FDA Could Rethink Orphan Drug Incentives

FDA Commissioner Scott Gottlieb, MD, has said that he is open to rethinking aspects of a 35-year-old law that create incentives for drug companies to develop orphan drugs for rare diseases affecting fewer than 200,000 people, because the market has changed since the law was passed. Although the Orphan Drug Act of 1983 has provided enormous public health value over the years, Gottlieb said, a pricing crisis has developed that was not anticipated when the law was developed.

The Orphan Drug Act created incentives for companies to develop drugs for rare diseases because such drugs were not considered financially viable due to the small patient populations affected. The incentives include 7 years of market exclusivity, tax breaks for research and development expenses, and a waiver on millions of dollars in fees. The FDA can change guidelines, but any changes to the Orphan Drug Act would require Congressional action. In November 2017, the Government Accountability Office began an investigation into possible abuses of the Orphan Drug Act, and the orphan drug tax credit has already been reduced from 50% of research and development costs to 25% in the recently passed tax legislation.

In the 10 years before the Orphan Drug Act was passed, only 10 industry-supported products for rare diseases were brought to market. Since the Act, more than 600 orphan drug indications have been approved from over 450 distinct drug products. Today, drug companies are readily developing orphan drugs. In fact, 41% of new drugs approved by the FDA in 2016 were orphan drugs, and 39% of new drugs approved in 2017 were orphan drugs. While they have promise for patients, orphan drugs frequently carry huge price tags: in 2016, the top 100 orphan drugs in the United States cost an average of $140,442 annually per patient.

Orphan drug prices have also been under scrutiny following public controversies, including the $89,000-per-year price tag of Marathon Pharmaceuticals’ Duchenne muscular dystrophy drug, Emflaza; patients had for years been able to access an imported generic version of the same drug for $1000 to $1600 per year.

In addition, investigations by news organizations found that many drugs with orphan status weren’t entirely new when approved. According to Kaiser Health News, of approximately 450 drugs that have been granted orphan approval since 1983, more than 70 were drugs that were first approved by the FDA for mass-market uses, including Humira, the world’s top-selling drug, approved for the treatment of rheumatoid arthritis and other inflammatory disorders.

More than 80 other orphan drugs were approved for multiple rare diseases, but for each approval, the drug maker qualified for a new set of incentives. Kaiser Health News’ investigation found that about one-third of drugs granted the FDA’s orphan status “have either been repurposed mass-market drugs or drugs that received multiple orphan approvals.” While repurposing common drugs for rare diseases is considered by experts to be scientifically sound, Gottlieb said that high drug prices are a public health concern and he questioned whether the financial incentives should be different for drugs receiving secondary approvals.

Gottlieb’s interest in the Orphan Drug Act is not new. Writing in the FDA Voice in June 2017 about the agency’s new Orphan Drug Modernization Plan, Gottlieb addressed the issue of the Act’s incentives, saying that the FDA would be taking steps to make sure that the incentives offered by the Act are granted by the agency in a way that is consistent with the manner Congress intended and would examine the appropriate application of orphan incentives.

“As part of this process, FDA will also be examining aspects of how the agency grants designations, to make sure they continue to reflect current science and drug development and the goals intended by Congress,” Gottlieb said, noting that, for all the success of the Orphan Drug Act, there’s been criticism that some sponsors are using designations as a way to sidestep other important public health goals set out by Congress. “We need to make sure our policies take notice of all of these new challenges and opportunities.”