Updated: Market Exclusivity is not What Attracts Orphan Drug Investment, Research Finds

Regulatory NewsRegulatory News | 09 May 2018 |  By 

The added incentive of seven years of market exclusivity has not been a major driver of investments into orphan drugs, which are used to treat conditions affecting fewer than 200,000 in the US, according to research published in Health Affairs by the Program on Regulation, Therapeutics, and Law in the Division of Pharmacoepidemiology and Pharmacoeconomics at Brigham and Women’s Hospital in Boston.

In many cases, pharmaceutical patents render the much-hyped seven years of orphan drug exclusivity “largely moot,” the authors note, finding that from 1985 to 2014, the Orphan Drug Act provided exclusivity protections that lasted longer than patents for only one-third of orphan-designated drugs, and accounted for less than one-fifth (17%) of their total market exclusivity.

So if it’s not the exclusivity, what’s causing this spike in investment in orphan drug research and approvals (from little more than 10 orphan drug approvals per year in the 1990s to almost 50 orphan drug approvals each of the last four years)?

The study’s authors point first to the prices that companies can set for such rare disease drugs.

“In 2014 the average annual per person list price of an orphan-designated drug was $118,820 (several drugs had list prices that exceeded $500,000); by contrast, the same price of a non-orphan-designated drug was $23,331,” they wrote.

Also, pharmaceutical companies can earn tax credits for conducting orphan drug research (though the new tax law reduced that credit from 50% to 25% of research costs), and perhaps most attractive of all, the researchers found that many orphan-designated drugs lack generic competition.

Ameet Sarpatwari, an instructor of medicine at Harvard Medical School, told Focus: "While the recent reduction in the tax credit for orphan drug research costs make orphan drug development somewhat less attractive, it likely won't make a considerable difference in the growth of these products given their lower development cost, quicker development time, and price premium relative to non-orphan products, in addition to the movement toward personalized medicine."

And the EU is seeing its own issues with orphan drugs.
"The proliferation of orphan drugs and their substantial impact on payers' budgets is not just a US problem," Sarpatwari said. "The EU is also assessing how to adjust their orphan drug legislation. Possible reform includes narrowing the definition of orphan diseases, aggregating prevalence across indications, and placing a revenue threshold at which orphan drug exclusivity expires. It is clear that there is a sense of urgency in tackling this issue."

Concerns with competition also linger.

“These drugs might not offer a large enough return on investment for generic manufacturers to make their entering the market worthwhile. In such cases, the orphan drug exclusivity is superfluous even when it outlasts all patent terms,” the authors wrote in the May issue of Health Affairs.

Moving forward, the authors suggested that policy makers “should be cautious about using the orphan drug exclusivity benefit as a model for other government-sponsored pharmaceutical incentive programs.”

Editor's note: Updated with comment from Dr. Sarpatwari.


© 2023 Regulatory Affairs Professionals Society.

Discover more of what matters to you

No taxonomy