The reasoning behind contract decisions related to humanitarian use devices & orphan drugs

Patients with rare diseases are often desperate for relief, and humanitarian use devices (HUDs) and orphan drugs become important treatment options. But these alternate pathways to Food and Drug Administration (FDA) approval are still somewhat mysterious in vision and scope, so they seldom become on-contract products for HealthTrust members.

HUDs & orphan drugs explained

To promote innovation in drug and device development, the FDA offers key incentives to manufacturers to find treatments for various rare conditions. The incentives exist because profits are far from guaranteed, yet a distinct public health need exists. Regulations surrounding these products vary from those for more commonly used devices and medications.

Jason Braithwaite
Jason Braithwaite, PharmD, MS, BCPS

“With rare diseases, in many cases, there’s no logical way a manufacturer could make a drug in a manner where they could recoup the money spent on research,” explains Jason Braithwaite, PharmD, MS, BCPS, AVP, Clinical Pharmacy Services at HealthTrust. “The FDA put the orphan drug designation in place because without this type of incentive, we may never have some of these treatments.”

Karen Bush, MSN, FNP, BC, NCRP

Similarly, HUDs can’t be rigorously researched, explains Karen Bush, MSN, FNP, BC, NCRP, Director of Clinical Research & Education at HealthTrust. “It’s very difficult to establish large-scale studies on these devices because the diseases they treat don’t occur often enough,” she adds.

HUD ground rules

Much attention has been focused on the FDA’s emergency use authorization (EUA) approval pathway since the COVID pandemic began. But HUD and orphan drug approvals—while not obtained to meet such rapid demand—are still stringent processes that can also lead to full FDA authorization.

“The designation is not a permanent situation. Manufacturers can gather enough data over many years to apply for actual FDA approval, which would then lead to revocation of the HUD,” says Bush.

Meant to benefit the diagnosis or treatment of conditions affecting no more than 8,000 people in the United States each year, HUD exemptions (HDEs) waive a manufacturer’s requirement to provide scientific evidence demonstrating effectiveness before a product is marketed. No other FDA-approved competitive devices can be on the market for the same condition, and the device must be approved by a facility’s internal review board or pediatric advisory committee.

An HDE allows manufacturers to sell such devices for profit only up to a point: Specifically, 8,000 devices multiplied by the annual distribution number—the amount needed to treat or diagnose each affected patient per year. The device can continue to be sold beyond this number, but not at a profit.

“Similar to an EUA, the clinician, facility and patient have to be notified that such a device has been approved through a HUD exemption pathway and is not FDA-approved, meaning that the effectiveness for a specific condition has not been fully demonstrated,” Bush says. “The patient has to sign off on that.”

Orphan drug designations

As with HUDs, orphan drugs treat diseases so rare that drug developers are reluctant to shepherd them under typical marketing conditions, Braithwaite notes. Passed in 1984, the Orphan Drug Act defined a rare disease as affecting fewer than 200,000 people in the United States.

Only a fraction of the 7,000 known rare diseases have approved treatments, with about 700 orphan drugs currently available in the United States.

But many benefits await pharmaceutical companies that manage to jump the necessary hurdles to orphan drug designation. Braithwaite says this includes creating a business case based on need by explaining long-term effects of a rare disease and how the drug prevents, treats or cures it.

“Manufacturers can avoid additional taxation for expenditures during a drug’s evaluation and an additional seven years of marketing exclusivity or patent extension, which helps companies recoup some of their investment,” Braithwaite explains. “Many times, they can also waive the fee to submit for FDA approval later on.”

Off-contract reasoning

Why aren’t orphan drugs or HDEs typically on contract for HealthTrust members? The answer—while not absolute—largely comes down to sheer economics, say Bush and Braithwaite.

“Most of the time, competition is what creates contracts,” Braithwaite says. “There’s just not a lot of competition that would push manufacturers to provide an additional discount to our members when no one else makes the drug.” He adds, “Some orphan drugs are on contract. But in cases where there might be only five, 10 or 15 patients in any given health system with such a need, the manufacturers don’t see that as a business opportunity.” (However, Braithwaite points out that some drugs get approval for other high-volume indications and then later apply for a rare-disease indication.)

Bush agrees, but she notes that most HealthTrust members don’t face any resulting disadvantages to these devices and drugs being off contract because the demand is so low.

Find more information about FDA approval pathways, and a list of orphan drugs.

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