Drug development for rare and orphan disease has skyrocketed since the approval of The Orphan Drug Act in 1983. Prior to the approval of this act there were only 10 industry supported agents brought to the market designed to treat rare diseases.  Since that time there have been over 770 orphan drugs and biological products brought to market covering more than 600 orphan disease indications with 32 novel drug approvals in 2020, representing 58% of new drug approvals for 2020. The increasing trend for new drug approvals that address orphan conditions continues with 560 agents in the development pipeline [Table 1].

Innovation has been the name of the game over the last decade. Many of the new rare and orphan drug therapies being brought to market today leverage new technologies and advanced scientific understandings such as chimeric antigen receptor T cells (CAR-T) therapies, immunotherapy, and cell and gene therapies. Innovation is expensive. The average orphan drug costs approximately $32,000 a year; however, more than a third of agents with an orphan indication cost upwards of $100,000 annually. Looming questions remain, can the US healthcare system afford to pay for these therapies, and if so, how?

Innovation isn’t unique just to pharmaceutical manufacturers; payers are also developing innovative strategies to pay for the rising cost of rare and orphan drug therapies. Value-based agreements have been put forth as an affordability strategy.  Several pharmaceutical organizations such as Novartis, AstraZeneca, Spark Therapeutics, BioMarin, and Bluebird Bio to name a few are amenable to VBCs. The conundrum is the US drug reimbursement system hasn’t evolved quickly enough to accommodate not only VBCs but additional alternative payment models. Adoption of value-based reimbursement has been hampered by hurdles such as aligning on metrics, balancing fee-for-service and fee-for-value mindsets, required infrastructure investment to administer, and adequate volume to make it all worthwhile.  What will it take for VBC models to gain more momentum? According to some research, better incentives are needed as well as some level of mandated participation is needed to move the dial. What other alternative payment options are sparking interest? PRECISIONvalue conducted surveyed research of, payers, employers, and providers, and reinsurance was the most commonly utilized strategy to maintain benefit affordability amongst both payers and employers, with 42% and 55% of respondents currently utilizing a reinsurance strategy, respectively. Additional considerations included a gene therapy carve out, shifting coverage of orphan drugs from the medical benefit to the pharmacy benefit, orphan drug carve-out, benefit exclusion, risk pools, amortization or installments, and a third-party subscription model. Correspondingly, this same research reported that payers and employers rated benefit exclusion, gene therapy carve-out, and reinsurance as the most effective strategies to maintain affordability.

At the current pace, it will take our healthcare system years to evolve our fee-for-service reimbursement system into one that consistently reflects value. Challenges loom across stakeholders such as budget constraints to invest in infrastructure; industry alignment on the most effective payment models; and metrics that are meaningful for payers, providers, and manufacturers, just to list a few. Payers and providers will need to invest in or contract for infrastructure that supports predictive and real-time analytics. Providers, payers, and manufacturers need to work together to align on meaningful metrics that confer the value of a product. Incentives are needed for all stakeholders to continue the momentum to a value-based system. Collaboration is the key to successfully shifting our healthcare system to value-based. Payers, providers, employers, and manufacturers each have pieces of the puzzle that can be assembled to deliver efficient, quality care with clear value.