C
Medicare Part D Coverage and Reimbursement of Orphan Drugs

Laura Faden and Haiden Huskamp*

INTRODUCTION

Given the small potential market for medications that treat rare conditions, pharmaceutical manufacturers may have reduced incentives to develop new medications for rare diseases. To increase incentives for manufacturers, the Orphan Drug Act (P.L. 97-414) provides the following provisions for drugs that receive an orphan drug indication1 from the U.S. Food and Drug Administration (FDA): a 7-year period of market exclusivity, a tax credit of 50 percent of the cost of conducting clinical trials, eligibility for federal research grants, and a waiver of user fees (21 USC 360bb, OIG, 2001). However, health plan coverage and reimbursement also influence a pharmaceutical firm’s decisions to invest in the development of a drug or biologic for a rare disease.

The purpose of this report is to examine stand-alone Medicare Part D prescription drug plan (PDP) coverage of a set of drugs and biologics that

*

Laura Faden., M.P.H., is a doctoral student in the Harvard University Program in Health Policy. Haiden Huskamp, Ph.D., is Professor of Health Care Policy in the Department of Health Care Policy at Harvard Medical School. Responsibility for the content of this paper rests with the author and does not necessarily represent the views of the Institute of Medicine or its committees and convening bodies.

1

The Orphan Drug Act of 1983 defines an orphan indication as follows: “in the case of a drug, any disease or conditions which (A) affects less than 200,000 persons in the United States, or (B) affects more than 200,000 in the United States and for which there is no reasonable expectation that the cost of developing and making available in the United States a drug for such disease or condition will be recovered from sales in the United States of such drug” (21 USC 360bb).



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C Medicare Part D Coverage and Reimbursement of Orphan Drugs Laura Faden and Haiden Huskamp∗ INTRODUCTION Given the small potential market for medications that treat rare con- ditions, pharmaceutical manufacturers may have reduced incentives to develop new medications for rare diseases. To increase incentives for manu- facturers, the Orphan Drug Act (P.L. 97-414) provides the following provi- sions for drugs that receive an orphan drug indication1 from the U.S. Food and Drug Administration (FDA): a 7-year period of market exclusivity, a tax credit of 50 percent of the cost of conducting clinical trials, eligibility for federal research grants, and a waiver of user fees (21 USC 360bb, OIG, 2001). However, health plan coverage and reimbursement also influence a pharmaceutical firm’s decisions to invest in the development of a drug or biologic for a rare disease. The purpose of this report is to examine stand-alone Medicare Part D prescription drug plan (PDP) coverage of a set of drugs and biologics that ∗ Laura Faden., M.P.H., is a doctoral student in the Harvard University Program in Health Policy. Haiden Huskamp, Ph.D., is Professor of Health Care Policy in the Department of Health Care Policy at Harvard Medical School. Responsibility for the content of this paper rests with the author and does not necessarily represent the views of the Institute of Medicine or its committees and convening bodies. 1 The Orphan Drug Act of 1983 defines an orphan indication as follows: “in the case of a drug, any disease or conditions which (A) affects less than 200,000 persons in the United States, or (B) affects more than 200,000 in the United States and for which there is no reason- able expectation that the cost of developing and making available in the United States a drug for such disease or condition will be recovered from sales in the United States of such drug” (21 USC 360bb). 0

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0 RARE DISEASES AND ORPHAN PRODUCTS treat rare diseases or conditions—which we will refer to collectively as “orphan drugs”—in the Medicare population. This report does not address Medicare coverage and reimbursement of medical devices. We focus on the Medicare population because the program covers approximately 15 percent of the U.S. population, including adults who have a disabling rare condition and who have Medicare coverage based on their qualification for Social Security Disability Insurance (SSDI). Further- more, data on Medicare prescription drug coverage and reimbursement are more readily available than similar data from Medicaid and private plans—because Medicare is a public, federal program, the data are public and centrally collected. There have been no comprehensive studies of Medicare PDP coverage and reimbursement of orphan drugs. In 2005, the National Organization for Rare Disorders (NORD) conducted a similar study that examined cover- age of orphan drugs in 10 national Medicare Part D plans (NORD, 2006). This report extends the NORD report by including drugs approved since 2005 and by analyzing coverage of all Medicare prescription drug plans. Furthermore, this report goes beyond the NORD analysis, which only ana- lyzed plan coverage, by also analyzing factors that may reduce access to covered drugs (i.e., formulary tier placement, utilization management).2 Medicare Beneficiaries Medicare, which was created by the Social Security Act of 1965, is a federally administered health insurance program for people who are 65 years of age or older or who qualify for SSDI. There is typically a two-year waiting period before people who qualify for SSDI can receive Medicare benefits. Congress has waived that requirement for people with end-stage renal disease or Lou Gehrig’s disease. As of January 2010, Medicare covers 46 million Americans, 17 percent of whom are under 65 years and are permanently disabled (KFF, 2010c). Al- most half (47 percent) of Medicare beneficiaries have low income (below 200 percent poverty), and 7 million beneficiaries meet income and asset criteria to quality for Medicaid—these beneficiaries are known as “dual-eligibles.” Among the Medicare population, there is a high prevalence of comorbid conditions (44 percent suffer from three or more chronic conditions), and 29 percent have a cognitive or mental impairment (KFF, 2010c). It is not known how many Medicare beneficiaries have a rare disease or, conversely, what proportion of people with a rare disease is covered by Medi- care. However, the Social Security Compassionate Allowances program— 2 Although the NORD report notes the tier placement and utilization management tools used for each drug, the authors do not provide any analysis of these aspects of drug coverage.

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 APPENDIX C which guarantees immediate SSDI benefits for people who suffer from certain conditions—covers many rare diseases (Social Security Online, 2010). Currently, more than 27 million Medicare beneficiaries are enrolled in a Medicare prescription drug plan, two-thirds of whom are enrolled in a stand-alone PDP (KFF, 2009d, 2010b).3 In 2009, 36 percent of these beneficiaries received low-income subsidies (LIS) that cover their premiums and deductibles; LIS beneficiaries are responsible only for a small copay- ment that is determined by their income level (KFF, 2009a). Dual-eligibles and those eligible for Supplemental Security Income cash assistance are automatically eligible for LIS, and other low-income beneficiaries can ap- ply for the subsidies. All LIS beneficiaries are enrolled in plans that have monthly premiums below the benchmark premium amount established for each region (hereafter referred to as “benchmark plans”). Medicare Prescription Drug Plans Until 2006, Medicare did not cover outpatient prescription drugs. It covered hospital and physician services (Part A and B), which included coverage of inpatient drugs and drugs administered by a physician (e.g., infusions). The Balanced Budget Act of 1997 created an option for Medi- care beneficiaries to receive insurance coverage from private health plans that contract with Medicare (Part C)—these plans are currently referred to as “Medicare Advantage Plans.” The Medicare Prescription Drug Im- provement and Modernization Act of 2003 created the Medicare Part D program, a voluntary drug benefit that is administered through private health plans or pharmaceutical benefit managers. As of January 1, 2006, Medicare beneficiaries could voluntarily enroll in either a stand-alone PDP or a Medicare Advantage plan with prescription drug coverage (MA-PD). Dual-eligibles are automatically enrolled in a benchmark plan. The legislation does not require PDPs to have uniform cost sharing requirements or formulary design. However, PDPs are required to offer a plan that is at least actuarially equivalent to a standard benefit package as determined by the Centers for Medicare and Medicaid Services (CMS) (CMS, 2010). In 2010, the standard benefit package is • $310 deductible; • 25 percent coinsurance up to $2,830 of total drug costs; 3 Of the remaining Medicare beneficiaries not covered by a Part D plan—approximately 19 million—most have drug coverage, either through a retiree drug plan (through an employer or union) or another form of drug coverage (e.g., Veterans Affairs, Indian Health Services, state pharmacy assistance programs, employer benefits for active workers, etc.). Approximately 10 percent of beneficiaries have no prescription drug coverage (KFF, 2009d, 2010b).

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 RARE DISEASES AND ORPHAN PRODUCTS • no coverage from $2,830 to $6,330 of total drug costs—a coverage gap that is commonly referred to as the “doughnut hole,” which, starting in 2010, will be partially subsidized (beneficiaries will receive a $250 rebate);4 and • 5 percent coinsurance, or a flat copayment of $2.50 for a generic drug and $6.30 for a brand drug, above $4,550 out-of-pocket expenses (i.e., catastrophic out-of-pocket spending limit) with no maximum limit on out-of-pocket expenses. In addition, CMS requires that PDP and MA-PD formularies include at least two drugs in every drug class5 and all, or substantially all, drugs in the following six “protected” therapeutic categories: antidepressants; anti- psychotics; anticonvulsants; immunosuppressants (to prevent rejection of organ transplants); antiretrovirals (for the treatment of infection by retrovi- ruses, primarily HIV); and antineoplastics (only those chemotherapy drugs that are generally are not covered under Medicare Part B) (CMS, 2010). Even with these requirements, PDPs and MA-PDs have a considerable amount of flexibility in formulary design. First, plans decide whether or not to cover a drug. Second, plans can use a tiered formulary structure to create financial incentives for beneficiaries to choose lower-cost or preferred drugs. In 2010, approximately three-fifths of plans have the following four- tier structure (KFF, 2009c). • Tier 1: generic drugs • Tier 2: preferred brand-name drugs • Tier 3: nonpreferred brand-name drugs 4 (“specialty tier”): specialty drugs6 • Tier Each tier has a different cost sharing requirement—most plans assign a flat copayment to the first three tiers and a coinsurance to the specialty tiers (although a growing number of plans are requiring a coinsurance for the first three tiers) (KFF, 2009c). Almost all (94 percent) of plans have a 4 The Patient Protection and Affordable Care Act of 2010 (P.L. 111-148) included provisions to reduce cost sharing in the doughnut hole. Starting in 2011, Medicare and manufacturers will phase in subsidies for generic and brand drugs with the goal of reducing out-of-pocket expenditure in the doughnut hole in 2010 to the same 25 percent coinsurance that applies to costs below the lower threshold of the coverage gap. 5 The U.S. Pharmacopeia has developed a therapeutic classification system that serves as a guideline for Part D formularies. Model guidelines are publicly available: see http://www.usp. org/pdf/EN/mmg/modelGuidelinesV4.0WithFKDTs.pdf. 6 CMS guidelines stipulate that drugs placed on the specialty tier must cost at least $600 per month and prohibit enrollees from requesting cost sharing exceptions for specialty drugs (CMS, 2009b).

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 APPENDIX C specialty tier (KFF, 2009c).7 In 2010, the specialty tier coinsurance ranges from 25 to 33 percent of the full cost of the drug (KFF, 2009c). In addition to coverage decisions and tiered formularies, a third way in which plans influence prescription drug utilization is by employing uti- lization management tools such as prior authorization (PA) requirements, step therapy (ST) requirements, and quantity limits (QL). PA requirements create an administrative barrier to accessing a drug—a patient or provider must follow a certain procedure, created by the plan, to request coverage of the drug and then await the plan’s approval of coverage. ST requirements establish a chronological course of recommended treatments for a condition that must be tried before coverage of the drug is approved. QL require- ments set explicit criteria for the quantity of a drug that will be covered during a given period of time. METHODS Medicare Part D Plans Characteristics and Orphan Drug Coverage We used the CMS Formulary and Pharmacy Network Information File (January 2010 quarterly release) to determine the coverage, tier place- ment, and utilization management requirements for each orphan drug. We classified drug plans as stand-alone drug plans (PDPs) and MA-PD plans.8 Within PDPs, we identified national plans (i.e., plans offered in every region of the country) and benchmark plans. National plans were identified by contract number (CMS, 2009b), and benchmark plans were identified using the regional premium limits (CMS, 2009a). We calculated the “plan coverage rate” for a particular drug as the per- centage of plans that cover the drug. Similar to the NORD report (NORD, 2006), we categorized each drug by level of coverage rate, which we clas- sified as the following: • No or low coverage: <25 percent plan coverage rate • Low coverage: 25-49 percent plan coverage rate • Medium coverage: 50-74 percent plan coverage rate • High coverage: 75-99 percent plan coverage rate • Complete coverage: 100 percent plan coverage rate We also examined tier placement and utilization management among drugs covered by PDPs. For each drug we calculated the “tier placement 7This excludes plans that offer the standard benefit package (i.e., plans that have no tiering). 8MA-PDs include both regional and local plans. However, for the analyses we removed duplicate MA-PDs by including each unique contract and plan combination only once.

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 RARE DISEASES AND ORPHAN PRODUCTS rate” as the percentage of plans that cover that drug on a given tier. For example, if 20 percent of the plans that cover a drug have placed that drug on tier 4, the drug has a tier 4 placement rate of 20 percent. The tiers range from one to four. A few plans have more than four tiers—for these plans we included all tiers greater than four in the tier 4 category.9 Similarly, we examined rates of step therapy requirements, quantity limits, and prior authorization requirements (“utilization management rate”).10 We categorized each covered drug by the rate of tier placement and use of utilization management, which we classified into the following categories: • No or low placement (or use): <25 percent of plans • Low placement (or use): 25-49 percent of plans • Medium placement (or use): 50-74 percent of plans • High placement (or use): 75-99 percent of plans • Complete placement (or use): 100 percent of plans In terms of beneficiary access to drugs, a higher plan coverage rate will likely improve access, whereas a higher utilization management or tier 4 placement rate may pose barriers to access. These categories are subjective and were created only to simplify the interpretation of the results for all drugs along the three dimensions of access (i.e., plan coverage, tier place- ment, and utilization management). Therefore we also report the raw rates. 9 For the purposes of this report, we refer to tiers 4-6 as “tier 4” and assume that tier 4 is equivalent to a specialty tier. However, given the heterogeneity of the PDPs’ formulary struc- tures, this assumption does not hold for all plans. As previously noted, three-fifths of the plans have a four tier structure—for these plans tier 4 is the specialty tier (CMS, 2009b). Some plans have no tiers (11 percent) or fewer than four tiers (7 percent)—for the latter, the specialty tier may actually be tier 3. Also, 21 percent of the plans have more than four tiers—for these plans, tier 4 may not be a specialty tier but rather a nonpreferred brand tier (CMS, 2009b) or a tier for injectible drugs (KFF, 2010a). Therefore, by collapsing tiers 4-6 and labeling this as a specialty tier, we may be misclassifying up to 28 percent of the plans. However, this mis- classification may have a negligible effect in terms of concerns about beneficiary cost sharing because a large share (34 percent) of PDPs now use coinsurance rates for nonpreferred brand tiers (CMS, 2009b) and these coinsurance rates may actually be higher than specialty-tier coinsurance rates. Likewise, cost sharing for drugs placed in an injectible tier is also likely to be high because these drugs are quite expensive. 10 Note that for these analyses, the rates are based on only the number of plans that cover each drug (i.e., the denominator is different for each drug). Since each drug is associated with multiple entries in the National Drug Code (NDC) directory, a drug may appear on multiple tiers of a plan’s formulary (e.g., both the brand and generic version are covered, but the generic is on lower tier). For the purposes of our analyses, we assign drugs to the lowest tier on which they appear. A plan is counted as having a utilization management tool for a drug if the tool is applied to at least one of the covered NDCs associated with the drug.

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 APPENDIX C To determine if coverage policies differed by type of plan, we repeated these analyses for several subgroups of plans: all PDPs, benchmark PDPs, national PDPs and MA-PDs. Although we present data on all analyses, we focus on the analyses of all PDPs in the results and discussion sections. List of Orphan Drugs We created a list of drugs that were approved by the FDA with an or- phan indication between 1983 and December 2008. We included only drugs approved prior to 2009 in order to provide adequate time for marketing and plan coverage decisions. We included only outpatient drugs (i.e., not covered by Medicare Part B as of July 2010) that have an approved orphan indication relevant to the Medicare population (i.e., not for a pediatric in- dication11) and that have not been discontinued or withdrawn. Our list excludes drugs that are covered by Medicare Part A or B and blood products. We also excluded drugs that are available on the market (for other FDA-approved indications) and that have been granted an orphan designation but have not yet received FDA approval for an orphan indica- tion. Lastly, we excluded drugs for the treatment of rare diseases or condi- tions that appear in Medicare compendia unless the FDA has approved the drugs for the same orphan indication (see Chapter 6 of this report). The National Drug Codes (NDCs) for each drug were obtained from First Data Bank (FDB), which was up-to-date as of January 2010. We noted which drugs are available in generic form and which are biologics versus new chemical entities. RESULTS List of Orphan Drugs Ninety-nine orphan drugs met our inclusion criteria (see Addendum Table C-A1). Drugs are listed in chronological order of the date of ap- proval of the first orphan indication relevant to the Medicare population (some drugs have multiple relevant orphan indications). Twenty-nine (29 percent) of the drugs are available in generic form and eleven (11 percent) are biologics. Medicare Plan Characteristics—Part D and Medicare Advantage Plans In 2010, there are 1,620 stand-alone PDPs and 2,418 MA-PDs. Of the PDPs, 1,295 (77 percent) are national plans and 398 (23 percent) are 11 We performed a separate analysis of Medicare Part D coverage of orphan drugs with only a pediatric indication orphan approval. See Addendum Tables C-A3 and C-A4.

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 RARE DISEASES AND ORPHAN PRODUCTS benchmark plans. The 1,295 national plans represent 12 plan sponsor organizations, 26 unique contracts, and 88 unique formularies (a sponsor may use the same formulary for multiple plans). The average monthly premium is $46.39 (range: $1.50 to $120.20; standard deviation: $19.75) (see Table C-1). More than half (60 percent) of the plans have deductibles. The median deductible for all plan types is $310.00 (range: $10.00 to $310.00). Benchmark plans and nonnational plans are more likely to have a deductible and to have a higher deduct- ible than nonbenchmark and national plans. Compared to stand-alone PDPs, MA-PDs have a lower average premium and are less likely to have a deductible. Medicare Plans’ Coverage of Orphan Drugs— Stand-Alone PDPs and MA-PDs The coverage rate (percentage of plans covering a drug) for orphan drugs among Medicare prescription drug plans is high. On average, an orphan drug is covered by 84 percent (standard deviation: 24 percent) of stand-alone PDPs. Table C-2 shows a breakdown of coverage rate category by plan type. Of the 99 drugs, 44 (44 percent) are covered by all 1,620 PDPs (i.e., complete coverage category). An additional 29 drugs (29 per- cent) are covered by at least 75 percent of the plans (i.e., high-coverage category). Table C-2 shows that 19 (19 percent) of the drugs fall into the medium- coverage category (i.e., only covered by 50-75 percent of plans) and that 7 (7 percent) are covered by less than half of the plans (i.e., no or very low coverage and low-coverage categories). As of January 2010 4 drugs are not covered by any PDP: citric acid, glucono-delta-lactone, and magnesium car- TABLE C-1 Average Premium and Use of Deductible for Different Types of Medicare Prescription Drug Plans (99 drugs) Average Premium % with Deductiblea (std. dev.) N All stand-alone PDPs 1,620 46.39 (19.75) 60 Benchmark PDPs 398 28.70 (5.69) 94 Nonbenchmark PDPs 1,222 52.15 (19.27) 49 National PDPs 1,295 46.70 (20.14) 57 Nonnational PDPs 325 45.15 (18.07) 72 MA-PDs 2,418 20.12 (18.81) 23 aThe median deductible across all plan types is $310. NOTE: 2010 Data.

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 APPENDIX C TABLE C-2 Orphan Drug Coverage by Type of Medicare Prescription Drug Plan (99 drugs) Stand- Stand- Stand- alone All Stand- alone alone Non- Stand- alone Non- Bench- bench- alone MA- National national mark mark PDPs PDPs PDPs PDPs PDPs PDPs (N) (N) (N) (N) (N) (N) No or very low coverage 4 4 4 10 4 4 (<25% plan coverage rate) Low coverage 3 0 0 13 7 2 (25-49% plan coverage rate) Medium coverage 19 17 19 8 15 19 (50-74% plan coverage rate) High coverage 29 36 19 25 24 29 (75-99% plan coverage rate) Complete coverage 44 42 57 43 49 45 (100% plan coverage rate) NOTE: Number of drugs that fall into each coverage rate category. Because the number of drugs in the analysis is 99, the numbers and percentages of drugs are identical; the percentages have therefore not been included in the table. bonate (Renacidin Irrigation); clofazimine (Lamprene); glutamine (Nutre- store); zinc acetate (Galzin). Three other drugs—lodoxamide tromethamine (Alomide Ophthalmic Solution), tinidazole (Tindamax), and metronidazole topical (Metrogel)—are covered by 45 to 50 percent of PDPs (see Table C-3). As explained in the note for the table, a search of formularies con- ducted in late spring 2010 found a few plans had initiated coverage of Galzin and Renacidin Irrigation. Overall, MA-PD plans have slightly better coverage of orphan drugs than stand-alone PDPs. Compared to PDPs, the percentage of drugs falling into the no-very low and low-coverage categories is slightly lower among MA-PDs (4 percent in MA-PDPs versus 7 percent in PDPs). On average, an orphan drug is covered by 87 percent (standard deviation: 22 percent) of MA-PDPs, compared to 84 percent of stand-alone PDPs. Within PDPs, there is some variation in coverage rates between bench- mark and nonbenchmark plans, with nonbenchmark plans having slightly higher coverage rates. On average, an orphan drug is covered by 83 per- cent (standard deviation: 26 percent) of benchmark plans and 85 percent (standard deviation: 24 percent) of nonbenchmark plans. The benchmark plans have a higher percentage of drugs that fall within the no-very low

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TABLE C-3 Orphan Drugs with No, Very Low, or Low Plan Coverage (less than 50% coverage among all stand-  alone PDPs) (7 drugs) Stand-alone PDP Trade Coverage (% plans Route of Orphan Designation(s) Generic Name Name that cover drug) Administration (year of orphan approval) Citric acid, glucono-delta- Renacidin 0a Irrigation Treatment of renal and bladder calculi of the lactone, and magnesium Irrigation apatite or struvite variety (1990) carbonate Clofazimine Lamprene 0 Oral Treatment of lepromatous leprosy, including dapsone-resistant lepromatous leprosy and lepromatous leprosy complicated by erythema nodosum leprosum (1986) Glutamine Nutrestore 0 Oral For use with human growth hormone in the treatment of short bowel syndrome (nutrient malabsorption from the gastrointestinal tract resulting from an inadequate absorptive surface) (2004) Zinc acetate Galzin 0a Oral Treatment of Wilson’s disease (1997) Lodoxamide tromethamine Alomide 46 Ophthalmic Treatment of vernal keratoconjunctivitis (1993) Ophthalmic Solution Tinidazole Tindamax 47 Oral (1) Treatment of giardiasis; (2) treatment of amebiasis (2004) Metronidazole (topical) Metrogel 49 Topical Treatment of acne rosacea (1988) a These drugs had 0% coverage according to our analysis, which was limited to coverage of the drugs’ NDCs (listed in the FDB) in the January 2010 CMS data release. Through a systematic search of all national PDP formularies and an unsystematic Internet search of all Medicare PDPs, we determined that Renacidin and Galzin are in fact covered by some PDPs as of June 2010. Galzin, which was a “high priority access problem drug” in the NORD analysis, is not on any national PDP formularies but appears on at least two nonnational formularies. Renacidin also appears on two national formularies and a few nonnational PDP formularies.

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 APPENDIX C and low-coverage categories (11 percent in benchmark versus 6 percent in nonbenchmark plans). There is considerably more variation in coverage rates between national and nonnational plans, with national plans having higher coverage rates. On average, an orphan drug is covered by only 77 percent (standard devia- tion: 32 percent) of nonnational plans, compared to 86 percent (standard deviation: 24 percent) of national plans. Within nonnational plans, almost a quarter (23 percent) of the drugs are classified as having a no-very low or low-coverage rate, compared to only 4 percent of drugs within national plans. Aside from the four drugs covered by no PDPs, no other drug is covered by less than 50 percent of the national plans. Conversely, 19 of the 95 covered drugs are covered by less than 50 percent of the nonnational plans. Formulary Tier Placement by Stand-Alone PDPs The orphan drugs are commonly placed on high cost sharing tiers. Table C-4 shows the tier 4 placement rate by plan type. For these analyses, and the utilization management analyses below, we excluded the four drugs not covered by any plan. Of the 95 remaining drugs, 84 (88 percent) are placed on tier 4 or higher by at least one PDP. Twenty-eight (29 percent) are placed on tier 4 by at least 75 percent of the plans (i.e., high tier 4 placement), and another 15 (16 percent) are placed on tier 4 by at least 50 percent of the plans (i.e., medium tier 4 placement). Utilization Management Tools Used by Stand-Alone PDPs PDPs rarely use step therapy to manage orphan drugs. ST is used by at least one plan only for 18 (19 percent) of the covered orphan drugs. Of these 18 drugs, half (9) have a ST use rate of less than 10 percent. The drug with the highest use of ST—interferon beta-1b—is given ST requirements by almost one-quarter (23 percent) of PDPs. The use of quantity limits to manage utilization of orphan drugs is more common among PDPs than the use of ST, although most plans do not use quantity limits for these drugs. QLs are used by at least one plan for 57 (60 percent) of the covered drugs. Twenty-seven (28 percent) of these drugs have QL use rates greater than 20 percent, and an additional 4 drugs (4 percent) have QL use rates greater than 50 percent (interferon beta-1a, lidocaine patch, raloxifene, and modafinil). Prior authorization is the most widely used form of utilization man- agement employed by PDPs. Table C-5 shows PA rates by plan type. PA is used by at least one plan for 80 (84 percent) of the covered orphan drugs. Thirty-three (35 percent) of the drugs are given a PA requirement by at least

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 RARE DISEASES AND ORPHAN PRODUCTS TABLE C-A2 Continued % Plans That Generic Name Trade Name Cover Drug Eltrombopag Promacta 90.5 Cysteamine Cystagon 91.9 Midodrine HCl Amatine 92.3 Modafinil Provigil 93.5 Trientine HCl Syprine 94.0 Anagrelide Agrylin 95.6 Riluzole Rilutek 95.7 Mefloquine HCl Lariam 95.8 Ambrisentan Letairis 98.3 Tiopronin Thiola 99.4 Betaine Cystadane 99.8 Pegvisomant Somavert 99.9 Tizanidine HCl Zanaflex 99.9 Cromolyn sodium 4% ophthalmic Opticrom 4% ophthalmic 99.9 solution solution Deferasirox Exjade 99.9 Ofloxacin Ocuflox ophthalmic solution 99.9 Alitretinoin Panretin 100.0 Altretamine Hexalen 100.0 Aminosalicylic acid Paser granules 100.0 Amiodarone HCl Cordarone 100.0 Bexarotene Targretin 100.0 Bosentan Tracleer 100.0 Calcium acetate Phos-lo 100.0 Cinacalcet Sensipar 100.0 Dasatinib Sprycel 100.0 Desmopressin acetate N/A 100.0 Exemestane Aromasin 100.0 Glatiramer acetate Copaxone 100.0 Hydroxyurea Droxia 100.0 Imatinib mesylate Gleevec 100.0 Infliximab Remicade 100.0 Interferon beta-1b Betaseron 100.0 Lamotrigine Lamictal 100.0 Lenalidomide Revlimid 100.0 Lidocaine patch 5 Lidoderm patch 100.0 Megestrol acetate Megace 100.0 Miglustat Zavesca 100.0 Naltrexone HCl Revia 100.0 Nilotinib Tasigna 100.0 Nitisinone Orfadin 100.0 Pilocarpine Salagen 100.0 Potassium citrate Urocit-K 100.0 Raloxifene Evista 100.0 Rifabutin Mycobutin 100.0 Rufinamide Banzel 100.0

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 APPENDIX C % Plans That % Plans That % Plans That % Plans That % Plans That Place on Tier 3 Place on Tier 4 Have ST Have QL Have PA 19.3 78.0 0.0 46.0 88.7 51.0 12.0 0.0 0.0 16.1 3.5 0.0 0.0 11.5 0.2 48.8 6.9 0.2 74.3 98.5 49.2 11.5 0.0 0.0 0.0 0.1 0.0 0.0 0.1 11.5 11.5 65.9 0.0 11.1 29.1 0.0 0.0 0.0 11.2 0.2 15.5 79.8 10.8 33.6 50.7 48.2 12.5 0.0 0.0 0.0 52.0 11.0 0.0 0.0 15.0 13.7 68.9 6.3 30.2 85.9 4.3 0.0 0.0 0.1 0.1 0.0 0.0 0.0 0.9 0.2 15.3 79.3 0.0 0.0 51.2 2.1 0.0 0.0 5.3 0.2 16.2 57.6 0.0 4.2 10.8 19.3 74.6 0.0 0.0 28.6 45.5 25.6 0.0 0.0 4.4 0.0 0.0 0.0 0.0 5.1 14.0 68.0 0.0 21.5 55.2 15.0 80.0 10.6 29.8 62.4 4.3 2.2 0.0 0.0 0.2 27.9 2.2 10.5 39.8 28.6 15.2 79.7 10.7 40.9 55.4 6.3 0.0 1.4 9.3 0.1 40.4 16.9 10.7 21.1 0.0 13.0 82.4 0.0 43.8 91.7 0.0 0.0 0.0 0.0 0.2 15.2 82.3 0.0 28.8 69.0 12.6 82.5 1.1 0.0 94.4 15.3 82.4 22.6 43.0 92.1 4.2 0.0 13.8 30.6 33.5 15.0 80.2 0.0 34.6 69.9 33.6 8.4 6.3 56.4 45.7 2.1 0.0 0.0 21.3 7.4 15.9 62.4 0.0 6.7 31.1 0.0 0.0 0.0 0.0 0.2 15.2 80.0 10.7 38.7 53.2 15.6 75.3 0.0 0.0 26.4 3.1 0.0 0.0 0.0 0.2 0.0 0.0 0.0 0.0 0.2 21.1 2.2 0.0 63.8 0.0 38.5 12.4 0.0 0.0 0.0 45.7 25.6 0.0 48.3 40.9 continued

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 RARE DISEASES AND ORPHAN PRODUCTS TABLE C-A2 Continued % Plans That Generic Name Trade Name Cover Drug Sacrosidase Sucraid 100.0 Selegiline HCl Eldepryl 100.0 Sodium phenylbutyrate Buphenyl 100.0 Sorafenib Nexavar 100.0 Sotalol HCl Betapace 100.0 Sulfadiazine N/A 100.0 Tacrolimus Prograf 100.0 Thalidomide Thalomid 100.0 Topiramate Topamax 100.0 Toremifene Fareston 100.0 Tranexamic acid Cyklokapron 100.0 Tretinoin Vesanoid 100.0 Ursodiol Urso 100.0 Vorinostat Zolinza 100.0 Zidovudine Retrovir 100.0

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 APPENDIX C % Plans That % Plans That % Plans That % Plans That % Plans That Place on Tier 3 Place on Tier 4 Have ST Have QL Have PA 20.5 66.6 0.0 0.0 21.9 0.0 0.0 0.3 0.1 0.2 16.1 61.7 0.0 0.0 19.3 12.9 79.9 0.0 41.2 83.1 0.0 0.0 0.0 0.0 0.2 1.4 4.3 0.0 0.0 0.0 39.9 18.6 0.0 7.6 99.8 10.2 79.8 0.0 33.5 71.4 11.6 2.1 0.1 38.8 13.7 48.3 16.6 0.0 16.9 4.1 17.0 11.8 0.0 0.0 24.0 8.2 50.5 0.0 0.0 31.9 2.1 0.0 0.0 0.0 0.2 15.3 80.0 0.0 34.5 64.1 2.1 0.0 0.0 0.2 0.0

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 RARE DISEASES AND ORPHAN PRODUCTS TABLE C-A3 Drugs with a Pediatric Orphan Indication (1983-2008 Approvals) (27 drugs) Exclusivity Start Date Generic Name Trade Name Indication for Original Approval 10/17/85 Somatropin Nutropin For use in the long-term treatment of children who have growth failure due to a lack of adequate endogenous growth hormone secretion 10/17/85 Somatrem for Protropin For long-term treatment of children injection who have growth failure due to a lack of adequate endogenous growth hormone secretion 3/8/87 Somatropin for Humatrope For the long-term treatment of injection children who have growth failure due to inadequate secretion of normal endogenous growth hormone 8/2/90 Colfosceril Exosurf Treatment of established hyaline palmitate, cetyl neonatal for membrane disease at all gestational alcohol, tyloxapol intratracheal ages suspension 1/30/91 Succimer Chemet Treatment of lead poisoning in children capsules 7/1/91 Beractant Survanta (1) Prevention of RDS (hyaline intratracheal membrane disease) in premature suspension infants less than 1250 grams birth weight or with evidence of surfactant deficiency. (2) Treatment of (“rescue”) premature infants with RDS confirmed by x-ray and requiring mechanical ventilation. 12/24/91 Histrelin acetate Supprelin Treatment of central precocious injection puberty 2/26/92 Nafarelin acetate Synarel nasal Treatment of central precocious solution puberty 7/14/92 Teniposide Vumon for Induction therapy in patients injection with refractory childhood acute lymphoblastic leukemia 4/16/93 Leuprolide acetate Lupron Treatment of children with central injection precocious puberty 7/29/93 Felbamate Felbatol As adjunctive therapy in the treatment of partial and generalized seizures associated with the Lennox-Gastaut syndrome in children 12/27/93 Immune globulin Gamimune N Infection prophylaxis in pediatric intravenous, human patients affected with the human immunodeficiency virus

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 APPENDIX C TABLE C-A3 Continued Exclusivity Start Date Generic Name Trade Name Indication for Original Approval 1/18/96 Respiratory Respigam Prophylaxis of respiratory syncytial syncytial virus virus (RSV) lower respiratory tract immune globulin infections in infants and young (human) children at high risk of RSV disease 9/26/97 Sermorelin acetate Geref Treatment of idiopathic or organic growth hormone deficiency in children with growth failure 5/27/99 Etanercept Enbrel Reduction in signs and symptoms of moderately to severely active polyarticular-course juvenile rheumatoid arthritis in patients who have had an inadequate response to one or more disease-modifying antirheumatic drugs 9/21/99 Caffeine Cafcit Short-term treatment of apnea of prematurity in infants between 28 and less than 33 weeks gestational age 6/20/00 Somatropin Genotropin Long-term treatment of pediatric (r-DNA) patients who have growth failure due to Prader-Willi syndrome (PWS) 7/12/02 Rasburicase Elitek Treatment of malignancy-associated or chemotherapy-induced hyperuricemia 7/29/03 Ribavirin Rebetol Treatment of chronic hepatitis C among previously untreated pediatric patients at least 3 years of age or older 10/23/03 Botulism immune Babybig Indicated for treatment of infant globulin botulism caused by type A or type B Clostridium botulinum 12/28/04 Clofarabine Clolar Treatment of pediatric patients 1 to 21 years old with relapsed or refractory acute lymphoblastic leukemia after at least two prior regimens 8/11/05 Meloxicam Mobic For relief of the signs and symptoms of pauciarticular or polyarticular course juvenile rheumatoid arthritis in patients 2 years of age or older 8/30/05 Mecasermin Increlex Long-term treatment of growth failure in children with severe primary IGF-1 deficiency (Primary IGFD) or with growth hormone (GH) gene deletion who have developed neutralizing antibodies to GH 12/12/05 Mecasermin Iplex Treatment of growth failure in children rinfabate with severe primary IGF-1 deficiency (Primary IGFD) or with growth hormone (GH) gene deletion who have developed neutralizing antibodies to GH continued

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0 RARE DISEASES AND ORPHAN PRODUCTS TABLE C-A3 Continued Exclusivity Start Date Generic Name Trade Name Indication for Original Approval 4/13/06 Ibuprofen lysine Neoprofen For closure of a clinically significant patent ductus arteriosus in premature infants weighing between 500 and 1500 g, who are no more than 32 weeks gestational age when usual medical management (e.g., fluid restriction, diuretics, respiratory support) is ineffective 12/20/06 Balsalazide Colazal Treatment of mildly to moderately disodium active ulcerative colitis in patients 5 years of age and older 2/21/08 Adalimumab Humira Treatment of juvenile rheumatoid arthritis NOTE: This list includes drugs that received approval only for a pediatric orphan indication. Remicade, which received a pediatric orphan approval for the treatment of pediatric Crohn’s disease, is also approved for an adult orphan indication and was therefore included in a previ- ous list of drugs. The drugs are sorted by the exclusivity date (i.e., date of approval of orphan indication) for first orphan approval with a relevant indication. Drugs with multiple orphan designations often have different exclusivity dates associated with each approved indication. The text for some indications has been abbreviated.

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TABLE C-A4 Medicare Stand-Alone PDP Coverage for Drugs with a Pediatric Orphan Indication: Inclusion on Formulary (i.e., Plan Coverage), Tier Placement, and Utilization Management (27 drugs) No. of %- Plans % Plans Plans % Plans That That That That % Plans % Plans % Plans Cover Cover Place on Place on That That That Generic Name Trade Name Drug Drug Tier 3 Tier 4 Have ST Have QL Have PA Beractant Survanta intratracheal 0 0.0 — — — — — suspension Botulism immune globulin Babybig 0 0.0 — — — — — Caffeine Cafcit 0 0.0 — — — — Colfosceril palmitate, cetyl Exosurf neonatal 0 0.0 — — — — — alcohol, tyloxapol for intratracheal suspension Histrelin acetate Supprelin injection 0 0.0 — — — — — Ibuprofen lysine Neoprofen 0 0.0 — — — — — Immune globulin Gamimune n 0 0.0 — — — — — intravenous, human Mecasermin rinfabate Iplex 0 0.0 — — — — — Respiratory syncytial virus Respigam 0 0.0 — — — — — immune globulin (human) Sermorelin acetate Geref 0 0.0 — — — — — Somatrem for injection Protropin 0 0.0 — — — — — Succimer Chemet capsules 0 0.0 — — — — — Teniposide Vumon for injection 0 0.0 — — — — — Somatropin [r-DNA] Genotropin 622 38.4 57.6 25.6 0.0 27.8 99.5 Somatropin Nutropin 625 38.6 16.6 77.6 0.0 28.0 99.5 Somatropin for injection Humatrope 693 42.8 15.0 79.4 0.0 25.3 99.6 continued 

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TABLE C-A4 Continued  No. of % Plans % Plans Plans % Plans That That That That % Plans % Plans % Plans Cover Cover Place on Place on That That That Generic Name Trade Name Drug Drug Tier 3 Tier 4 Have ST Have QL Have PA Clofarabine Clolar 899 55.5 25.0 66.6 0.0 0.0 19.4 Mecasermin Increlex 1,347 83.1 21.4 73.1 0.0 0.0 92.0 Nafarelin acetate Synarel nasal solution 1,445 89.2 30.0 61.7 0.0 0.0 31.4 Etanercept Enbrel 1,450 89.5 11.5 83.3 1.4 45.2 93.7 Balsalazide disodium Colazal 1,536 94.8 4.4 0.0 0.0 0.0 0.2 Meloxicam Mobic 1,546 95.4 0.0 0.0 0.1 0.2 Leuprolide acetate Lupron injection 1,554 95.9 11.1 9.8 0.0 18.1 71.1 Adalimumab Humira 1,618 99.9 13.0 82.4 1.2 46.8 94.3 Felbamate Felbatol 1,620 100.0 38.1 18.9 0.0 0.0 0.0 Rasburicase Elitek 1,620 100.0 17.7 77.3 0.0 0.0 49.0 Ribavirin Rebetol 1,620 100.0 6.9 6.4 0.0 17.4 73.6

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 APPENDIX C REFERENCES CMS (Centers for Medicare and Medicaid Services). 2009a. 00 Medicare Advantage Rate- book and Prescription Drug Rate Information: 00 Low-Income Premium Subsidy Amounts. http://www.cms.hhs.gov/MedicareAdvtgSpecRateStats/Downloads/Regional RatesBenchmarks2010.pdf (accessed September 2, 2010). CMS. 2009b. 00 Medicare Part D National Stand-Alone Prescription Drug Plans. http:// www.cms.hhs.gov/PrescriptionDrugCovGenIn/Downloads/NationalPDPs.pdf (accessed September 2, 2010). CMS. 2010. CMS Announces Course of Action to Identify Protected Class of Prescription Drugs. http://www.cms.hhs.gov/apps/media/press/release.asp?Counter=3409 (accessed September 2, 2010). KFF (Kaiser Family Foundation). 2009a. Medicare: Low-Income Assistance Under the Medi- care Drug Benefit. http://www.kff.org/medicare/upload/7327-05.pdf (accessed September 2, 2010). KFF. 2009b. Medicare Part D 00 Data Spotlight: Specialty Tiers. http://www.kff.org/ medicare/upload/7919.pdf (accessed September 2, 2010). KFF. 2009c. Medicare Part D 00 Spotlight: Benefit Design and Cost-Sharing. December. http://www.kff.org/medicare/upload/8033.pdf (accessed September 2, 2010). KFF. 2009d. Medicare Part D Spotlight: Part D Plan Availability in 00 and Key Changes since 00. http://www.kff.org/medicare/upload/7986.pdf (accessed September 2, 2010). KFF. 2010a. Explaining Health Care Reform: Key Changes to the Medicare Part D Drug Benefit Coverage Gap. http://www.kff.org/healthreform/upload/8059.pdf (accessed Sep- tember 2, 2010). KFF. 2010b. Medicare: A Primer. http://www.kff.org/medicare/upload/7615-03.pdf (accessed September 2, 2010). KFF. 2010c. Medicare at a Glance. http://www.kff.org/medicare/upload/1066-12.pdf (accessed September 2, 2010). NORD (National Organization for Rare Disorders). 2006. Letter to Mark B. McClellan, M.D., Ph.D., Administrator of CMS: Orphan Drug Coverage in Medicare Part D For- mularies January. http://www.rarediseases.org/news/pdf/Final_ltr_CMS_011006_V2.pdf (accessed September 2, 2010). OIG (Office of Inspector General, U.S. Department of Health and Human Services). 2001. The Orphan Drug Act: Implementation and Impact. http://oig.hhs.gov/oei/reports/oei-09-00- 00380.pdf (accessed September 2, 2010). Social Security Online. 2010. Compassionate Allowances. http://www.socialsecurity.gov/ compassionateallowances/ (accessed September 2, 2010).

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