February 15, 2017

Senator launches investigation into FDA's orphan drug program

Daily Briefing

    Senate Judiciary Committee Chair Chuck Grassley (R-Iowa) has opened an investigation into potential abuse of the federal orphan drug program.

    Grassley in a statement said the inquiry stems from consumer concern about high prescription drug prices, as well as a KHN investigation published in January that found drugmakers are legally manipulating the orphan drug program to "maximize" profits and "protect niche markets" for medicines that millions of people already use.
    He said he is "interested in learning whether the unanticipated uses of the [orphan drug program's] provisions are contributing to high prices for commonly used drugs," adding that his "staff is meeting with interested groups and other Senate staff to get their views on the extent of the problem and how we might fix it."

    Background on the orphan drug program

    The Orphan Drug Act, signed into law in 1983, created incentives for drugmakers to develop drugs for rare, or "orphan," diseases. Under the program, a drugmaker receives seven years of exclusive rights to the marketplace for a treatment for an orphan disease, meaning FDA will not approve another version of the drug during that seven-year period, even if the company's patent expires. According to KHN, the intention is that the exclusivity period compensates the drugmaker for producing a medication expected to serve only a small population. Drugmakers can return to FDA to seek a new seven-year exclusivity period on the drug by having it approved to treat another disease.

    However, KHN has reported that exclusivity allows drugmakers to set orphan drug prices as high as they want, without pricing pressure from a competitor. In addition, if FDA designates a drug as an orphan, the drugmaker receives a 50 percent research and development tax credit and access to federal grants.

    Background on KHN's investigation

    Since the orphan program began in the 1980s, about one-third of approvals under the program have been for mass market drugs repurposed to treat orphan diseases or products that have received several orphan approvals, according to KHN.

    Further, the share of new drugs approved as orphans has grown considerably, KHN found. Orphans accounted for 47 percent of new medicines in 2015 and 40 percent in 2016, compared with 29 percent in 2010. According to EvaluatePharma, orphan drugs currently represent seven of the 10 top-selling drugs, in terms of annual sales.

    According to KHN, orphan drugs also are costly, with an average annual price of $111,820 in 2014, compared with an average annual price of $23,331 for mass market drugs.

    KHN found that there are several ways companies can win orphan drug status. Tim Coté, a former FDA official who now runs a consulting firm that advises drugmakers on orphan drugs, said companies can test drugs on children with adult diseases or find drugs for conditions that are uncommon in the United States. Another strategy is to develop "follow-on drugs" that show incremental progress.

    Further, drugmakers can repurpose a drug that FDA already has approved to treat other conditions. In such cases, Coté said drugmakers can move quickly into a clinical trial because the drug's safety already has been demonstrated.

    Moreover, KHN found that "a small cottage industry has grown around" advising companies on how they can repurpose drugs for orphan approval. Bernard Munos, a former corporate strategy advisor at Eli Lilly, said, "What we are seeing is a system that was created with good intent being hijacked" (Tribble, Kaiser Health News, 2/10).

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