The Commercial Fate of Orphan Drugs

Many pharmaceutical companies frown on releasing an orphan drug due to fears of poor returns on investment. However, this article details the reasons why orphan drugs are important and how they can potentially benefit companies.
By Safia Abouelleil and Albert Wertheimer, PhD, MBA

The year 2008 marks the 25th anniversary of the passage of the U.S. Orphan Drug Act. There can be no question of its success. It is estimated that there are about 6,000 to 7,000 rare diseases and medical conditions in the world, and prior to the passage of this landmark legislation, only 47 drugs were ever approved by the U.S. FDA for orphan conditions (and only 10 of those came from U.S. pharmaceutical companies).1 In these past 25 years, more than 1,800 agents have been granted an orphan drug designation and 325 of these were approved by the FDA.2 These orphan drugs have had an impact on the lives of 2.5 million Americans.

BACKGROUND INFORMATION
The U.S. pharmaceutical industry is investor-owned and made up of for-profit firms. It is logical, normal, legal, and to be expected that these companies would attempt to maximize their profits by developing drugs for the largest markets (i.e., cardiovascular disease, asthma, diabetes, pain/inflammation, depression, gastroesophageal reflux disease, etc.). Yet hundreds of thousands of patients are suffering from rare diseases, where, often, an effective drug has been developed but the firm has elected not to market it because of an expected insufficient return on investment, or where the firm has chosen not to conduct research also due to the small size of the market.

In order to correct this inequity, U.S. Orphan Drug Act was passed in 1983 to recognize an orphan drug as a drug that is used for an orphan (rare) disease. An orphan disease is a disease affecting fewer than 200,000 people in the United States or with a prevalence of less than five per 10,000 in the community.2 Later, in October 1993, the Japanese government revised their pharmaceutical law by introducing special provisions for research and development for orphan drugs. In Japan, orphan drug status can be granted to a drug, provided it fulfills the following two criteria: First, the disease for which use of the drug is claimed must be incurable; there must be no possible alternative treatment or the efficacy and expected safety of the drug must be excellent in comparison with other available drugs. Second, the number of patients affected by this disease in Japan must be less than 50,000 on Japanese territory, which corresponds to a maximal incidence of four per 10,000 persons.3

The revolution reached Europe in 1999 with the adoption by the European Parliament of the Regulation on Orphan Medicinal Products. The granting of orphan drug status is designed to encourage the development of drugs which are necessary but would be unprofitable to develop under normal circumstances. Because development of drugs to treat such diseases is financially disadvantageous, companies that do so get certain advantages and tax credits. Orphan drug status also exists in the European Union (EU), administered by the Committee on Orphan Medicinal Products of the European Medicines Agency (EMEA). In June 2007, the FDA and EMEA came to an agreement such that the same application could be used for both agencies, thus reducing the time and finances required of companies to apply for orphan drug status. According to Eurordis, the European organization for rare diseases, these drugs are called “orphan” because the pharmaceutical industry has little interest under normal market conditions in developing and marketing products intended for only a small number of patients suffering from very rare conditions.4,5 For the drug companies, the cost of bringing a drug for a rare disease to market would not be recovered by the expected sales of the product. For this reason, governments and rare disease patient advocacy organizations such as Eurordis have emphasized the need for economic incentives to encourage drug companies to develop and market medicines for the many neglected and “orphaned” patients with rare diseases.5,6

The Australian orphan drugs policy was set up in 1997. This policy aims to ensure the availability of a greater range of treatments for rare diseases and allows the Australian Therapeutic Goods Administration (TGA) to use information from the FDA. According to the TGA, orphan designation is intended for drugs, which aim to treat diseases with a prevalence of 2,000 patients or less in the Australian population of 18 million. Another alternative criterion, which leads to orphan designation, consists in combining the fact that the drug is not commercially viable when used in the patient population it is indicated for and an acceptable rationale for the drug and its indication. Once orphan designation is granted, the TGA waives the evaluation and annual fees, thus removing a major impediment to make these crucial drugs available.3

INTRODUCTION
Under the U.S. Orphan Drug Act, many companies have developed and manufactured orphan drugs and have received several waivers and exemptions warranted by the FDA. Advantages companies have when developing orphan drugs include:2,7,8

• Federal tax credits for the research done (up to 50% of costs) to develop an orphan drug
• Waivers of fees relating to the marketing approval process
• Waiver of FDA annual product fee
• A guaranteed monopoly on drug sales for the first company to obtain FDA marketing approval of a drug. This applies only to the approved use of the drug but another application for a different use could also be approved by the FDA, and that company would have exclusive marketing rights for the drug for that other use
• Community marketing authorization—a centralized procedure of marketing authorization, which extends to all the member states of the EU
• Protocol assistance—the provision of scientific advice to drug companies about the various tests and clinical trials necessary for a drug being developed
• Granting of additional rights above and beyond those granted by the regular patent laws
• Subsidizing and funding clinical research by universities and industry sponsors to develop medical products (including drugs, biological products, devices, and medical foods) for rare diseases
• Maintaining an extremely close working relationship with the FDA and the Office of Orphan Products Development throughout the entire clinical and regulatory programs

In Europe, Eurordis advocates for the implementation of incentives in the development of orphan drugs: Fee waiver for orphan designation and reduced fees for marketing authorization, inspections, variations and protocol assistance, two-year extension of market exclusivity for orphan drugs for children (12 years in total instead of 10 for other orphan drugs), parallel EU–U.S. submission and designation of orphan drugs to speed up development, creation of a clinical research program for orphan drugs in support of designated products, and national incentives such a research grants and tax credits.5,9

STUDY METHODOLOGY
As of May 16, 2008, 1,855 medications have received orphan indications by the FDA; however, only 325 medications were approved for marketing. Out of the 325 orphan medications, 105 were approved over the past five years for specific indications (this extensive Table can be viewed at www. pm360online.com/downloads). In this research, only medications that are available in pharmacies and outpatient clinics were included to obtain a list of 51 medications and the sales for these medications were obtained from 2003 to 2008. The purpose of this research is to observe the fate of orphan medications that have been marketed over the past five years.

FINDINGS
Only the sales for 2007 were observed closely. The mean sales of medications with sales less than $100 million is $9,264,319 with a range of $83,548,487 to $179.49. The mean sale of medications with sales between $50 to $99 million is $66,647,883 with a range of $83,548,487 to $50,809,939. The mean sales of medications with sales greater than $100 million is $355,291,790 with a range of $112,836,332 to $794,459,009.

Table 1 categorizes orphan drugs based on their 2007 sales. There is only one orphan medication, tacrolimus anhydrous, with sales greater than $500 million. Five orphan medications had sales between $100 to $499 million: Sensipar, Serostim, Remicade, Thalomid, and Revlimid. Two medications made sales between $50 and $99 million: Deferasirox and Somatropin. Eleven medications had sales between $4 to $49 million: Pemetrexed disodium, Apomorphine HCl, Cetuximab, Agalsidase Beta, Ribavirin, Pegvisomant, Dasatinib, Tinidazole, Miglustat, and Ambrisentan.

The cost figures seen in Table 2 are very rough approximations of what the cost for a year’s supply of these orphan drugs might be, based on an assumption of 100,000 users. If there were only 50,000 patients using a drug, the annual cost per patient would be double the figure seen in Table 2.

DISCUSSION
There is speculation that some firms go through the orphan drug procedure knowing or suspecting that their drug has additional indications in larger markets (Table 3). For example tacrolimus (generic for Prograf) is approved for marketing by the FDA for organ rejection prophylaxis; however, it has been found to be useful for rheumatoid arthritis, which provides a larger patient population. 10 Also, cinacalcet (generic for Sensipar) is approved for secondary hyperparathyroidism, but it is found to be used for primary hyperparathyroidism as well. But overall, most orphan drugs are simply treat the rare conditions they were created to treat.

CONCLUSION
The purpose of this study was to observe the fate of orphan medications that have been on the market over the past five years. It was observed that some of these orphan drugs have high sales. The sales were compared to the size of patient population of these drugs and it was observed that a few of drugs have a high cost per patient. A possible explanation to this high per patient cost could be that some orphan medications are used for indications other than the orphan diseases that they were approved for.

REFERENCES
1. Asbury CH: The Orphan Drug Act. The first 7 years. JAMA 1991;264(7):893-897.
2. The Orphan Drug Act (as amended). U.S. Food and Drug Administration. (www.fda. gov/orphan/oda.htm), Accessed July 10, 2008.
3. Meyers A, Lipucci Di Paola M: The orphan medicinal products: An international challenge. Minerva Biotechnol 2003;15:161–166.
4. Valverde JL (ed): The European Regulation on Orphan Medicinal Products. Pharmaceuticals Policy and Law, Vol. 3,. IOS Press, Amsterdam, The Netherlands, 2001.
5. Young D (2007-11-28): U.S., EU Will Use Same Orphan Drug Application. BioWorld News (Washington).
6. Alcimed. Study on Orphan Drugs. Paris: Alcimed, 2004.
7. Arnonin JS: The orphan opportunity. Pharmaceutical Executive 2008;28(9):42.
8. Rohde DD: The Orphan Drug Act: An engine of innovation? At what cost? Food Drug Law J 2000;55(1):125-143.
9. De Varax A, Lettelier M, Bortlein M: Study on orphan drugs. Phase II: consideration on the application of article 8.2 of EU regulation 141/2000 concerning orphan drugs. Paris: Alcimed, 2004.
10. Drug Facts and Comparisons (2008).

Safia Abouelleil is a PharmD student at Temple University School of Pharmacy.

Albert Wertheimer is Director, Center for Pharmaceutical Health Services Research, at Temple University School of Pharmacy. He can be reached at albert.wertheimer@temple.edu.

To download the figures and tables cited in this article, please visit www.PM360online.com/tools.