The Orphan’s Drug Market – Part 2

February 08, 2013 | By Márcio Barra

Here’s part 2 of my orphan drug article.

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The orphan drug market

What is driving the orphan foward with such momentum? I’ve identified six main driving forces.

Research: As more and more molecular pathways of diseases are figured out through new technologies, drug development gets more and more targeted to very specific diseases.

Incentives: The positive momentum owes a lot to the US Congress passage of the Orphan Drug Act in 1983. This Act provided key enticements for manufacturers to develop orphan drugs, providing products who achieve orphan designation special marketing conditions, like 7 years of market exclusivity (conventional drugs usually get five), tax credits, grants, less fees, shorter development timelines and less regulatory hurdles.

In Europe, the European Regulation on Orphan drugs was designed to stimulate the orphan drug market. Manufacturers that attain orphan designation for their drug benefit from protocol assistance, direct access to EMA’s centralized procedure, ten years of market exclusivity starting from the date of marketing authorization and financial incentives.

Generic competition: Since orphan drugs are usually more complex molecules, usually biologics, they face less sales erosion when the patent is up, as generics are harder to come up with. Thus, their high economic value continues beyond the end of patent expiration.

Profits: this is a no brainer. Companies can price some really high, premium prices for their drugs, justified by the low market prevalence of some diseases, even though many of these drugs usually reach blockbuster status. The drug Soliris for example, from Alexion, is the world’s most expensive drug, costing more than $409,000 per year, and is used for treating paroxysymal nocturnal hemoglobinuria. Gattex, from NPS Pharmaceuticals and approved back in December 2012, is priced at $295,000 per patient per year, and is used to treat short bowel syndrome(7, 9)

Moreover, development costs can be low compared to traditional drug development (for example, Gattex, costed about $250 million to develop, a small amount compared to the traditional $1 billion or more that traditional drugs cost till approval), saving money for the company.

Patient backing: Pharmaceutical companies know that, when marketing these kinds of drugs, they can’t afford to lose a single patient. So companies form close bonds with patient advocacy and support groups, and hire patient care coordinators who play a more central role in the clinical trial development than other areas. These organizations even go as far as writing appeal letters to insurers if they refuse to pay for an orphan drug, and raise hundreds of millions of dollars to give to companies to fund the development of orphan drugs (10, 11).

New market opportunities: There are 7,000 rare diseases worldwide and market-worth of $50 billion globally. Rituxan alone, created by Genentech, is the second largest revenue-generating drug in the world, garnering significant sales for its two orphan indications, chronic lymphocytic leukemia and non-Hodgkin’s lymphoma, alongside its non-orphan indication for rheumatoid arthritis (7, 12).

Spent market:  Difficulties in the traditional market, such as the enormous expenses, time requirements and high failure rate of clinical trials for agents turned companies to the orphan market.

It’s not surprising to see that with all these stimuli and market conditions, many pharmaceuticals companies are trying to enter into what was mostly till now a biotech dominated business.

Check tomorrow for the final part of this article!

3 comments
  1. 1. Toumi M. Issues affecting access to orphan drugs in Europe. Hospital Pharmacy Europ. 2012(64).
    2. EMA. Orphan designation. [cited 2013 07-02-2013]; Available from: http://www.emea.europa.eu/ema/index.jsp?curl=pages/regulation/general/general_content_000029.jsp&mid=WC0b01ac05800240ce.
    3. Comission E. Orphan medicinal products. [cited 2013 07-02-2013]; Available from: http://ec.europa.eu/health/human-use/orphan-medicines/index_en.htm.
    4. Palmer E. FDA Approvals of 2012. FiercePharma [cited 2013 07-02-2013]; Available from: http://www.fiercebiotech.com/slideshows/fda-approvals-2012.
    5. Gaffney A. 30 Years Later, FDA Looks Back on Passage of Orphan Drug Act. Regulatory Focus2013 [cited 2013 07-02-2013]; Available from: http://www.raps.org/focus-online/news/news-article-view/article/2686/30-years-later-fda-looks-back-on-passage-of-orphan-drug-act.aspx.
    6. Silverman E. Orphan Drugs: ‘Rare’ Opportunities To Make Money. Forbes2012 [cited 2013 07-02-2013]; Available from: http://www.forbes.com/sites/edsilverman/2012/08/23/orphan-drugs-rare-opportunities-to-make-money/.
    7. Reuters T. THE ECONOMIC POWER OF ORPHAN DRUGS. Thomson Reuters, 2012.
    8. EURORDIS. Rare Diseases: understanding this Public Health Priority. EURORDIS, 2005.
    9. Herper M. Inside The Pricing Of A $300,000-A-Year Drug. Forbes2013 [cited 2013 07-02-2013]; Available from: http://www.forbes.com/sites/matthewherper/2013/01/03/inside-the-pricing-of-a-300000-a-year-drug/.
    10. Thomas K. Making ‘Every Patient Counts’ a Business Imperative. The New York times2013 [cited 2013 07-02-2013]; Available from: http://www.nytimes.com/2013/01/31/business/orphan-drugs-for-rare-diseases-gain-popularity-with-pharmaceutical-companies.html?_r=4&.
    11. Gaffney A. 30 Years Later, FDA Looks Back on Passage of Orphan Drug Act. Regulatory Focus2013 [cited 2013 08-02-2013]; Available from: http://www.raps.org/focus-online/news/news-article-view/article/2686/30-years-later-fda-looks-back-on-passage-of-orphan-drug-act.aspx.
    12. Hirschler B, Humer C. FDA new drug approvals hit 16-year high in 2012. Reuters2012 [cited 2013 08-02-2013]; Available from: http://www.reuters.com/article/2012/12/31/us-pharmaceuticals-fda-approvals-idUSBRE8BU0EK20121231.

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