Why do pharmaceutical companies invest research and money into treating a rare disease when the payout is low? They don’t. Recent research suggests a congressional act encouraging research on rare disease treatments translates into substantial profits for drug companies.
The US Congress approved the Orphan Drug Act (ODA) in 1983, offering financial incentives to companies conducting research on diseases that affect fewer than 200,000 US citizens, called “orphan” diseases A recent study in JAMA Research Letters found that ODA incentives make orphan disease treatments as profitable as medications for more prevalent illnesses and then some.
This presents a new question for the FDA, the US Congress, and the American people: Why are we paying a high price tag for research and then again for the meds themselves?
Dr. S.S. Tu at West Virginia University and colleagues compared the revenue earned from orphan and non-orphan designated drugs over the last four decades. Out of the 315 drugs identified, 26% were initially orphan-designated. Designation as an orphan drug offers benefits such as funding grants, FDA fee waivers, and the right to be the exclusive version of the drug available on the market for an extended amount of time.
When factors such as the year the drug was released, the type of drug, and novelty were controlled for, the study found that pharmaceutical companies offset the cost of rare disease research with higher drug price tags. The Tu et al. paper found the initial prices of these drugs are, on average, seven times higher than non-orphan drugs.
Another way pharmaceutical companies are milking the ODA is by designating new drug uses, called an indication. When scientists discover a different indication, sometimes for the same disease, it can trigger a new, sometimes seven-year exclusivity period for the drug. The researchers found no significant difference in the money made from those with one or multiple indications within the first five years on the market. But a seven-year analysis or one that factors repeated indication discoveries might illuminate how profits are maximized by tacking on indications.
Orphan drugs can be approved for common diseases and rare diseases, allowing higher prices and exclusivity benefits in categories beyond rare diseases. Companies may even take a drug for a larger disease and seek an orphan designation, making orphan drugs more lucrative than previously believed. Additionally, the majority of the highest-expenditure Medicare drugs were at one point designated as orphan drugs.
These findings suggest that working on "forgotten" orphan diseases might not be as altruistic as it seems. While the pharmaceutical company pushes back on any public policy efforts to curtail painful pricing, they have taken full advantage of the ODA. With thousands of rare diseases still needing therapeutic options, ODA incentives are warranted. Tu et al. call for a repayment of the tax credits provided when taxpayer’s money is paying for the commercial success of a drug.
Sources: JAMA Research Letters: Five-Year Sales for Newly Marketed Prescription
Drugs With and Without Initial Orphan Drug Act
Designation, Orphanet Journal of Rare Diseases, Office of Inspector General, Healthcare (Basel), Pharmaceutical Law Group