Supply Chain Design for Orphan Drugs and Rare Diseases

We’ve already discussed above how the orphan drug market is growing rapidly and is predicted to continue along that trajectory in the future.

Orphan drugs are defined by the US Orphan Drug Act of 1983 as a drug intended for the safe and effective treatment, diagnosis or prevention of rare diseases/disorders that affect fewer than 200,000 people, or that affect more than 200,000 persons but are not expected to recover the costs of developing and marketing a treatment drug.

Because these drugs are designed for very rare conditions and are unlikely to recoup the costs associated with their development, production, marketing, and, most crucially for our purposes, distribution, pharma brands must often seek subsidies from government to make them viable.

Orphan Drug Supply Chains

In order to provide the best possible reimbursement and access opportunities for orphan drugs, many pharma brands are finding success in a hub and spoke model.

Because of the manner in which relationships between specialty pharmacies and payers are vertically integrated, exclusive sales agreements with a single distributor tends to limit coverage options. If such a distributor should subsequently merge with a major payer, this then creates further challenges when it comes to receiving reimbursement from other insurers.

However, the hub and spoke model solves these problems by giving patients and payers more options when it comes to access and reimbursement.

“For rare diseases with around 50,000 patients or more, a hub and spoke model involving multiple specialty pharmacies often offers the best reimbursement and access opportunities,” explains CEO of rare disease market development firm Engage Health, Patti Engel. “Under this model, a centralized specialty pharmacy hub can direct patients to spokes of other specialty pharmacies that accept different insurance models.”

Following a hub and spoke distribution model for orphan drugs means drug manufacturers can often avoid administration and delivery services fees – reducing the cost associated with orphan drug logistics and passing that responsibility onto the specialist pharmacies on the spokes.

However, exclusive arrangements can often be the solution when it comes to ultra-rare diseases and their associated treatments.

“If one pharmacy is the sole provider for a disease with a population in the thousands, insurers are motivated to work with that one pharmacy,” Engel adds. “In addition, the small specialty pharmacy could provide expertise in the specific rare disease, relationships with key clinicians, and knowledge of negotiating coverage with insurers.”

Final Thoughts

The above perspectives demonstrate that, when it comes to the supply chains for orphan drugs and rare disease, there does not exist a single one size fits all solution and manufacturers, pharmacies, payers, insurers, and government agencies need to work together to make sure these critical non-commercial treatments can get into the hands of those who need them most.

Whether it’s through exclusive arrangements with specialist pharmacies in the case of ultra-rare diseases, or a hub and spoke distribution model for other orphan drugs, manufacturers in the pharmaceutical industry need to focus on developing supply chain solutions which will benefit all involved.