The current policy for price negotiations on high prices of orphan drugs in Europe is neither a transparent nor a structural solution for reimbursement decisions for orphan drugs. In a previous paper, we proposed the Discounted Cash Flow model as an alternative assessment methodology for the price of innovative drugs including the investor's perspective.
The objective of this current paper was to apply this concept to orphan drugs in The Netherlands, where pharmaceutical companies were recently challenged by the health authorities because of the perception of high prices.
We selected the orphan drugs with a positive clinical assessment and an incremental cost-effectiveness ratio exceeding €80,000 per Quality Adjusted Life Year QALY in The Netherlands. We applied the discounted cash flow method, which was adopted to assess the price of a new drug from an investor's perspective.
The actual prices of the drugs in this analysis are in 56% lower than the minimum break-even price based on the Discounted Cash Flow Model. If we build in a margin of 30%, which means that actual price is up to 30% higher than the break-even price, nearly 78% of the drug prices in this analysis may be reasonable from the investor's perspective.
The application of the Discounted Cash Flow to orphan drugs shows that it may be a future useful tool for health authorities and pharmaceutical companies to assess the price of orphan drugs.