An estimated 6,000-7,000 rare diseases and conditions, affecting 25 million Americans, remain either untreatable or are treated with therapeutics that are not very effective (e.g. they are non-specific, or offer limited symptomatic relief) or causes serious adverse effects. The signing of the ODA by Ronald Reagan in 1983 was meant to give hope to more than 25 million Americans suffering from a rare disease or condition and no doubt the ODA has made an impact. 325 drugs have received market authorisation, as of April 2008 – in the decade before the act was passed, only 10 treatments had been developed for rare diseases. Naturally the act has an effect on the companies too.
The ODA provides direct incentives to developers of drugs for rare diseases and disorders (i.e. those affecting <200,000>
- Seven years of marketing exclusivity: completely bars competition from similar compounds
- R&D tax credits
- FDA counselling and fast-track programs
- Grant funding of clinical development
- Short review time: FDA has the recent years used about 2,5 months on approval – which is significant lower compared to the approval time of NME’s and NDA’s
The idea behind the ODA was to get Pharma to develop new alternatives to untreated rare diseases and Pharma has made it a good business. The market pull incentives to compensate for low sales has made some orphan drugs blockbusters (see figure 1).
Figure one depicts a number of examples of orphan drugs reaching blockbuster status. But how can a drug targeting <200,000 people secure an annual cash flow of minimum USD 1,000 millions? The answer is simple: by setting a high price. The most widespread criticism of the orphan drug legislation has been the sky-scraping treatment cost. Many healthcare professionals, patients etc. have expressed that the only error in the orphan drug act is the missing regulation of the price. If the price was regulated it would improve the accessibility and affordability, but should naturally not conflict with the interests of the Pharma companies to invest in the segment. Development companies are in the market to generate shareholder value and have to create a positive ROI and when the indication is small it affects the price.
According to the Global Markets for Orphan Drugs report (by BCC), the total market size of orphan drugs in 2006 was USD 58.7 billion and is expected to rise to USD 81.8 billion by 2011. Around 60% of the orphan drugs are biologics and the report depicts the most promising categories within biologics to be monoclonal antibodies, interferons/interleukins, growth hormones, and plasma products. The future success of the orphan drug blockbuster strategy is depending upon the entry of biogenerics. The biogeneric market is very attractive to generic manufactures nevertheless the approval process is not made clear-cut by FDA, yet. But no doubt legislations permitting biogenerics is on the way – just look at Europe, where EMEA has approved a couple of biogenerics. This will only change the name of the game when a drug is loosing patent protection. In my opinion the above incentives of the ODA will still make the orphan drug blockbuster strategy an attractive approach. But in time the competitive environment of orphan drugs can be too crowed and push Pharma in other directions.
