Where Do 
Orphan Drugs 
Go From Here?

NICE INSIGHT OVERVIEW: ORPHAN DRUGS

Since laws were implemented in the United States, Europe and Japan to encourage the development of drugs to treat rare diseases, the number of orphan drugs on the market has increased. In spite of this, development and approval times can be quite lengthy, and the treatments often carry very high price tags. The consensus is starting to build among many stakeholders that the programs need a major overhaul.

Steadily Growing Market
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Following the inception of legislation promoting the commercialization of orphan drugs, development of new drugs to treat the approximately 7,000–8,000 known rare diseases has been financially incentivized through marketing exclusivity periods, tax credits and reduced fees. 

Evaluate Pharma estimates that the current global orphan drug market is expanding at a compound annual growth rate of 11.3% — nearly twice that of the overall pharma market (6.4%) — and will reach a value of $262 billion in 2024.1 By then, orphan drugs are expected to account for 20% of worldwide prescription sales and one-third of total R&D pipeline sales through 2024. 

In addition, of all innovative drugs that have expanded the human drug target landscape from 1983 to 2017, orphan drugs account for more than 40%.2 As of mid-2018, investigative drugs for the treatment of rare diseases also accounted for 40% of the 803 drug candidates undergoing clinical trials.

This growth is occurring despite declines in year-on-year price increases (which rose at 5.2% annually, compared to 9.2% for the top 100 non-orphan products), perhaps because the mean cost per patient was still nearly $150,000 in 2017.1 Cancer treatments will account for approximately half of the global orphan drug market in 2024, followed by blood therapies at 12.5%.1 Notably, four of the top five approved oncology drugs received orphan drug designations — and achieved blockbuster status.2

The U.S. Food and Drug Administration has granted more orphan drug designations than any other regulatory body, with many more coming since the implementation of the agency’s orphan drug modernization plan beginning in 2016. Nearly 4,000 drugs received orphan drug designations in the United States in the period between 1983 and 2017, and more than 650 were approved for marketing in the United States during that time.3 Between 2014 and 2017, orphan drugs comprised over 40% of the new molecule entities approved each year.1

Lengthy Development and Approval Times Q2_NI Overview_sidebarB

A study conducted by the Tufts Center for the Study of Drug Development revealed that the time required to transition from first patent filing to product launch for orphan drugs is 18% longer on average than it is for all new drugs.3 Development of drugs to treat ultra-rare diseases that affect only a few hundred patients takes even longer — 17.2 years on average versus 15.1 years for regular orphan drugs. 

Of the 86 orphan drugs that received marketing approval from the FDA in 2018, 16 had been designated as an orphan drug for the treatment of a rare disease 10 or more years before approval, and waited 20 or more years to secure approval.4 Many received orphan drug designation four to eight years before marketing authorization.

The Tufts study was based on 46 first-in-class orphan new molecular entities approved by the FDA between 1999 and 2012. Previous studies evaluated the time from filing of a new drug application to FDA approval, which does not take into consideration the challenges associated with setting up and running clinical trials. Some other difficulties include variability in the expression, severity and/or course of diseases that may not be well known and/or lack well-understood biologies; small and geographically dispersed populations; and lack of obvious endpoints and outcome measures.3

The fact that the study only looked at data through 2012 may have contributed to the lengthy development times, because recent advances in drug development and approval pathways were not accounted for, such as the FDA’s Breakthrough Therapy designation for accelerated approvals, which was implemented in 2012.3

In addition, a 2017 study by Kaiser Health News and National Public Radio found that one-third of orphan drugs approved in the United States, since the program began in 1983, were either repurposed mass-market drugs, or drugs that received multiple orphan approvals with dramatically reduced approval times. These approaches have been increasing in recent years as a strategy for extending patent protection. New approaches to study design, such as involving patient advocacy groups and the use of adaptive clinical trials, are also helping reduce development times.3

Drug development costs continue to rise, and resistance to high drug prices remains vocal and strident from patients, payers and the presidential administration. These changes may reduce the attractiveness of orphan drug development. 

Questions about Costs and Pricing

Pricing decisions for some orphan drugs are raising serious concerns and questions among patients, payers and government officials.

Procysbi for the treatment of cystinosis, a rare, fatal childhood disease, is one example. Developer Raptor Pharmaceutical (since acquired by Horizon Pharma) licensed the tech from the University of California San Diego and worked closely with it and the cystinosis research foundation to develop the drug, which the company’s board — against the wishes of then-CEO Christopher Starr and then Chief Medical Officer Patrice Rioux — launched in 2013 with a $300,000 price tag — a price that has risen 48% since then.5 According to Horizon, the company has a program that covers deductibles and copays or the entire cost if insurance is lacking, so all patients who need Procysbi can receive it.

Despite cases like this one, there is evidence to suggest that the seven-year market exclusivity granted to drugs designated under the Orphan Drug Act of 1983 for rare diseases is working as intended. A study commissioned by the National Organization for Rare Disorders (NORD) and published by IQVIA Institute found that orphan exclusivity did not inappropriately prevent generics and biosimilars from entering the market.6 Of the 503 approved therapies with an orphan indication at the time the research was conducted, 217 are no longer covered by orphan exclusivity or patent protection, and 116 of them have generic or biosimilar competition. 

In addition, in 2017, median spending on the 101 orphan drugs without protection from competition and without competitors was found to be only $8.6 million per year per drug. Thirty of these drugs have since been discontinued because they were replaced by newer drugs or were insufficiently profitable.7 The study also found that most orphan drugs have relatively low prices. When they do have very high prices, it is often because the patient population is quite small and there is little or no interest from potential competitors. Furthermore, it was determined that prices for orphan drugs are in general raised more slowly than prices for other branded drugs, both for therapies developed as orphan drugs and those for which an orphan indication is later added. 

A recent study on the development costs for orphan drugs is raising some questions, however. It found that while the total out-of-pocket clinical costs and capitalized expected costs per approved drug were both higher for orphan drugs than nonorphan drugs ($55 and $96 million vs. $30 and $43 million, respectively); when the overall probability of clinical success was taken into account, both costs for orphan drugs were actually lower ($166 and $291 million vs. $291 million and $489 million, respectively).8 The results were determined using data from 1163 trials evaluating 561 nonorphan drugs and 602 orphan drugs. No hard conclusions can be made, however, because significant variabilities in the trial designs, subjects and lengths of the studies may not all have been accounted for. Furthermore, the authors note that the cost of development must be considered in the context of the drug’s therapeutic role.

Clinical trials for orphan drugs can be more challenging to establish because it can be difficult to find enough patients, but they also can be conducted with many fewer participants (as few as 20) than those for non-orphan drugs, which may require thousands.9 Smaller trials can lead to faster approvals and lower costs.

Following the inception of legislation promoting the commercialization of orphan drugs, development of new drugs to treat the approximately 7,000–8,000 known rare diseases has been financially incentivized through marketing exclusivity periods, tax credits and reduced fees.

Is There Manipulation of the System?

While the orphan drug exclusivity appears to be working, some believe that, in certain cases, orphan drug laws are being abused and exploited for economic gain. Two strategies raising concern are the repurposing of commonly used drugs and obtaining multiple orphan designations in different indications for the same drug.9 It should be noted, however, that clinical trials must be performed before approval can be sought for any new indication.

In another approach, companies have divided common conditions into much smaller subsets defined by specific biomarker-defined characteristics. In 2016, a study found that 13 of the 84 drugs approved with orphan designations between 2009 and 2015 were for subsets of more prevalent diseases, with some also approved for other, related conditions.9 As an example, Genentech’s Avastin cancer treatment has 11 approved orphan uses.10 This strategy falls under the category of personalized medicine for some and should be distinguished from orphan drugs that treat genuinely rare conditions, many of which are suffered by children.

Additional concerns include the avoidance of the traditional large clinical trials typically conducted for non-orphan drugs and the ability in some cases for drug makers to charge extremely high prices and realize significant profits.11

Recommendations for Refining the Process

The U.S. Government Accounting Office (GAO) investigated the orphan drug approval process and found that the FDA does not always take into account background information it should when determining whether a drug qualifies for orphan designation, particularly since the implementation of the agency’s modernization plan.10,12 In 15% of the approvals investigated, FDA reviewers failed to independently verify patient estimates.

The GAO recommends that the FDA ensure that all required information, such as regulatory history information, including adverse actions, reported to other regulatory agencies for reviews of orphan designation applications be consistently recorded and evaluated.12 The FDA and the Department of Health and Human Services agreed with the GAO’s recommendations.

Others would like to see more significant changes, because for many drugs that could receive orphan designation, the period of marketing exclusivity is unnecessary, given that they are unlikely to face generic competition.13 Limiting financial incentives to tax credits would address this issue. It has also been proposed to give tax credits only to pharma companies that can demonstrate a small patient population and the lack of economic viability without receiving financial assistance. Others have suggested adding the ability to reclaim any tax incentives where it is clear they were not needed to facilitate development. Finally, implementation of price regulation for orphan drugs after patent expiry that have no generic competition has been proposed to control patient costs.

Another suggestion is to focus orphan drug approvals on rare diseases that have not yet received the attention of major pharmaceutical companies rather than on the size of the patient population.11 

Development of drugs to treat ultra-rare diseases that affect only a few hundred patients takes even longer — 17.2 years on average versus 15.1 years for regular orphan drugs.

Will Governments Act?

In November 2018, Senator Orrin Hatch and Representatives Leonard Lance and G.K. Butterfield introduced a resolution that marked 35 years of success of the Orphan Drug Act and called for ongoing support of the law.

Senator Kay Hagan has also introduced a plan developed by the Biotechnology Industry Organization to expand the FDA’s accelerated-approval program.14  The proposal, which is included in the renewal of the Prescription Drug User Fee Act (PDUFA), would allow drug approvals based on phase II clinical trial results when data cannot be “ethically, feasibly or practicably generated” — a common scenario for orphan drugs.15

What Does the Future Hold?

On the other hand, the U.S. tax reform legislation passed in 2018 reduced the tax credit for orphan drug developers by half, from 50% to 25%. Drug development costs continue to rise, and resistance to high drug prices remains vocal and strident from patients, payers and the presidential administration. These changes may reduce the attractiveness of orphan drug development. Some companies have already made the decision to stop investing in rare disease therapies. 

So what does it all mean for the future of orphan drugs? Thousands of rare diseases still lack treatments, and genomics technologies are facilitating the identification of novel drug targets. In many cases, the development costs for drugs to treat these diseases can be combined with limited generic competition to create incentives for drug makers — even if the financial advantages established by orphan drug laws are reduced. Taking all this into consideration, further growth of the orphan drug market can therefore be expected. 

References

  1. Orphan Drug Report 2018, 5th Edition. Evaluate Pharma. May 2018. Web.
  2. Attwood, Misty M., Mathias Rask-Andersen, Helgi B. Schiöth. “Orphan Drugs and Their Impact on Pharmaceutical Development.” Trends in Pharmacological Sciences. 39:525–535 (2018).
  3. Redfearn, Suz. “Tufts: Facing Many Challenges, Orphan Drugs Take 18% Longer to Develop.” Center Watch Weekly. 14 May 2018. Web.
  4. “Engaged for 20 years: an orphan drug designation from 1995 just got approved in 2018.” Draceana Consulting, 3 Jan. 2019. Web.
  5. Kopp, Emily and Jay Hancock. “The High Cost Of Hope: When The Parallel Interests Of Pharma And Families Collide.” Kaiser Health News. 7 Sep. 2018. Web.
  6. Jensen, Christina. “New Study Finds Orphan Drug Exclusivity Working As Intended, On-Market Orphan Drug Prices Rise Slower than Common Drugs.” National Organization for Rare Disorders Feature News. 18 Dec. 2018. Web.
  7. Aitken, Murray and Michael Kleinrock. “Orphan Drugs in the United States: Exclusivity, Pricing and Treated Populations.” IQVIA Institute for Human Data Science. Dec. 2018. Web.
  8. Bai, David. “Orphan Drugs Have Lower Drug Development Costs Compared With Nonorphan Drugs.” AJMC Managed Markets Network Newsroom. 3 Feb. 2019. Web.
  9. Kwon, Diana. “How Orphan Drugs Became a Highly Profitable Industry.” The Scientist. 1 May 2018. Web.
  10. Tribble, Sarah Jane and Sydney Lupkin. “Government Investigation Finds Flaws In the FDA’s Orphan Drug Program.” Kaiser Health News. 30 Nov. 2018. Web.
  11. Thomas, Shalin and Arthur Caplan. “The Orphan Drug Act Revisited.” Journal of the American Medical Association. 321: 833-834 (2019).
  12. Orphan Drugs: FDA Could Improve Designation Review Consistency; Rare Disease Drug Development Challenges Continue. Government Accounting Office (GAO-19-83). 30 Nov. 2018. Web.
  13. Bagley, Nicholas, Amitabh Chandra, Craig Garthwaite and Ariel D. Stern. “It’s Time to Reform the Orphan Drug Act.” New England Journal of Medicine Catalyst. 19 Dec. 2018. Web.
  14. Sullivan, Thomas. “Senator Kay Hagan Encourages FDA to Consider Faster Approval Pathway for Orphan Disease Treatments.” Policy and Medicine. 6 May 2018. Web.
  15. Jensen, Christina. “Orphan Drug Act Resolution Introduced in Congress.” National Organization for Rare Disorders Feature News. 19 Nov. 2018. Web

Nigel Walker

Mr. Walker is the founder and managing director of That’s Nice LLC, a research-driven marketing agency with 20 years dedicated to life sciences. Nigel harnesses the strategic capabilities of Nice Insight, the research arm of That’s Nice, to help companies communicate science-based visions to grow their businesses. Mr. Walker earned a bachelor’s degree in graphic design with honors from London College of Communication, University of the Arts London, England.