and to generate profits because public and private health insurance plans and patients and families will pay that price, then a manufacturer may not be deterred by a small target market. Public and private health plans that cover orphan drugs generally lack leverage to negotiate prices in the absence of alternative brand-name or generic products. The most expensive orphan drugs cost more than $400,000 per year.

The committee’s analysis focused on Medicare, which covers many individuals with severe, disabling rare conditions. Based on its examination of drug coverage under Medicare Part B (which covers drugs administered by physicians and outpatient facilities) and Medicare Part D (which covers prescription drugs in private plans administered according to government rules), the committee concluded that nearly all orphan drugs are, within a relatively short period following approval, covered either under Part B or by a majority of Part D plans. Part D plans often place orphan drugs in a “specialty” category of coverage that requires much higher out-of-pocket costs, and they often require prior authorization before a drug will be covered. Little is known about how such requirements are implemented and whether they may restrict access.

RECOMMENDATION 6-1: The Centers for Medicare and Medicaid Services or the Medicare Payment Advisory Commission should study how the implementation of prior authorization requirements by Medicare Part D and state Medicaid plans affects beneficiary access to orphan drugs. The findings should guide recommendations and actions to improve policies and practices for the Part D program.

In addition, little is known about the application of coverage restrictions when orphan or nonorphan drugs are used off-label to treat people with rare conditions that may have few or no FDA-approved treatments. Medicare requires coverage for off-label uses that are described in certain compendia (comprehensive listings of drugs with descriptions of their recommended uses). The creation of an evidence-based compendium focused specifically on off-label uses of drugs for rare diseases could inform clinicians, health plans, and potentially patients and families. It could also suggest areas for future research or literature reviews.

RECOMMENDATION 6-2: The Agency for Healthcare Research and Quality or a similar appropriate agency should undertake a pilot project to develop an evidence-based compendium to inform health plan decisions on both orphan and nonorphan drugs that may have indications for rare conditions that have not been evaluated or approved by FDA.

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