Presentation (CTI)

OBJECTIVES: To analyze what is the most relevant measure of rarity that should be used when determining orphan drug designation.Both the United States and the European Union have legislation designed to incentivize the development of medicines for rare diseases, commonly referred to as orphan drug legislation. The underlying rationale is that developing a new medicine is costly, and although R&D expenses for rare diseases may be somewhat lower, the expense per treated patient is often significantly higher compared to medicines for more common conditions.
METHODS: Theoretical mathematical analysis.
RESULTS: To determine whether a drug qualifies for orphan drug designation (ODD), the measure of rarity should ideally reflect how rarity affects a company’s potential to generate revenue. Currently, both U.S. and EU regulations use disease prevalence as the criterion. However, in this paper, we demonstrate that incidence is a far more important determinant of revenue potential.
CONCLUSIONS: This distinction has practical implications: if the goal is to grant ODD to drugs with the lowest revenue potential—for a given the health gain per patient—current rules result in too many cancer drugs and too few treatments for chronic conditions receiving ODD. Cancer indications often have low prevalence relative to incidence due to short disease duration, whereas chronic conditions typically have high prevalence relative to incidence because of their long duration.
Our conclusion—that incidence matters more than prevalence—rests on the assumption that drug prices are proportional to patients’ total health gain. In other words, that a firm’s total revenue per patient over the course of the disease aligns with the accumulated health benefit. This occurs when drug prices are set to achieve an Incremental Cost-Effectiveness Ratio (ICER) at the willingness-to-pay threshold.