Cus­tody fight over or­phan drugs

Pharma, providers at odds over ‘or­phan drugs’

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Aphar­ma­ceu­ti­cal in­dus­try trend seek­ing in­creased prof­its from med­i­cal treat­ments for rare dis­or­ders is col­lid­ing with a hospi­tal push for greater dis­counts on those drugs. De­spite the rel­a­tively small num­ber of med­i­ca­tions for rare med­i­cal con­di­tions—known as “or­phan drugs”—such med­i­ca­tions are in­creas­ingly seen as one of the most prof­itable com­po­nents of the phar­ma­ceu­ti­cal in­dus­try, ac­cord­ing to in­dus­try sources. A va­ri­ety of fac­tors com­bine to el­e­vate the fi­nan­cial prom­ise of or­phan drugs, in­clud­ing longer ex­clu­siv­ity, an ex­pe­dited reg­u­la­tory path and the gen­eral lack of low-cost al­ter­na­tives to the fre­quently ex­pen­sive med­i­ca­tions.

“There’s an in­creas­ing recog­ni­tion within the ven­ture com­mu­nity and within big pharma that or­phan drugs can rep­re­sent at­trac­tive in­vest­ment op­por­tu­ni­ties,” says Jonathan Leff, man­ag­ing di­rec­tor at War­burg Pin­cus in New York.

The el­e­vated fi­nan­cial out­look for or­phan drugs was il­lus­trated by a re­cent sur­vey of the mem­bers of the Na­tional Ven­ture Cap­i­tal As­so­ci­a­tion that found re­cent in­vest­ment de­creases in ev­ery area of bio­phar­ma­ceu­ti­cals, ex­cept or­phan drugs, and that was ex­pected to con­tinue at least over the next three years, ac­cord­ing to Leff, a board mem­ber of the in­vestor as­so­ci­a­tion.

“There is a per­cep­tion that or­phan drugs are rel­a­tively more at­trac­tive than some other ar­eas and so that area of in­vest­ment is grow­ing whereas oth­ers are shrink­ing,” Leff says.

An­other il­lus­tra­tion of the in­creased fo­cus on or­phan drugs is the num­ber of such med­i­ca­tions re­ceiv­ing mar­ket­ing ap­proval from the U.S. Food and Drug Ad­min­is­tra­tion, as well as the share they rep­re­sent of all drugs ap­proved by the FDA. Twenty-six or­phan drugs re­ceived FDA ap­proval in 2011, up from only six in 2001, ac­cord­ing to agency data. Dur­ing at least the past five years, or­phan drugs in 2011 also reached their high­est point as a per­cent­age of over­all drug mar­ket­ing ap­provals, or about 36%.

Such dom­i­nance of the reg­u­la­tory ap­proval process for drugs that by FDA def­i­ni­tion treat con­di­tions af­fect­ing fewer than 200,000 peo­ple in the U.S. is driven in part by the ex­pe­dited re­view process for such med­i­ca­tions, in­dus­try ex­perts say. But it’s also fu­eled by the trend of many broadly ap­pli­ca­ble treat­ments mov­ing to generic for­mu­la­tions in re­cent years. Or­phan drugs rarely have such com­pe­ti­tion and in­clude some of the most ex­pen­sive med­i­ca­tions in the world, such as Soliris, a drug for blood dis­or­ders that costs about $500,000 for a one-year sup­ply.

The po­ten­tial to profit from such costly treat­ments is lim­ited only by ei­ther the re­luc­tance of pay­ers or from the ap­pli­ca­tion of manda­tory dis­counts.

Congress ex­panded a lead­ing fed­eral pro­gram re­quir­ing such drug man­u­fac­turer dis­counts as part of the 2010 fed­eral health­care over­haul; how­ever, the ex­pan­sion ex­plic­itly ex­cluded or­phan drugs. Reg­u­la­tors gen­er­ally main­tain that ex­clu­sion in pro­posed rules is­sued in mid-2011 to im­ple­ment the law.

Use of or­phan drugs to treat non-or­phan dis­eases—an ex­pand­ing mar­ket for or­phan drugs—was in­cluded in the dis­count pro­gram.

Hospi­tals cel­e­brated that pro­posed lim­ited roll­back of the or­phan dis­count re­stric­tion and hope reg­u­la­tors re­tain it when they is­sue fi­nal rules later this year.

Hospi­tals and their con­gres­sional al­lies now are push­ing to in­clude or­phan drugs in that manda­tory dis­count pro­gram.

“It’s been prob­lem­atic for these hospi­tals be­cause their pa­tients are forced to travel some­times sev­eral hun­dred miles just to get ac­cess to new and af­ford­able drugs,” says Ted Slaf­sky, ex­ec­u­tive di­rec­tor of Safety Net Hospi­tals for Phar­ma­ceu­ti­cal Ac­cess. The al­liance of about 800 not-for-profit hospi­tals and health sys­tems was formed in 1993 to in­crease ac­cess to the so­called 340B pro­gram. The 340B pro­gram re­quires drug­mak­ers to pro­vide dis­counts on out­pa­tient drugs to safety net providers.

Quirks in the his­tory of the dis­count pro­gram al­low safety net hospi­tals to ac­quire the lower-cost ver­sions of the drugs when treat­ing pa­tients in out­pa­tient set­ting but the cost of the drug for pa­tients in­creases from 25% to 40% once their con­di­tion re­quires hos­pi­tal­iza­tion, ac­cord­ing to the SNHPA.

Rep. Cathy Mc­mor­ris Rodgers (R-wash.), a mem­ber of the House Repub­li­can lead­er­ship, in­tro­duced leg­is­la­tion in fall 2011 to re­move the hospi­tals’ or­phan drug dis­count lim­i­ta­tion to out­pa­tient set­tings. “Our bill will charge the FDA with un­der­tak­ing the com­mon-sense re­forms that are needed to keep Amer­ica the world cap­i­tal of med­i­cal in­no­va­tion,” Mc­mor­ris Rogers says in a writ­ten state­ment.

A Se­nate ver­sion is ex­pected soon, ac­cord­ing to sup­port­ers. How­ever, the leg­isla­tive out­look is un­cer­tain and no im­mi­nent ac­tion is ex­pected, ac­cord­ing to a con­gres­sional staffer.

The most likely route to en­act­ment, ad­vo­cates of ex­pand­ing the 340B dis­count pro­gram and oth­ers agree, is if Congress were to add the mea­sure’s lan­guage to a re­cent agree­ment by FDA of­fi­cials and in­dus­try rep­re­sen­ta­tives to reau­tho­rize the agency’s mar­ket­ing ap­pli­ca­tion fee struc­ture. The agree­ment, which re­quires con­gres­sional ap­proval, is ex­pected to be one of the few Fda-re­lated mea­sures to clear Congress in the cur­rent elec­tion year.

Sup­port­ers of the ex­panded dis­count say they are op­ti­mistic Congress will en­act it be­cause such a move also would cut costs for drug pur­chas­ing in fed­eral health­care pro­grams, which is seen as a grow­ing pri­or­ity on Capi­tol Hill.

“We rec­og­nize that it’s a tough po­lit­i­cal en­vi­ron­ment out there and the drug in­dus­try is very pow­er­ful and noth­ing is easy to get ac­com­plished in Washington,” Slaf­sky says.

The grow­ing num­ber of or­phan drugs clear­ing the FDA has in­creased the num­ber of pa­tients who could po­ten­tially ben­e­fit from

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