total amount the plan would pay for a given enrollee over the course of his or her lifetime, often referred to as a lifetime spending maximum. In 2009, 16 percent of those with employer-sponsored coverage had a lifetime maximum between $1 million and $2 million, and another 43 percent had a lifetime maximum of $2 million or more (KFF, 2009c). An adult who receives twice-monthly injections of alglucosidase alfa (Myozyme) for Pompe disease could run up costs of $300,000 a year just for the drug, and the drug can have serious side effects that require hospitalization and additional expenses. Such a patient could reach a $1 million cap fairly quickly. (By way of comparison, total first-year costs for a heart transplant for the year of the transplant could run $800,000, but costs in subsequent years—assuming no serious complications—would be much lower, perhaps $20,000 to $40,000 [UNOS, 2010].) Only a minority (10 percent) of private health plans had an out-of-pocket maximum specifically for prescription drugs in 2009, which limits an enrollee’s financial risk for medication costs.

Effective in 2010, the Affordable Care Act prohibits individual and employer health plans from setting lifetime limits on the dollar value of coverage, and it permits annual caps on coverage only as allowed by the Department of Health and Human Services. The law also prohibits plans from canceling coverage because an individual develops health problems. Effective in 2014, the law provides an array of measures to expand access to insurance, one of which will prohibit insurers participating in newly created insurance exchanges from refusing coverage to people with medical problems and varying premiums based on health status. These and other provisions should benefit individuals who use high-cost orphan drugs, although many details remain unclear. For example, private plans could restrict coverage of drugs used by high-cost patients, unless regulations restrict that strategy.

Private health plans vary in their policies and practices with respect to off-label use of prescription drugs. Some conduct evidence reviews for certain drugs (see, e.g., Monroe et al., 2006), and some have set forth criteria for when off-label use will be considered (RegenceRx, 2010; Wellmark Blue Cross Blue Shield, 2010). An informal review of plan policies for a few orphan drugs likewise showed variation. Some excluded one or more of the drugs on the basis that other alternatives are preferable, some required prior authorization, and a few covered the drugs without restriction except for specialty-tier listing.

Even if drug companies expect that they can set profitable prices for a drug for a rare condition and anticipate that they will have a sufficient market of mostly insured patients able to pay those prices, they may also judge