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The Orphan Drug Act was created to encourage drugmakers to develop medicines for rare diseases. So why is it many drug companies are abusing this law?
The development of new drugs is crucial for everyone, but especially for people who suffer from rare disorders where there may be few – if any – treatments available. That’s why almost 35 years ago, Congress passed the Orphan Drug Act, which provides incentives to pharmaceutical companies to develop medications for illnesses or conditions that affect fewer than 200,000 people.
Sounds like a win-win for everyone, right? Wrong. While the intent of the Orphan Drug Act is noble, unfortunately, the law has increasingly been abused by pharmaceutical companies to get drugs that aren’t new at all approved as orphan drugs so that they can get 7 years of patent exclusivity. That means there won’t be competition for that period. In addition, drug developers are given tax incentives and have to go through a less rigorous regulatory process to win approval.
This is all problematic, given that drugs that win orphan drug designation are among the most expensive therapies available, usually costing several hundreds of thousands of dollars per year. Needless to say, such high price tags have drawn criticism.
Adding Oversight
Thankfully, something is finally going to be done about this. In response to a letter from several senators last month, the GAO has agreed to investigate if the orphan drug program – which is run by the FDA – is being administered properly and if there are any abuses of it.
“While few will argue against the importance of the development of these drugs, several recent press reports suggest that some pharmaceutical manufacturers might be taking advantage of the multiple designation allowance in the orphan drug approval process,” the senators wrote in their letter to the GAO.
A great example of gaming the orphan drug program came earlier this year when Marathon Pharmaceuticals won approval for a relatively inexpensive steroid that has been used extensively around the world for the rare disease Duchenne muscular dystrophy. The company then set a list price of $89,000 a year for the drug, an astronomical, unheard-of amount for a steroid. Marathon has since held off on launching Emflaza (deflazacort). Incidentally, deflazacort can be obtained through online pharmacies for about a $1 a pill.
Of the roughly 450 drugs that have orphan drug status, 73 were approved as “mass market” drugs that later received an orphan indication and additional patent protection.
But this isn’t even the worst of it. As a Kaiser Health News analysis published in January demonstrated, many drugs that have been around for decades – and not even initially approved as orphan drugs – are benefiting from patent exclusivity and thus, lack of competition because of additional indications that were designated as orphan. For example, Humira (adalimumab) and Enbrel (etanercept), the No. 2 and No. 3 best-selling drugs of 2015 with sales of, respectively, $8.4 billion and $5.1 billion, were initially approved for non-orphan diseases but now have orphan drug protections due to additional indications for rare disease conditions.
Of the roughly 450 drugs that have orphan drug status, about 300 were originally approved as orphan drugs. Another 73 were approved as “mass market” drugs and later received an orphan indication. Some drugs even have multiple orphan drug indications. Given that each indication is worth another 7 years of patent exclusivity, a drugmaker could prevent generic competition on it for decades.
Expecting Growth
Not surprisingly, drug companies have taken a liking to orphan drugs. In fact, orphan drugs are expected to account for 21.4% of all global prescription sales by 2022, according to a report by the Evaluate Group.
The GAO report should helpfully provide a treasure trove of data to justify changes to the Orphan Drug Act to prevent its abuse by drugmakers. Here’s hoping Congress and the FDA will act to make those changes.
