Proposed 'grant-and-access' program with price caps could stimulate development of drugs for very rare diseases

Health Affairs

Volumn 31, Issue 11, 2012, Pages 2528-2535

  Valverde, Ana M ^a   Reed, Shelby D ^a   Schulman, Kevin A ^a  

^a DUKE UNIVERSITY SCHOOL OF MEDICINE   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

ORPHAN DRUG;

ARTICLE; DRUG COST; DRUG INDUSTRY; DRUG MARKETING; FUNDING; GOVERNMENT; HEALTH CARE POLICY; HEALTH PROGRAM; HUMAN; RARE DISEASE; REIMBURSEMENT; TAX;

COST SAVINGS; DRUG INDUSTRY; FINANCING, ORGANIZED; HEALTH CARE RATIONING; HEALTH RESOURCES; HUMANS; ORPHAN DRUG PRODUCTION; PROGRAM EVALUATION; RARE DISEASES; UNITED STATES; UNITED STATES FOOD AND DRUG ADMINISTRATION;

EID: 84871875549     PISSN: 02782715     EISSN: 15445208     Source Type: Journal    
DOI: 10.1377/hlthaff.2012.0235     Document Type: Article

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24. We assumed that a generic alternative would be available after the seven-year exclusivity period and that the original developer would therefore receive no revenues from the orphan drug after that period. We chose $1 billion in sales to represent an orphan drug with blockbuster sales, equivalent to 5 percent of the patient population spending $100,000 each on the drug.
25. For simplicity, costs in this section are not discounted to take into account the time value of money. Since the $4.5 million from the grant program would not all be paid in year 1 but would be spread out over the seven years of development, the actual total cost of the program would be lower than $4.5 million, or equivalent to the sum of the amounts paid each year discounted by the cost of capital. The internal rate of return, on the other hand, is by definition calculated taking into account the time value of money.