Orphan drug market gets some bruises in the commercial arena

High prices and questionable marketing activities muddy an otherwise bright picture

There’s a best-of-times, worst-of-times vibe to the orphan drug industry these days, after more than 30 years of mostly upward and heartening progress. On the one hand, the industry has never been busier, with more new approvals (see figure), many more FDA applications, and exciting medical advances in some of the most dynamic new genetic techniques. On the other, the cost of some therapies (reaching over $500,00 per year in a few cases) is making payers look more closely at what they’re buying. Regulators are also looking at some questionable business and marketing practices, such as the (legal) practice of using the incentives to develop orphan treatments for drugs whose ultimate goal is a much broader, non-orphan market.

These questions are a factor in what has just happened in Congress: as part of the overall tax reform legislation, the tax credit that orphan drug developers have enjoyed (enabling them to write off 50% of the cost of clinical research) has been halved. Congressional accountants estimate that the cut will save $32.5 billion over the next 10 years. The National Organization for Rare Diseases (NORD), the lead trade and lobbying group for rare disease advocates, sent a letter to Congress in early December asserting that “The Orphan Drug Tax Credit is one of the only tax credits that actually saves lives,” citing a 2015 study that found that without the credit, roughly 33% fewer orphan products would be in development. A 27.5% credit (which was in the original Senate tax bill) was a “bare minimum;” with the final Congressional bill setting it at 25%, that wasn’t quite reached.

The tax credit is but one part of how orphan drug research is supported. FDA itself awards research grants for rare diseases (typically to academic researchers). When announcing its latest round of $22 million in grants in October, FDA noted that it had provided over $390 million since the program began in 1983. That has certainly helped move research along; however, one drug company working on one orphan project could burn through tens of millions of dollars in a year; the role of philanthropy and private-industry research is far larger.
Another incentive is the seven years of market exclusivity, which keeps competing products off the market and usually results in more revenue coming to the product originator. (Since orphan products have been getting approvals since the mid-1980s, it’s becoming common for a rare disease to have multiple treatments available. In turn, drug developers make considerable effort to expand the indications of a rare-disease drug, which can extend the life of the drug’s marketability considerably.)

Other benefits of the Orphan Drug Act, as amended over the years, are the avoidance of user fees now paid to FDA to perform the review process leading to approval. The most intriguing benefit is the seldom mentioned “rare pediatric disease priority review voucher (PRV),” which can be given (based on an FDA assessment) to a rare-disease drug targeting a pediatric population. Most of the time and for most drugs, the target population is adults; FDA provides an additional six months of market exclusivity to a novel drug when the developer conducts clinical trials to ensure that the drug is safe and efficacious for the young (which can include teens up to 18).

Since the passage of the FDA Amendments Act of 2007, orphan products targeting pediatric populations have been eligible for the PRV, which is granted simultaneously with the orphan product getting FDA approval. The voucher awardee can use the voucher for another drug in its pipeline or—and this is where the incentive becomes significant—sell it to any other company with any other drug (orphan or not) entering the FDA approval process. The money earned nominally goes back into the orphan product originator’s coffers to support its ongoing commercialization efforts.

Based on a report compiled by the Regulatory Affairs Professional Society in December, the prices at which PRVs were sold has ranged from $65 million to $350 million (the most recent sales have been in the $100-150-million range). The purchasers tend to be large multinationals with mass-market (non-orphan) drugs, for whom the possibility of cutting a regulatory review process by several months can be worth millions. One catch to the PRV is that using it does not guarantee an FDA approval, and there are cases where the approval was not granted, effectively wasting the money spent on obtaining the PRV.

As of mid-December, five drugs approved in 2017 received PRVs—a somewhat higher-than-average figure, since only 13 were granted from 2007 through 2017.

Developing any new drug is a long, arduous and expensive process; this difficulty is multiplied many times over with rare diseases. They’re called rare, obviously, because patients are seldom encountered, making the filling out of a clinical trial difficult. In recent years, the particular case of “ultra-orphan” drugs has come to the fore. In the US, a rare disease is one that has fewer than 200,000 patients at any given time; ultra orphan, by contrast numbers its patients in the hundreds to low thousands. (In an FDA context, an ultra-orphan drug is still an orphan drug.) On the business side, that same rarity means that to get any reasonable return on the investment, the drug’s price needs to be high—some of the highest of any drug anywhere occurs in rare diseases: $702,000 per year for recently approved Brineura, which requires a biweekly injection at a cost of $27,000; Biogen’s Spinraza (nusinersen), $750,000 in the first year, dropping to $375,000 in later years; Alexion Pharma’s Soliris (eculizumab), $500,000-700,000 per year (depending on the indication).

The record holder to date appears to be Glybera (alipogene tiparvovec), priced at $1.2 million per year. The drug, which treats familial lipoprotein lipase deficiency, had only been approved in Europe (the US application had been withdrawn), but in October, the marketing authorization holder, UniQure, announced it was ceasing production. “As part of Glybera’s approval, uniQure was required to establish a global registry for the long-term surveillance of patients, conduct a post-approval clinical study, submit for annual regulatory reassessments and implement additional risk management procedures,” said the company at the time. “All of these activities required a significant infrastructure for uniQure.”

NORD commissioned a study by IQVIA (formerly QuintilesIMS), the market research and clinical studies company, to study the overall dynamics of orphan drug pricing. The study,* published in October, found that the 449 orphan drugs currently approved in the US amounted to 7.9% of overall drug spending in 2016—some $36 billion. The percentage was 3% in the early 1990s; by the 2010s, its proportion of overall spending was growing by about a percentage point per year, but that slowed in the past two years. It’s not that spending flatlined, but rather that the growth rate of overall spending of all drugs jumped, especially as the hepatitis C treatments hit the market in 2015. The gist of the IQVIA study seems to be that orphan drug spending is more or less in line with all spending on specialty drugs; yet specialty drugs are a fast-growing part of total US drug spending.

IQVIA’s analysis also extends into the question whether orphan drug approvals are a stalking horse (with the substantial incentives that an orphan drug designation provides) for drugs that are going to be marketed to mass markets; in effect, whether the developer is getting a relatively free ride on drug development for a drug that ultimately will not be primarily used in rare disease settings. The evidence is decidedly mixed: of 449 approved drugs as of 2016, 351 are orphan only; 34 received orphan designation first, and later a traditional indication; 54 were approved for non-orphan indications first, and then for orphan; and 10 were grated both simultaneously. A case in point is Humira (adalimumab), AbbVie’s product which happens to be the top-selling drug in the world, grossing around $13 billion annually. The drug was first approved for a non-orphan indication (rheumatoid arthritis), but now has 12 indications, including six orphan ones. IQVIA says that the orphan indications amount to 3.8% of the annual sales volume of Humira.

NORD’s assessment seems to be, “we’re just along for the ride” on the topic of rising healthcare costs in America. “While the issue of orphan drugs and rising healthcare costs is sometimes raised, NORD has always questioned whether the concern was speculative and headline-driven,” it states in a white paper issued in conjunction with the IQVIA study. “New, just-released data from QuintilesIMS now document that the ODA has not been a significant driver of healthcare spending in the U.S.”

Price, development incentives and pioneering science all came together last August when Novartis garnered the first FDA approval for a cellular therapy employing CAR-T technology, a method of rewriting genetic codes in living cells. When FDA approved Kymriah (tisagenlecleucel) to treat certain forms of acute lymphoblastic leukemia, it also granted the company a rare pediatric disease PRV (no news yet as to what Novartis will do with it, but since the company is a major multinational, it probably has numerous drugs in its pipeline awaiting FDA review). At the time, Novartis announced that the pricing for Kymriah would be a hefty figure: $475,000. It’s worth bearing in mind, though, that the treatment is a one-time matter (at least based on what is known currently on the therapy—83% of patients were in remission after treatment); a sick child getting the treatment can look forward, in most cases, to a lifetime cure.

In addition, Novartis indicated that it would engage in another fast-evolving part of drug commercialization: an outcomes-based contract with the Center for Medicare and Medicaid Services (CMS), which oversees Medicaid payments to patients. Novartis says that it will charge full price only for patients who are, in effect, cured. “Novartis has been at the forefront of outcomes-based pricing,” stated Joseph Jimenez, then-CEO of the company, “and is very pleased to work with CMS on this first-of-its-kind collaboration with a technology that has the potential to transform cancer care.” The details of this remain to be worked out; several Congressmen sent a letter to Seema Verma, CMS Administrator, noting that the therapy had received substantial federal support in its early years, and whether its cost was justified on the terms Novartis was outlining.

“CAR-T agents and the procedures and hospitalization time for these therapies are quite expensive; only the top health centers have the facilities and skills necessary to successfully implement these advanced therapies,” notes Sam Falsetti, PhD, Head of Medical Strategy and Product Innovation at Cambridge Biomarketing, a communications agency specializing in rare disease commercialization. “The patient demand is there, the approval is there, but effectiveness in clinical practice requires access and reimbursement. The commercial challenges for these scientific breakthroughs remain despite the approvals.”

Once a drug developer has commercialized an orphan product, the challenge shifts to contining to find new patients for the drug (beyond the few dozen typically engaged in the clinical trials), and keeping the patients it has on therapy. Together, those activities generate the revenue that pays the bills and funds future drug development.

Here is where patient advocacy groups—some of whom have been involved in a drug’s development from its earliest stages—become vital on a continuing basis. These groups (there are hundreds, including multiple ones for some rare diseases) are a critical resource for the patients and families dealing with a rare disease; with today’s social media channels, they also become a destination for patients who aren’t sure what is causing their illness (research in this area shows that rare disease patients go through seven years and 4-8 physicians before they are properly diagnosed).

Advocacy groups and NORD, provide education to patients, families and physicians on rare diseases. NORD has an online database of conditions, publishes Physician Guides, and sponsors continuing medical education on rare diseases.

Paying for the drugs is the obvious first and biggest hurdle once a therapy has been identified. Both commercial payers and public sector assistance agencies need to be educated on a rare disease and its treatment. Commercial payers have considerable latitude in how they address a rare disease, and could require a first-line therapy before experimental or newly approved drugs are reimbursed. Commercial insurers also are more frequently imposing a “prior authorization” report before a therapy is approved for reimbursement; getting through these forms and the diagnostic testing that might be required can be an onerous task for patients and their families.

It is in matters like prior authorizations and financial assistance that patient support programs at the manufacturer (or an organization hired by the manufacturer) become vital. So-called “hub” providers try to centralize all the tasks that need to be performed, and then to keep the patient on therapy. Dohmen Life Science Serivces (DLSS), for one, has carved out a space for itself specializing in serving the orphan and ultra-orphan market, as a service provider to manufacturers. The company recently published a white paper noting that adherence to therapy falls to 58-65% for rare disease patients, who routinely deal with difficulties in obtaining therapy, handling side effects, and connecting with knowledgeable healthcare providers. Poor adherence translates into lost revenue for the manufacturer.

These “wraparound” services, after a prescription has been written, can be a crucial part of a successful outcome for a rare disease patient. However, there’s a risk when the manufacturer’s motivation for finding and keeping patients is ruled by the financial aspects rather than the patient care. Several companies are currently in litigation over their practices, which in some cases involve nurse educators (who are supposed to inform physicians and caregivers) actively involved in promoting a drug’s use. The most public example of this has been Alexion Pharma, which ran into trouble for several years over its practices of allegedly sharing patient data with sales reps for the company and other aggressive marketing practices. The company has since hired a new CEO and replaced much of its upper management.

Such situations point to the regulatory compliance programs that rare disease companies need to establish once their products are commercialized (all pharma companies need to have internal compliance programs; it’s just that rare disease ones are sometimes too resource-constrained, or put too low a priority on the practice). “Some orphan-drug companies are small organizations with limited commercialization budgets; in addition, the high cost of some orphan products motivates aggressive marketing practices,” notes Manny Tzavlakis, managing director at Helio Health, a consulting firm specializing in compliance programs. “Together, these situations have made the creation of a robust compliance program a priority for companies in the orphan-drug space, if not all specialty pharma companies.” Rumor has it, according to Tzavlakis, that state attorneys general are putting an emphasis on investigating small pharma companies based on the strength of their compliance programs; companies with minimal commitments will warrant closer investigation.