Innovation and affordability of orphan drugs
Insider Insights

US: ICER white paper looks at innovation and affordability of orphan drugs


The Institute for Clinical and Economic Review (ICER) has published a white paper looking at innovation and affordability in relation to orphan drugs in the US. The paper examines potential reforms to current policies and practices related to orphan drug development, pricing, and coverage. Key potential reforms identified in the paper include: 

Encouraging ultra-rare drug development  

  • Establish a definition of ultra-rare disorders 
  • Increase incentives to develop treatments for ultra-rare disorders 
  • Use value-based pricing and reimbursement for ultra-rare treatments  

Limiting incentives for partial orphans 

  • Establish a maximum revenue threshold to be eligible for ODA (Orphan Drug Act) incentives  
  • Assess FDA (Food and Drug Administration) standards for defining distinct diseases 
  • Eliminate 340B exclusions for partial orphans 

Strengthening evidence generation 

  • Update ICD-10 codes to reflect rare diseases 
  • Fund patient registry development 
  • Clarify evidence expectations 

Reducing prices for rare disease products 

  • Expand outcomes-based contracts Medicare could “create a demonstration program in which coverage for certain orphan products, such as cell and gene therapies, could be conditioned on negotiation of an outcomes-based contract”. Medicare could set a value-based price and work with the manufacturer and other stakeholders to select endpoints and the timing and mechanism of rebates. The program could also “serve as a model for private payers”.  
  • Consider indication-based pricing “Independent value assessment entities could help establish a value-based price for a given rare condition and indication, based on the clinical benefit and strength of the evidence by disease area”.  
  • Pursue value-based pricing  “In adopting a value-based price setting mechanism for orphan products, policymakers must consider whether products that treat rare and ultra-rare conditions should be afforded different standards for cost-effectiveness […] While the custom of accepting higher prices for ultra-rare disease products suggests a societal willingness to pay more for these products, ICER concluded that the logic and ethics of opportunity costs suggested that cost-effectiveness thresholds should not shift systematically solely on the basis of rarity, and that such shifts threaten the goals of health equity”.  The ICER goes on to note that “value-based pricing mechanisms may result in pushing prices too low to incentivize investment in areas in which success is less certain, or in which the clinical gains from treatment would be relatively small”.  
  • Volume based contracts The federal government or a consortium of private payers could directly negotiate to purchase enough orphan product volume to cover all eligible patients with a given rare condition at a price unique to the orphan indication (distinct from the lower price for the product for non-orphan indications). Manufacturers would benefit from a single contract, improved patient access, and predictable utilization.  


  1., “The Next Generation of Rare Diseases Drug Policy: Ensuring both Innovation and Affordability”, 7th April 2022 

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