Webinar: Going Through The Roof: Selling Through Insurance

To participate, please send an email to: ae-secr@ese.eur.nl

Rare (orphan) disease drug prices are known to be high. Yearly drug

treatment price levels at 100k USD or higher are not exceptional. There is an

evidence that prices for orphan drugs are inversely related to the prevalence

of the disease (Messori et al., 2010, and Medic et al., 2017). This is hard to

explain by differences in the levels of competition as there is generally little,

if any, competition for most orphan drugs. Moreover, Kesselheim (2016) does not

find a correlation between development costs and drug prices. In this paper, we

develop a simple model in which we compare monopoly pricing decisions when the

monopoly sells orphan drugs directly and when it sells through insurance. We

show that in the latter case, the price is inversely related to the prevalence

of the disease. Given the low prevalence (< 10 per 100000), this means that

the drug prices are indeed likely to go sky high.