We are all aware that orphan disease drugs are typically very expensive. Yet, health plans tend to avoid risk-sharing arrangements that could significantly mitigate those costs. Reluctance stems from diverse factors such as the differences in dosing schedules (daily vs. weekly, etc.), administration routes (provider- vs. patient-administered), and tolerability issues, etc. Collectively, the abundant variables of each unique course of treatment create significant barriers to implementing and tracking risk contract performance.
But, the landscape is changing. Between 2020 and 2024, roughly 20-25 new orphan drugs gained FDA approval annually, with projections indicating 160-200 more could enter review by 2030. Many of these new treatments include gene and cell therapies, biologics, and high-cost small molecules for the same conditions. This increasing pipeline will likely lead to multiple high-priced options competing for the same orphan indication, intensifying market competition.
As more therapies emerge for the same conditions, will pricing pressures curb future growth, especially if new treatments do not demonstrate significant clinical benefits? To justify premium pricing amid stiff competition, later entrants might consider risk-sharing contracts, especially if they can substantiate clinically meaningful advantages.
Can risk contracting be that key differentiator? Risk contracts are particularly appealing when clinical data support superior outcomes, enabling companies to justify higher prices. Such contracting aligns well with the rising emphasis on value-based care in managed health plans and presents a strategic opportunity for new entrants to position themselves as committed to delivering that value.
With an expanding pipeline, building risk-sharing arrangements into drug launch strategies could be a necessity for orphan drug developers… provided they can minimize operational burdens on payers.
Risk Contracting When Orphan Disease Space is Crowded
Health plans face challenges in risk arrangements for orphan drugs, but increasing competition may open doors for innovative pricing strategies.
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