Report: Orphan drugs to nab 19% of drug sales by 2020--if payers don't balk, that is

Pharma companies have been quick to get on board with the orphan drug development trend in recent years, racing to bring pricey treatments for small patient populations to market. And that trend won't be going out of style anytime soon, a new report says.

Orphan drug sales will make up 19% of the total share of prescription drug sales by 2020, totaling $176 billion, according to EvaluatePharma's Orphan Drug Report 2014. And they'll grow at an annual rate of nearly 11% per year through the end of the decade, compared with about 4% for drugs treating larger populations, EP predicts.

It's easy to see why, the report's authors note. Orphan drugs are cheaper to develop, in part because of tax incentives, and trial sizes are generally smaller. The lack of alternative treatments gives orphan drugs an edge in the regulatory review process, and it often keeps them free from generic competition, too. And then there's the pricing power they command: On average, their cost per patient is 6 times that of non-orphan drugs, EP says.

Another reason orphan drug sales are set to soar: Bristol-Myers Squibb's ($BMY) Opdivo. Behind just Celgene's ($CELG) Revlimid, Bristol's highly touted forthcoming treatment should finish with $6 billion in worldwide sales, EP's forecasts say. That haul will help BMS pass Novartis ($NVS) to take the title for biggest orphan company by the time 2020 rolls around.

And with orphan drug designations for in-development products racking up faster than ever--the FDA granted a record 260 last year--"in all likelihood the number of orphan drugs that successfully complete the clinical and registration stages will be on the rise," EP says.

But one thing could put a big damper on orphan therapies' sales potential, and that's payers. Though the pricing environment is favorable now, they'll "be looking to manage escalating drug bills as patent expires slow in coming years," EP points out.

That's something they already have a head start on thanks to a new group of next-gen hepatitis C treatments. PBMs have already begun making moves to control costs--like Express Scripts, which this year began assembling a coalition to exclude Gilead's ($GILD) $84,000-per-treatment-course Sovaldi until rival drugs hit the market and forced prices down.

- download EP's report

Special Report: Top 20 orphan drugs by 2018