Report: Cost of Drug Development for Orphan Drugs Less Than for Non-Orphan Drugs

Drug prices have captured the political and public spotlight as a primary target for reining in the soaring cost of healthcare. At the same time, drugmakers have increasingly focused on developing orphan drugs, aimed to treat patient populations of less than 200,000. In 2018 almost 60 percent of new drug approvals were for orphan indications. Yet, little research has been done on the cost of developing an orphan drug, until recently.

In a new study published in Orphanet Journal of Rare Diseases, researchers at the University of Toronto and the University of Calgary found that the cost of developing new medicines for rare diseases was about half the cost of developing new medicines for non-orphan indications.

“We found that the out-of-pocket clinical costs per approved orphan drug to be $166 million and $291 million (2013 USD) per non-orphan drug. The capitalized clinical costs per approved orphan drug and non-orphan drug were estimated to be $291 million and $412 million respectively,” reported the researchers. “When focusing on NMEs [new molecular entities] alone, we found that the capitalized clinical cost per approved orphan drug was half that of a non-orphan drug,” the researchers said.

Estimates of the research and development cost of a new drug vary widely, from Tuft’s 2013 analysis that put it at $2.6 billion in capitalized costs per newly approved medical entity to a more recent study by Prasad in 2017 that estimated the capitalized cost of developing a cancer drug at $757 million.

In the new study, researchers randomly selected 100 orphan drugs and randomly selected 100 non-orphan drugs approved by the U.S. Food and Drug Administration between January 2000 and December 2015. Using publicly available clinical trial data, versus confidential surveys used in other studies, they calculated out-of-pocket and capitalized clinical cost of drug development for these two classes.

Their analysis showed that the out-of-pocket costs per approved orphan drug were about 60 percent of the cost for approved non-orphan drugs. The capitalized costs per approved orphan drug were about 70 percent of the cost of the non-orphan drugs.  Differences in trial characteristics including trial size (smaller for orphan drugs) and length (longer for orphan drugs) were taken into account. Researchers noted that although their estimates were dependent on varied parameters, their findings about the differences in development costs for orphan and non-orphan drugs remained consistent.

Orphan drugs are some of the priciest medicines: enzyme replacement therapy Cerezyme to treat Gaucher disease can run $400,000 per year; Soliris for paroxysma nocturnal hemoglobinuria costs upwards of $500,000 per year; and Kalydeco to treat a subpopulation of cystic fibrosis patients costs more than $300,000 per year.

“When considering value of drugs,” the author wrote, “more discussion is required before assessing whether recouping R&D costs should be a consideration when setting prices for drugs.”

January 14, 2019