Dr Scott Gottlieb: Reimbursement Models Play a Vital Role in the Development of Orphan Indications

The development and access to orphan indications rely on reimbursement models that require regulatory action toward out-of-pocket costs for patients, said Scott Gottlieb, MD, former FDA commissioner (2017-2019).

Transcript

What can we do to accelerate the approval of orphan drugs? Particularly for cancer.

Yeah, I think we’ve adopted a lot of policies over time to try to create incentives for the development of treatments targeted to very rare diseases—orphan indications, as well as, rare subtypes of cancer.

It’s not just through things like the Orphan Drug Act, where we provide additional incentives to the development of those kind of treatments, but it’s also in the way that we’ve designed the reimbursement model by creating sort of a specialty tier in Medicare, which was done for a variety of reasons; but by creating that specialty tier where reimbursement was largely assured for people who developed drugs targeted to rare, unmet medical needs that were going to be priced at a premium because of the value they were delivering. By protecting that reimbursement, we drove incentives in the marketplace for product developers to develop products that were targeted toward those kinds of indications.

So, this decision—these constructs—were done back in the early 2000’s and I was at Medicare when we redesigned the Part D benefit and made some of these decisions. It was at a time when everyone complained, “Well, drug companies are just developing a lot of me-too products—they’re developing new iterations of already marketed drugs—we’re not seeing a whole lot of innovation.”

So, we made some deliberate decisions to try to make that the market for sort of those me-too products where there were good enough generics, very highly competitive, but preserved coverage—preserved reimbursement—if you had something that was truly novel that targeted an unmet medical need. What happened was we saw investors were rational, and we saw investment capital very quickly go into those new spaces. Now, we’re seeing the fruits of that through a lot of really promising innovation that’s delivering real practical benefits for patients.

Now, the flipside of that is that these products are very costly—prices have continued to go up. Patients are facing high out-of-pocket costs that are irrational, because these out-of-pocket costs, at least in Medicare Part D, are tied to the list price, which is largely not a real price—it’s not a price the payers are paying, but the patients are paying out-of-pocket costs that are tied to that list price and their liabilities’ uncapped. There is no limit on what their out-of-pocket cost can be in Medicare Part D, and that’s causing a lot of hardship. So, we need to solve that—we need to make sure patients aren’t priced out of the products they need, particularly when they’re facing a catastrophic illness like cancer.