Canada needs policy on 'Orphan drugs'

Recently, there has been considerable talk about the Canadian government's approach to battling cancer. Much of the debate has been spurred on by Prime Minster Stephen Harper's claim that his recently announced cancer plan will save 423,000 lives by 2036. While cancer remains a very important battle, others rage on, often away from the public eye. One example is the fight against rare diseases.
A major problem confronting those battling rare diseases is that the cost for pharmaceutical drugs (so-called orphan drugs)to treat these illnesses is often astonishingly expensive. For example, a therapy for Pompe disease, costs over $400,000 for an adult patient for just one years therapy. Fabrazyme, for Fabre's disease, is priced at about $290,000 per patient per year. Not may sick people have the kind of ready cash required to pay for such medicines, so the burden of payment falls automatically on the provinces.
This means that when Deciding whether to cover the cost of these medications, provincal insurers have to make tough decisions based upon the trade-off between patient's care and the price of the drugs. It is heartless not to pay for medicines that are effective, but provincal health budgets are already strained and so hard decisions are required on what insurance should cover- and what must be excluded. This also has incentive effects on firms that might develop orhpan drugs: if insurance coverage is not provided because the terapies are deemed not cost-effective, innovators may decide not to invest in therapies for rae diseases. In essence, If coverage decisions are made on the same basis as drugs for common dieases, then most drugs for rare dieases will never be developed.
For obvious practical and ethical reasons this situation requires redress in the in the form of a coherent policy on orphan drugs. Most importantly, provincial insures need a seperate evaluatory framework to determine whether and how much they pay for rare drugs. Innovation in the global battle against rare dieases makes this imperative.
A natural and compassionate reponse to the opportunity to extend a person's life is that government should pay for it. But if the provinces or the federal government commit to paying for any useful drug, no matter how expensive, drug firms with monopolies will be obligated to increase their prices without limit. This is not because they are immoral, but because as public enterpririses they have responsibilties to shareholders. So what do we do?
A straightforward rule would be to set a maxmium price per additional year of life that the drug is expected to allow. For rare disease drugs , however, such a rule may lead to insufficinent revenues to pay for the cost of innovation-of which Canada's share should be about $7.5 million per drug developed. In that case, firms would lack incentives to develop drugs for rare diseases. Therefore, a rule for orphan drugs should allow a higher a higher maximum price per additional year of life and factor in the high costs associated with innovation. The rarer the disease, the higher the maxium price.
Ceiling prices should also be made public by governments. This way drug companies do not get carte blanche but rather a basis for research investment decisions The pharmaceutical companies can then obtain incentives to invest innovative treatments for rare diseases, and Canadians can get access to such treatments on a fair basis.