Orphan drugs have been making headlines for decades — not only for bringing new treatment options to patients with rare conditions and diseases, but also for notoriously high costs that are rewriting the rules for pricing, discounts and reimbursement.
Over the 40 years of the Orphan Drug Act, 6,340 orphan drug designations were granted, representing drug development for 1,079 rare diseases. Additionally, 882 of those designations resulted in at least one FDA approval for use in 392 rare diseases. With worldwide orphan drug sales growing more than twice as fast as non-orphan pharmaceuticals, both the opportunity of optimizing manufacturer discounts and the risk of figuratively leaving money on the table are too great for 340B health systems to ignore.
The growing adoption of orphan drugs
Globally and domestically, the incidence of rare diseases is on the rise. These conditions affect 7 of every 10,000 people; however, the prevalence of these conditions is growing. Since 2021, orphan drugs used to treat these and other conditions have accounted for more than half of the novel drugs approved by the FDA, fueling North America’s position as the global revenue leader in the orphan drugs market.
Access, investments and opportunities for health systems
Unfortunately, the same orphan drugs that are covered in an acute-care outpatient setting for 340B disproportionate share hospitals are subject to an orphan drug exclusion that leaves discounts for critical access hospitals, sole community hospitals, rural referral centers and freestanding cancer centers at the sole discretion of the manufacturer. For some patients, their sole community hospital or rural referral center may be the only site of care for miles, making orphan drug access and affordability a priority throughout the health system.
“For any health system regardless of disproportionate share hospital, big hospital, a rural referral, community, or critical access site you want to deliver an equitable standard of care” Dr. Nezneski said.
As with 340B pricing for covered outpatient drugs, discretionary manufacturer discounts for orphan drugs can help health systems stretch resources to achieve more and deliver a consistent experience across the continuum of care.
“The savings for our customers in 2022 was $500 million” said Dr. Lisa Nezneski, 340B Senior Managing Consultant for McKesson
Navigating 340B complexity to improve pricing
While health systems are generally well versed in administering these often-complex medical therapies, they may not be as well prepared to navigate 340B complexities — especially amid a moving target of FDA approvals and manufacturer discounts.
As the FDA’s list of approved orphan drugs continues to grow, so does the burden of program management. The orphan drug portfolio changes every quarter, and manufacturers regularly change the rules surrounding their discount pricing. This makes it especially important for health systems to take a close look at their orphan drugs during these times, Dr. Nezneski said.
Additionally, as with all drug purchases among 340B covered entities, health systems must maintain accurate records to demonstrate program compliance, as the spirit of the discounts are given with the 340B rules in mind. Each split-billing software company interprets the Orphan Drug Exclusion differently. The McKesson Orphan Drug Support Program helps customers identify which Orphan drugs have discounts, and how best to adjust your split-billing software to purchase and capture all the savings.
Next steps and potential pitfalls
Whether you are pursuing discounts under the orphan drug exclusion for the first time or searching for ways to fine-tune existing strategies, the next steps are straightforward, yet critical:
- Make an up-to-date list of the orphan drugs you currently purchase or would like to purchase.
- Work with your distributor and 340B software provider to:
- improve purchasing for 340B-covered orphan drugs.
- Pursue manufacturer discounts for therapies subject to the orphan drug exclusion.
Once you’ve identified which orphan drugs you’re able to buy, and at what price, you’ll have a clearer picture of how to tailor your purchasing across the entire health system. McKesson Orphan Drug Support Program helps you navigate manufacturer contracts, take advantage of proven processes to drive savings, and with the advisory of McKesson experts you can avoid common pitfalls. For example, only the FDA can grant orphan drug status — and the FDA website is the only source that matters when searching for approved orphan drugs. Once the drug is listed by the FDA, manufacturers have the option, but not the obligation, to offer 340B discounts.
Key takeaways
- Orphan drug sales are growing more than twice as fast as those of non-orphan pharmaceuticals.
- 340B health systems are generally well suited to provide the skilled healthcare that high-touch orphan drug treatments require.
- Discretionary manufacturer discounts for Orphan Drug therapies can help health systems achieve more across multiple sites of care.
- The McKesson Orphan Drug Support Program is the industry leader in supporting Expansion Entities with all the nuances of access, pricing, and purchasing.
To learn more about 340B Program Consulting from McKesson, visit our website.