Custody fight over orphan drugs
Pharma, providers at odds over ‘orphan drugs’
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