How the Orphan Drug Act changed the development landscape

Most of the world’s highest-priced drugs are for rare diseases. In the U.S., those are conditions that affect about a couple hundred thousand people.  But some affect as few as a couple hundred people worldwide.

Surprising? Turns out that even small patient populations can now deliver a healthy profit. Price tags for such drugs can reach more than $500,000 per patient/per year. And there are other bonuses for developing a rare disease drug. As a result, this field has drawn tremendous interest from drug developers and led to some startling breakthroughs that have literally turned deadly diseases into manageable conditions.

Still, over 7,000 rare, or orphan, diseases are known. Most of these are genetic conditions, but even rare sub-types of cancer qualify for this designation. While there are a growing number of success stories, the vast majority of rare disease patients continue waiting for cures. At the same time, questions are starting to emerge about whether the unique regulatory path that spurred this wealth of new drugs is still working, or if it needs fine-tuning.

A breakthrough regulation

The 1983 Orphan Drug Act changed the pharmaceutical playing field dramatically by finally making it lucrative to pursue development of drugs for small populations —in the U.S. that's 200,000 patients or less. Prior to that, it just wasn’t worth it for drug makers to even consider working on rare diseases. It made better financial sense to pursue cures for common diseases, such as asthma, heart disease or arthritis. Such conditions have a potential market of hundreds of millions of patients. Even some of the most common rare diseases don’t have markets of enough size to justify the huge investment of time and money required to bring a drug to market.

But the Orphan Drug Act made it much more profitable to make such drugs. It offered some very enticing rewards for companies going into this field, including an exclusive license for seven years — providing companies a virtual monopoly — as well as other potential financial rewards, including a 50% tax break on R&D costs, waiving of the user fees associated with getting a drug reviewed and grants for early stage research. 

The result of the new law was striking.

"Only ten drugs for orphan diseases were approved in the ten years prior to the Orphan Drug Act’s passage," noted Paul Melmeyer, Director of Federal Policy for the National Organization of Rare Disorders (NORD). "But since 1983, more than 600 drugs for orphan diseases have been developed."  Some of these are just new formulations or other types of tweaks of a current drug, but several hundred drugs developed specifically for orphan diseases have reached patients.

The insurance industry reacts

Of course, somebody has to pay for these drugs, and since many of them now have eye-popping prices, it is not surprising people started to question the process.

 A 2013 study by Robert Handfield and Josh Feldstein found that 67% of U.S. private insurance companies were concerned about the cost of orphan drugs, but only approximately 17% had developed meaningful strategies for addressing this problem. Most, the report said, were not doing cost-effectiveness analyses "because of a lack of the availability of medicines to facilitate such comparisons." In other words, they just hadn’t figured out how to evaluate the value of these drugs.

"I think this is an issue we will hear more about," Handfield said.  "Some of the physicians I’ve spoken to at insurance companies are saying this is a growing problem, but one no one is dealing with yet."

Then in January of this year, Kaiser Health News (KHN) came out with an investigative report charging that the orphan drug system in the U.S. was being "… manipulated by drugmakers to maximize profits and protect niche markets for medicine already being taken by millions." The story stated that "... about a third of orphan approvals by the FDA since the program began have been either for repurposed mass market drugs or drugs that received multiple orphan approvals." Further, the exclusivity guarantee is a potent pricing tool, the authors argued: If a company has exclusivity they can charge a lot more.

KHN reported that at least one FDA official, Gayatri Rao, who is director of the FDA’s Office of Orphan Products Development, said the agency would "look into" the news agency’s work, adding that regulatory change was a possibility.

Not everyone, particularly disease advocacy groups, is convinced by this argument, which others have forwarded as well.  "We can see the smoke, but are not sure there really is a fire," said Melmeyer. He points out, for example, that some anti-inflammatory drugs can be useful in rare diseases, and have gotten approval for such use. But claiming additional indications for a drug approved in a common disease doesn’t necessarily garner companies more profits than a regular approval. "We just don’t see the argument that there is abuse here," he added.

Shining a brief spotlight

Rare diseases got a big unexpected publicity boost early this year when President Donald Trump invited Megan Crowley to attend his first joint speech to Congress in February.  It happened that he was giving his speech on Rare Disease Day.

Megan was born with Pompe disease and has had symptoms since infancy. Her brother also has the condition. Their father, John Crowley, took the bold step of actually founding a drug firm just to find a cure for the enzyme deficiency underlying Pompe, which causes glycogen buildup and leads to muscle and respiratory damage.

Pompe affects only approximately one in 40,000 people. So it was a tall order to raise the funds, let alone find the cure, but John Crowley’s company managed it, and his children got access to a potentially life-extending treatment.

It was touching to see Megan, now a college student but barely mobile, seated in her specialized wheelchair and listening to the president’s speech. But rare-disease advocates were not all sold on the President’s suggestion that we should "slash restraints" on our "slow and burdensome" FDA approval process. In fact, the next day NORD released a statement saying that while the FDA process could be improved, they disagreed that it needed radical overhaul.

"Between 2008 and 2013, 87% of the 113 rare disease treatments reviewed by the FDA received an expedited review, compared to 35% of treatments for common diseases. Seventy-eight percent of rare disease treatments were approved using one or more flexible development approaches," according to NORD.

Rather, NORD and other groups would rather see better funding of the FDA, including reauthorization of the user fee agreements that help fund the agency by charging companies fees.

What’s Next?

Obviously, not everyone can take the same tact John Crowley took, but there are a growing number of rare disease advocacy groups trying to catch the interest of researchers or drug developers.

One relatively new approach is illustrated by American MedChem (AMC), which is just starting its work using philanthropy and grants to underwrite pre-clinical research and development in children’s rare diseases with academic groups. They plan to then partner with pharmaceutical companies and disease foundations to bring treatments through clinical trials and to market.

The company’s founder and CEO, Robert Selliah, points out that clinical trials in children are especially difficult and not nearly as common as those in adults. "Pediatric drug development has always been the second act," he said.  "Often it is the FDA itself that tells companies to pursue a pediatric application." He aims to use incentives from the Orphan Drug Act and the Pediatric Priority Review Voucher to convince partners to help AMC take their drug candidates to the finish line.

Advocacy groups such as NORD would also like to see better integration of experts on rare diseases in the drug review process. "The rare disease patient population is unique, and they often present special challenges," Melmeyer noted. "Having experts at the table when any [FDA] division is reviewing such drugs will help establish consistency in the use of the special programs available."

Insurance companies and other payers, of course, will keep watching the dial. If drug prices go up and up, they may take steps. 

Meanwhile, patients with rare diseases and the companies seeking to serve them will continue to look at this a golden opportunity, if only the right drug candidates can be found.

Filed Under: Clinical Trials Regulatory / Compliance