Orphanet Journal of Rare Diseases | Methodological Challenges in Cost-Effectiveness Analysis of Non-Oncological Orphan Drugs and Comparison of Alternative Pricing Models

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This study systematically analyzes the Dutch health technology assessment (HTA) agency's cost-effectiveness evaluations of non-oncological orphan drugs, revealing major challenges faced by traditional value-based pricing in the rare disease context, and compares the applicability of multiple alternative pricing models.

 

Literature Overview

The article titled 'Methodological challenges in Dutch HTA of non-oncological orphan drugs: a retrospective analysis and price comparison using different pricing models,' published in the Orphanet Journal of Rare Diseases, reviews and summarizes cost-effectiveness assessment reports for non-oncological orphan drugs issued by the Dutch Healthcare Institute (ZIN) between 2015 and 2024. It systematically analyzes methodological challenges and compares estimated prices under value-based pricing, cost-plus pricing (CPP), and discounted cash flow (DCF) models. The study finds that although significant uncertainty exists, cost-effectiveness analysis can still inform decision-making, but most orphan drugs fall far short of cost-effectiveness thresholds, and alternative pricing models also involve substantial assumptions and limitations. This research provides important empirical evidence for orphan drug pricing policies.

Background Knowledge

Orphan drugs are medications developed to treat rare diseases. Due to extremely small patient populations, these drugs face high development costs and limited market returns, posing significant challenges to traditional economic evaluation methods. Cost-effectiveness analysis (CEA) is a core tool for drug pricing and reimbursement decisions, typically based on the incremental cost-effectiveness ratio (ICER) and quality-adjusted life years (QALYs). However, in the context of rare diseases, issues such as lack of suitable comparators, insufficient disease understanding, scarcity of long-term efficacy data, difficulties in measuring health-related quality of life (QoL), and uncertainty in treatment effects are common, significantly undermining the reliability of CEA. Moreover, most orphan drugs are priced very high, making it difficult to meet conventional cost-effectiveness thresholds and resulting in poor patient access. To address this, alternative models such as cost-plus pricing (CPP) and discounted cash flow (DCF) have been proposed. CPP determines prices from the payer’s perspective based on R&D and production costs plus a reasonable profit margin, while DCF focuses on the company’s perspective, ensuring return on investment to incentivize innovation. Although both models use similar parameters, their starting points are opposite, and there has been insufficient comparative analysis in real-world applications. This study fills that gap using real-world assessment data, providing key references for policy development.

 

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Research Methods and Experiments

The research team collected all cost-effectiveness assessment reports for non-oncological orphan drugs published by the Dutch Healthcare Institute (ZIN) between 2015 and 2024, identifying 16 reports covering 13 therapies. The methodological challenges in these reports were systematically reviewed and categorized into five major types: lack of suitable comparators, insufficient disease understanding, limited model evidence, uncertainty in treatment effects, and defects in QoL measurement. Subsequently, drug prices were re-estimated using the cost-plus pricing (CPP) model proposed by the Affordability and Innovation Mechanism (AIM) and the discounted cash flow (DCF) model proposed by Nuijten et al. Model inputs included R&D investment (set within a range of €250 million to €2.5 billion), production costs, innovation premiums, expected rate of return (8%), Netherlands market share (4.58%), and patient numbers. Value-based reference prices were derived by back-calculating the discounts required to meet cost-effectiveness thresholds and were compared with publicly listed prices.

Key Findings and Insights

• Among the 13 non-oncological orphan drugs studied, only one was considered cost-effective within the threshold; the rest required substantial price reductions to approach cost-effectiveness standards, with most requiring discounts exceeding 75%
• All assessment reports identified at least one major methodological challenge, with the most common being lack of suitable comparators, insufficient natural history data, uncertainty in long-term efficacy, and unreliable QoL measurements
• There was no consistent relationship between value-based reference prices and prices estimated by CPP and DCF models: for some drugs, the value-based price was lower than all model estimates, while for others it was significantly higher, indicating substantial divergence between models
• Prices estimated by CPP and DCF models were generally lower than value-based reference prices and highly sensitive to assumptions about R&D costs and patient numbers, especially fluctuating sharply when patient numbers were very low
• Despite uncertainties, cost-effectiveness analysis still provides useful information for reimbursement decisions, but the results highlight a fundamental tension between economic feasibility and timely access to orphan drugs
• Current CPP and DCF models rely heavily on assumptions, lack data transparency, and do not account for market competition dynamics, making them unsuitable as standalone pricing mechanisms at this stage

Research Implications and Outlook

This study is the first to systematically compare multiple orphan drug pricing models based on real-world health technology assessment data, revealing limitations and inherent contradictions in existing methods. The findings emphasize that relying solely on traditional value-based pricing or current alternative models cannot resolve the accessibility dilemma of orphan drugs. Future efforts should promote more transparent sharing of R&D cost and risk data, and develop integrated differential pricing frameworks that incorporate disease severity, unmet medical needs, and societal willingness to pay.

Additionally, the study suggests that regulatory and assessment agencies need to adapt methodologically to the characteristics of rare diseases—for example, by using real-world evidence, adaptive pathways, and long-term follow-up mechanisms to reduce uncertainty. Policymakers should also explore multinational joint assessment and procurement mechanisms to enhance bargaining power and share risks. Ultimately, fairer and more sustainable innovation incentive mechanisms are needed to balance corporate returns with healthcare system affordability.

 

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Conclusion

This study systematically evaluates Dutch health agencies’ practices in conducting cost-effectiveness analyses for non-oncological orphan drugs, revealing widespread methodological challenges, including lack of comparators, insufficient disease understanding, limited evidence, uncertain treatment effects, and defective quality-of-life measurements. Despite these uncertainties, cost-effectiveness analysis remains an important basis for reimbursement decisions. However, the analysis shows that the vast majority of orphan drugs fall far short of cost-effectiveness standards, creating significant barriers to patient access. The study further compares value-based pricing, cost-plus pricing (CPP), and discounted cash flow (DCF) models, finding that alternative model estimates are generally lower and highly assumption-dependent, failing to offer more reliable solutions. While CPP and DCF models have theoretical value, they are constrained by data transparency and dynamic market conditions, making them currently unable to independently support pricing decisions. Therefore, the study concludes that all existing pricing mechanisms have significant limitations, and there is an urgent need to promote R&D cost transparency and develop integrated differential pricing frameworks to balance patient access, innovation incentives, and healthcare system sustainability. Future research should focus on integrating real-world data and multinational collaboration mechanisms to address the fundamental challenges in rare disease drug evaluation and pricing.

 

Jelle Walraven, Mahtab Kaveh, and Carin Uyl - de Groot. Methodological challenges in Dutch HTA of non-oncological orphan drugs: a retrospective analysis and price comparison using different pricing models. Orphanet Journal of Rare Diseases.