Long regarded as a neglected backwater within the drug discovery landscape and the preserve of only a handful of niche players, the rare disease space has been undergoing an extraordinary turnaround in fortunes of late.
According to EvaluatePharma’s forecasts, orphan drug sales are set to grow 11 percent each year between now and 2024, significantly outpacing the overall pharma market, which is set to expand a mere 6.4 percent over the same period. Moreover, by 2024, orphan drugs are predicted to constitute a fifth of all prescription sales generating some USD 262 billion worth of revenues worldwide, making rare disease therapies some of the hottest property within the entire industry. Currently, only five percent of rare diseases have treatments, representing an enormous opportunity for the industry to meet unmet medical need.
Developing drugs for rare diseases, once considered a rare phenomenon itself, has fast become an orthodox strategy for many companies’ drug development pipelines
Gayatri Rao, Office of Orphan Product Development, US FDA
Little wonder, therefore, that the segment has gone completely mainstream and is nowadays dominated by the very same big pharma brands that once eschewed it: no fewer than 7 of the top 10 companies by orphan drug sales are household names, global industry players. “Developing drugs for rare diseases, once considered a rare phenomenon itself, has fast become an orthodox strategy for many companies’ drug development pipelines,” says Gayatri Rao, director of the US FDA’s Office of Orphan Product Development. This is a remarkable reversal of circumstance when one considers that, in the past, orphan drugs were often not developed or marketed on the basis that their extremely limited use rendered them unprofitable. What then, could have triggered such a dramatic change?
Many analysts pinpoint the 1983 enacting of the USA’s Orphan Drug Act (ODA) as the game-changing moment when rare disease drug development suddenly became lucrative. In a bid to alleviate market failure, the legislation awarded incentives for pharmaceutical companies that would normally be reticent about investing in a drug that might benefit only a tiny patient population. These included a whole slew of policy initiatives including, among other items, tax credits that defray the costs of R&D, privileged approval times, 7 years of market exclusivity, clinical trials subsidies and reduced regulatory fees. Moreover, other regulatory agencies around the globe were ultimately to follow suit with the European Union passing its own equivalent bill in 2000 with even more favourable terms such as 10 years of exclusivity and additional protection for pediatric indications.
Meanwhile, a proliferation of the deployment of auxiliary or surrogate endpoints within clinical trials for orphan drugs has significantly alleviated the time and expense required for conducting R&D, because they apply substantially lower thresholds for indicating treatment success.
“The way to make big bucks from medicines conventionally used to be to develop a blockbuster commodity drug, such as a remedy for high blood pressure or elevated cholesterol. Used every day by millions, it was a sure route to profits. Now, increasingly the way to be sure of generating a strong return on investment is to conceive a treatment for one of the hundreds of rare diseases for which there is no cure. The actual pool of patients who can benefit may be tiny, but for that group, it will be life-changing or life-saving,” explains Sarah Neville, Global Pharmaceuticals Editor of the Financial Times.
Because of this guarantee of a return on investment, if an orphan drug is approved, multinational pharma companies, including J&J, Takeda and Ipsen among others are increasingly looking towards acquiring smaller rare disease-focused players.
According to the pharmaceutical trade organization PhRMA, over 600 orphan drugs have been approved by the FDA since the inception of the Orphan Drug Act and yet still only five percent of rare diseases have an approved treatment, which means there remains considerable growth potential to tap into for many years to come.
Gaming the System
Other commentators note how adept drug developers have become in manipulating the rules of the game so as to acquire orphan status for therapies whose usage is actually far more widespread. Under FDA terminology, there are approximately 6,800 rare diseases in the world, many of which still have no approved treatment. Furthermore, to be considered a rare disease, a condition must affect fewer than 200,000 Americans.
Many drug makers, however, have been accused of a technique known as “salami-slicing” which essentially means applying for multiple orphan drug approvals for a single drug by splitting a prevalent disease into smaller subcategories, often characterized by genomic biomarkers. It has not, for example, escaped notice that some of today’s cash cows have benefited from orphan drug status privileges. “Some of the world’s best selling drugs notched initial approvals for diseases with broad patient populations and then, when the drug developers applied for approval in rare diseases, brought in benefits such as tax breaks and monopoly pricing power,” reflects FiercePharma’s Eric Sagonowsky, highlighting AbbVie’s rheumatoid arthritis medication, Humira, and Roche’s cancer therapy, Herceptin, as obvious cases in point.
Time to Tweak the Rules?
In view of these loopholes, there is increasing suspicion that orphan drug status may no longer be fit for purpose. Nicholas Bagley, Professor of Law at the University of Michigan Law School and Institute for Healthcare Policy and Innovation points out that “the incentive structure is an especially poor fit for orphan drugs that target such rare conditions, or are so challenging to manufacture, that the market will not support similar products from multiple firms because these natural monopoly drugs will never face meaningful competition and so would likely prove highly lucrative even without the ODA benefits.”
The once protected island orphan drugs represented for drugmakers may well suffer some erosion as payers become emboldened to take on pricing in areas that were once too small to risk the public relations damage of doing so
Daniel Levine, Global Genes
Payers doubtless agree that the moment is ripe to review the system especially now that orphan drugs have been chalking up some of the most expensive price tags in the entire industry. Spark Therapeutics’ Luxturna, a gene therapy that was approved by the FDA in 2018 and is designed to treat patients with a rare form of inherited blindness, for example, comes in at a hefty cost of USD 425,000 per eye (so USD 850,000 per patient) affording it the dubious distinction of being the most expensive pharmaceutical in the country.
Already we are seeing preliminary moves on the part of regulators to reform the mechanism to introduce greater fairness into the process. “The once protected island orphan drugs represented for drugmakers may well suffer some erosion as payers become emboldened to take on pricing in areas that were once too small to risk the public relations damage of doing so,” warns Daniel Levine of Global Genes.
Aligned with the Science
The focal point of big pharmaceutical players efforts is gradually drifting from blockbuster to niche-buster
James Wilson, University of Pennsylvania Orphan Disease Center
Don’t necessarily expect the rare disease space to be losing its lustre any time soon, however, as all the signs point to this segment of drug development being highly aligned to the new world of medical science. The maturation of personalized precision medicine, big data and genomics is allowing for a much more effective targeting of difficult to diagnose and treat disease forms, while an improved understanding of the genetic basis of pathologies is unlocking the ability to define and target rare disorders.
Moreover, the underlying rationale of striving for orphan status in an era of austerity and ever-greater belt-tightening should not be underestimated. “Focusing energies on rare diseases affords drug makers an unparalleled opportunity to generate convincing clinical safety and efficacy data with very limited patient populations, which can translate to a quick path to regulatory approval, which in turn means the cost of development will be a fraction of what it could be for more common diseases,” reasons James Wilson, director of the Orphan Disease Center at the University of Pennsylvania. “In this way, you could even say the focal point of big pharmaceutical players efforts is gradually drifting from blockbuster to niche-buster.”