Policy 5 min read

Insuring Costly Orphan Drugs

Anthem’s decision to cover a $300,000 per year medication for Duchenne muscular dystrophy still has some caveats.

By Sonya Collins featured image Aaron P. Bernstein / Getty Images

Last month, health insurer Anthem, owner of Blue Cross and Blue Shield, announced that, under certain circumstances, it would cover the Duchenne muscular dystrophy drug Exondys 51 (eteplirsen), which benefits about 13 percent of boys with the rare disease. The announcement reversed Anthem’s previous decision not to cover the drug, manufactured by Sarepta Therapeutics, after it gained Food and Drug Administration (FDA) approval amid substantial controversy in September 2016. And it may shed light on how costly orphan drugs with small measurable benefits come to be accepted by once-skeptical payers.

“When insurers change their coverage decision,” says Christine Lu, co-director of the Precision Medicine Translational Research Center at Harvard Medical School, “it might be that physicians have requested access to the drug, the evidence has moved along, or the drug company has provided some unpublished data.”

In the case of Exondys 51, Anthem’s staff provided new information about the drug to an external medical committee, says Lori McLaughlin, a spokesperson for Anthem. “In considering this information, the committee determined that Exondys 51 met Anthem’s criteria to be considered medically necessary in certain circumstances, making it a covered service for members in these specific situations,” she says.

A Controversial Orphan Drug

Not everyone expected Exondys 51 to gain FDA approval when it first became available. An advisory panel to the FDA actually voted 7-6 against its approval in April 2016 because the drug was far from a cure.

But since Exondys 51 treats a rare condition for which there is no other treatment, it was eligible for accelerated FDA approval. Through this pathway, rather than wait the years it could take to prove that a drug prolongs life, companies can gain approval for experimental drugs based on a surrogate endpoint. That is, a “marker” — such as a lab test or a scan — that researchers believe would predict the eventual clinical benefit of the medication.

For Exondys 51, the production of a protein called dystrophin was set as the surrogate endpoint for approval. Boys with Duchenne lack dystrophin. As a result, their muscles slowly deteriorate, taking away their ability to walk and eventually to breathe. In about 13 percent of these boys, a lack of dystrophin is due to a gene defect that Exondys 51 is meant to correct.

Controversy arose over Exondys 51’s effectiveness, however, when a 2013 placebo-controlled study that claimed to show substantial improvement in boys’ dystrophin levels and their walking abilities was deemed misleading and recommended for retraction. The subsequent study, on which the FDA approval was finally based, showed that Exondys 51 increased dystrophin levels to a far lesser degree — just 0.44 percent the levels of typical, healthy boys.

Despite the small gains in dystrophin, upon FDA approval, most major insurers agreed to cover the drug, which costs about $300,000 a year per child. Among the holdouts was Anthem.

Change of Course

Now, Anthem’s new policy deems Exondys 51 to be “medically necessary” if patients have a confirmed diagnosis as well as the relevant gene mutation. But the company’s coverage comes with some caveats: It still won’t cover the treatment of patients who can’t walk with or without a cane, walker, or other assistive device.

McLaughlin explained that the company had considered data provided by Sarepta and the observations of doctors treating patients with the drug. The decision was also based on ongoing studies showing that Exondys 51 helps slow down declines in ambulatory ability. In one study, after three years on the drug, boys with Duchenne could walk about 500 more feet in six minutes than a group of previously observed untreated boys. Roughly 16 percent of boys on Exondys 51 still lost their ability to walk during the three-year study, but almost half of untreated boys the same age lose the ability to walk in that time.

Often, drug companies like Sarepta assist patients with rare diseases in getting insurance coverage. By entering risk-sharing agreements with payers — also called performance- or outcomes-based contracts — they can make the payers’ cost for the drug contingent on continued evidence of its efficacy. This can offset payers’ risks in covering expensive drugs with uncertain benefits. In the end, the drug might not cost payers nearly the advertised retail price.

Whatever the Market Will Bear

That doesn’t mean drug makers will remove any of the zeros from the price tags on new drugs for rare diseases. “Think of how many drugs had to fail on the way to getting this successful one,” says Lu, who has researched the legislation and regulations that impact global access to orphan drugs.

How drug makers arrive at these prices depends on many factors, not all of which are transparent. “It’s not only the R&D cost of that drug, but the drugs that failed before it. R&D can never be precisely calculated,” says Lu. The price of new drugs also depends on whether competing drugs exist, she says. And none exists for Exondys 51.

So for now, the market seems willing to pay possibly $300,000 per year for Exondys 51. Doing the numbers, in 2007, the most recent year for which data are available, 349 boys in the U.S. had Duchenne. An estimated 45 of them would have the gene mutation that makes them eligible for Exondys 51. If an insurance company like Anthem has just 5 of the 45 boys among its members, it could be on the hook for up to $1.5 million a year. Considering those costs, says Lu, “I think the insurers who do cover these types of drugs are making a very brave decision.”