Orphan Drugs May be Left Out in the Cold

Achieving orphan status for medicine development has resulted in many breakthroughs by drug manufacturers that may not have otherwise been achieved. But with the related financial incentives for the pharmaceutical industry now apparently in danger, will innovation for rare disease treatment suffer?



Under the Orphan Drug Act (ODA) of January 1983, passed in the United States, companies that develop a drug for a disorder affecting fewer than 200,000 people in the region may sell it without competition for seven years, and may get clinical trial tax incentives. The European Union (EU) approved similar legislation in 1999, whereby pharmaceuticals developed to treat rare diseases (including some tropical diseases) are referred to as orphan medicinal products and orphan drug status gives marketing exclusivity in the EU for 10 years after approval.

The success of these positive regulations can be seen in the hive of development activity for such treatments on both continents.  More than 70 therapies for rare diseases have been approved in Europe since 2000, and according to the Food and Drug Administration (FDA), more than 400 orphan products have been approved in the US in the last three decades. As a result, the sector – worth a reported $86 billion of the entire pharmaceutical industry – has been expanding twice as fast as the market as a whole.

The price is not right

But as more medicines win approval to treat these uncommon diseases, and austerity measures still coming hard and fast, European payers have started to look at how much money some of these drug companies are making.  The financially weary governments are realising that the R&D spend of orphan drug firms may have long been substantially recouped, and are therefore looking to get access to the drugs at a lower price.

While the European Commission approves drugs for all 27 members of the EU, each country is currently responsible for deciding whether and what it will pay for them.  Earlier this year, a number of the European nations took exception to these high prices – the poorer countries citing major problems of orphan drug access.  The Netherlands demanded cuts in the prices of enzyme-replacement therapies including Sanofi ’s Myozyme, for example, and Ireland achieved a ‘significant’ reduction in the cost of Vertex’s Kalydeco for the treatment of cystic fibrosis.

However, problems with irregularity of access and pricing across the landscape has encouraged the European Commission to draw up a scheme to collaborate on assessments of the value that orphan drugs represent, a step that should lead to increased and uniform usage across Europe. Under the proposal, value would be weighed against criteria such as the rarity of the disease, the availability of alternative treatments, the effectiveness of the drug, the response rate and the degree of certainty.

Social responsibility

But this does not solve the potentially negative forecast for the future of rare disease treatments. Although the social responsibility of firms in the pharmaceutical industry has been well studied, orphan drugs as a sector remains a relative mystery, according to Olga Bruyaka, assistant professor of management in the Pamplin College of Business. As such, Bruyaka has co-authored a new study that examines the extent to which pharma combines orphan drug development, social responsibility objectives and core business activities to create a more strategic approach to obtain both economic and non-economic benefits for the firm and its stakeholders.  “The notion is that businesses have a responsibility to society to consider moral obligations and good corporate deeds simultaneously with the profit motive and compliance with government laws and regulations.”

While legislation such as the ODA has dramatically spurred work on orphan drugs, the increased scrutiny into drug value in Europe and the fear that this question of price sustainability will soon have an impact on US shores may translate to a very different environment as regards orphan drug development.  Without a cash carrot at the end of the research stick, will pharma still feel obliged to fulfil their social duty?


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