impact on QoL; for
example McCabe et al (2006) suggest that formal ‘home
help’ might increase QoL to a greater extent than beta
interferon in multiple sclerosis patients
• Associated with this reasoning is ‘option value’ – that
disease modifying therapies offer the option of future
knowledge which can in turn lead to a ‘cure’

14. There is a societal value of orphan
drugs
• Value depends on the objective of the healthcare system
• Maximising health gains – clinical need as the capacity to
benefit and all individual’s health gain valued equally
• Implicitly embedded in cost effectiveness
• Cost effectiveness of drugs for rare diseases should be
treated in the same way as others
• Otherwise we imply that orphan diseases have a right that
supersedes the rights of other, more common diseases

15. There is a societal value of orphan
drugs
• But what about equality of access; equality of resource use
or allocation of resources in proportion to severity of
individual’s health, equality of health outcomes?
• Use of these different objectives would have profound
implications for allocation of resources – not just for the
treatment of rare diseases

16. QALYs don’t necessarily include all
relevant health gains
• Measuring health gain to incorporate all effects is
challenging - QALYs do not necessarily capture all that is
valued
• These arguments are also relevant to common diseases –
shouldn’t we just look to improve measurement and
valuation of outcome across both common and rare
disease?

17. Some final thoughts……
• There are now over 6000 orphan diseases
• Orphan status is likely to become more common
• Orphan status is likely to produce added incentives to
pharmaceutical companies
• Many of the arguments put forward for giving orphan drugs
special status apply more generally in health care; to
common as well as rare diseases

18. Some final thoughts……
• If society does have a preference for rarity – and is willing to
pay a premium this should be incorporated in to cost
effectiveness analysis provided there is robust evidence
that it is a preference for rarity alone
• Should we value health gain to two individuals differently
because one has a common disorder and one has a rare
disorder?
• The real choice posed by orphan status where treatment
cost is higher is between whether we treat one person with
the rare disease or several people with the common
disease – if the former then we are placing a higher value
on the health gain for the person with the rare disease