Photo by Steven Harbour
Health experts are calling on US lawmakers and regulators to “close loopholes” in the Orphan Drug Act.
The experts say the loopholes can provide pharmaceutical companies with millions of dollars in unintended subsidies and tax breaks and fuel skyrocketing medication costs.
They argue that companies are exploiting gaps in the law by claiming orphan status for drugs that end up being marketed for more common conditions.
“The industry has been gaming the system by slicing and dicing indications so that drugs qualify for lucrative orphan status benefits,” says Martin Makary, MD, of Johns Hopkins Hospital in Baltimore, Maryland.
“As a result, funding support intended for rare disease medicine is diverted to fund the development of blockbuster drugs.”
Dr Makary and his colleagues express this viewpoint in a commentary published in the American Journal of Clinical Oncology.
The US Food and Drug Administration (FDA) grants orphan designation to encourage the development of drugs for diseases that affect fewer than 200,000 people in the US. The Orphan Drug Act was enacted in 1983 to provide incentives for drug companies to develop treatments for so-called orphan diseases that would be unprofitable because of the limited market.
Dr Makary and his colleagues say the legislation has accomplished that mission and sparked the development of life-saving therapies for a range of rare disorders. However, the authors say the law has also invited abuse.
Under the terms of the act, companies can receive federal taxpayer subsidies of up to half a million dollars a year for up to 4 years per drug, large tax credits, and waivers of marketing application fees that can cost more than $2 million. In addition, the FDA can grant companies 7 years of marketing exclusivity for an orphan drug to ensure that companies recoup the costs of research and development.
Dr Makary says companies exploit the law by initially listing only a single indication for a drug’s use—one narrow enough to qualify for orphan disease benefits. After FDA approval, however, some such drugs are marketed and used off-label more broadly, thus turning large profits.
“This is a financially toxic practice that is also unethical,” says study author Michael Daniel, also of Johns Hopkins.
“It’s time to ensure that we also render it illegal. The practice inflates drug prices, and the costs are passed on to consumers in the form of higher health insurance premiums.”
For example, the drug rituximab was originally approved to treat follicular B-cell non-Hodgkin lymphoma, a disease that affects about 14,000 patients a year. Now, rituximab is also used to treat several other types of cancer, organ rejection following kidney transplant, and autoimmune diseases, including rheumatoid arthritis, which affects 1.3 million Americans.
Rituximab, marketed under several trade names, is the top-selling medication approved as an orphan drug, the 12th all-time drug best-seller in the US, and it generated $3.7 billion in domestic sales in 2014.
In fact, 7 of the top 10 best-selling drugs in the US for 2014 came on the market with an orphan designation, according to Dr Makary and his colleagues.
Of the 41 drugs approved by the FDA in 2014, 18 had orphan status designations. The authors predict that, in 2015, orphan drugs will generate sales totaling $107 billion. And that number is expected to reach $176 billion by 2020.
Dr Makary says this projection represents a yearly growth rate of nearly 11%, or double the growth rate of the overall prescription drug market. The authors also cite data showing that, by 2020, orphan drugs are expected to account for 19% of global prescription drug sales, up from 6% in the year 2000.
Although the reasons for this boom in orphan drugs are likely multifactorial, the exploitation of the orphan drug act is an important catalyst behind this trend, the authors say.
Because orphan designation guarantees a 7-year exclusivity deal to market the drug and protects it from generic competition, the price tags for such medications often balloon rapidly.
For example, the drug imatinib was initially priced at $30,000 per year in 2001. By 2012, it cost $92,000 a year.
The drug’s original designation was for chronic myelogenous leukemia, and it would therefore treat 9000 patients a year in the US. Subsequently, imatinib was given 6 additional orphan designations for various conditions, including gastric cancers and immune disorders.
Dr Makary says, in essence, the exclusivity clause guarantees a hyperextended government-sponsored monopoly. So it’s not surprising that the median cost for orphan drugs is more than $98,000 per patient per year, compared with a median cost of just over $5000 per patient per year for drugs without orphan status.
Overall, nearly 15% of already approved orphan drugs subsequently add far more common diseases to their treatment repertoires.
Dr Makary and his colleagues recommend that, once a drug exceeds the basic tenets of the act—to treat fewer than 200,000 people—it should no longer receive government support or marketing exclusivity.
This can be achieved, the authors say, through pricing negotiations, clauses that reduce marketing exclusivity, and leveling of taxes once a medication becomes a blockbuster treatment for conditions not listed in the original FDA approval.
They say such measures would ensure the spirit of the original act is followed while continuing to provide critical economic incentives for truly rare diseases.
