This document discusses orphan drugs and cost-effectiveness analysis in the UK. It notes that drugs for rare diseases are often deemed too expensive based on standard HTA methods. While measures have been taken to encourage orphan drug development, questions remain about whether a premium should be paid for these drugs. The UK's NICE concluded that no changes are needed for drugs treating diseases affecting over 1 in 50,000 people, but may develop special processes for rarer diseases. The document examines arguments for special status for orphan drugs and their implications for resource allocation decisions.

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