Description
Orphan drugs, also in the EU, are very expensive: indeed, their price is normally higher than that resulting from the value-based pricing (Paulden, et al. 2015). This is due to the fact that R&D expenses for orphan drugs are recouped from a small number of patients, resulting in an individual high treatment costs (cfr. Zongelsma, for Spinal Muscular Atrophy, costing around 2.1 million euros per course of treatment per patient).
However, it seems that the 10-years market exclusivity attached to the orphan designation, provided by the EU orphan Regulation from 2001, is the main factor that enables pharmaceutical companies to apply such high prices (Technopolis, 2019). This policy tool, designed to provide the incentives on companies to produce medicines that treat diseases with a low prevalence, endows them with a strong market power that governments/payers are less able to counterbalance.
The resulting monopolistic prices pose a significant trade-off between the need for national governments to grant access to very expensive drug therapies to patients affected by life-threatening or chronically debilitating diseases, and the policy objective of providing pharmaceutical companies the economic incentive to produce these drugs (European Commission, SWD(2020) 164 final).
The striking of this trade-off between efficiency and equity in public health care protection seems to be less difficult for the so-called repurposed drugs, i.e. for known active substances which were already authorised for a given therapeutic purpose, used off label for the rare disease, and marketed at low prices. In that case, high prices for the “new” orphan products seem to be unjustified, since the costs borne to repurpose or reposition an existing product are likely to be substantially smaller than those needed to develop a completely new drug (European Commission, SWD(2020) 164 final).
The enforcement activity of some EU National Competition Authorities (NCAs) in relation to the Leadiant case in 2021-2022 shows that competition law can play an important role in disciplining the market power exercised in relation to repurposed orphan drugs.
Leadiant was found to have abused abused its dominant position by charging excessive prices for the CDCA Leadiant.
CDCA is used off label since decades to treat an extremely rare disease (cerebrotendinous xanthomatosis) that can lead to dementia and death.
Leadiant acquired CDCA and then relaunched it as an orphan drug. The orphan designation gave the undertaking a 10-years market exclusivity in the EU for CDCA-based drugs for the treatment of CTX and allowed it to imposed huge price increases (up to 20 times).
The NCAs first established that Leadiant’s CDCA prices were excessive since the internal rate of return on investment was vastly superior to the weighted average of cost of capital considered reasonable for this investment. Also, given the nature of the drug and the fact that Leadiant did not introduce any innovative product, Leadiant’s CDCA prices were considered unfair.
These decisions have been legally challenged before courts. The very much awaited outcome of these litigations is going to be decisive for the future design of the new EU policy on orphan drugs.
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