Thinking straight about orphan drugs, Part 1.

In the United States, the median price for an orphan drug is about $100,000 per year, twenty times the price of the median non-orphan drug. By 2020, orphan drugs are expected to cost the world $178 billion every year, roughly one-fifth of global prescription-drug spending. All that money has led to what the Wall Street Journal calls “a deal-making surge among pharmaceutical companies, which have been particularly keen on makers of drugs for rare diseases.”

Given the staggering costs of orphan drugs, you’d think we’d have a solid handle on whether that money is well-spent. But the truth is that we don’t. I’ll be doing a short series on what we know about orphan drugs—and what we still need to find out.

What are orphan drugs?

Typically, a new drug in the U.S. receives 20 years of patent protection running from the time a patent is filed on the drug. But a drug manufacturer can’t sell the drug until FDA approves it based on clinical trials that take many years to conduct. Because patents are usually filed before that testing occurs, the wait for FDA approval cuts into the brand-name drug’s period of patent monopoly.

To make as much money as possible during that shortened period, a drug manufacturer will, all else being equal, prefer to develop drugs for lots and lots of patients. But the market for drugs to treat low-prevalence diseases is necessarily small. They’re “orphan” diseases—easily forgotten and often overlooked. (In the United States, orphan diseases are defined to afflict fewer than 200,000 people, implying a prevalence of about 1 in 1,620.)

In the late 1970s and early 1980s, Congress came to believe that the patent system wasn’t spurring enough research into drugs for orphan diseases. It therefore adopted the Orphan Drug Act of 1983, which (among other things) confers a seven-year period of market exclusivity on orphan drugs. Significantly, that period runs from the moment the drug is approved for sale, regardless of any remaining patent protection.

In other words, drug manufacturers receive a special, extended monopoly on orphan drugs that they do not receive for non-orphans. In 2000, the EU adopted similar legislation granting a 10-year exclusivity period to orphan drugs. Other countries have followed suit.

Has the Orphan Drug Act worked?

It depends on what you mean by “worked.” From one perspective, it’s worked extravagantly well. Since the advent of the legislation, orphan drugs have been approved in the U.S. in ever-growing numbers. Indeed, the pace of approvals has accelerated sharply over the last five years: between 2011 and 2015, 72 new orphan drugs were launched, almost twice as many as in the five years before.

Some of these drugs are genuine breakthroughs. Kalydeco, for example, offers life-changing relief for those suffering from certain subtypes of cystic fibrosis. And Cerezyme treats a variant of Gaucher’s disease, a debilitating condition that occurs when an enzyme responsible for fat metabolism doesn’t work properly.

But these drugs come with an especially hefty price tag. Kalydeco costs more than $300,000 per year; Cerezyme, more than $200,000 per year. Patients will be on both for the rest of their lives. And because both were approved as orphan drugs, their manufacturers have seven years to market them without any risk of generic competition.

Are the costs of orphan drugs like these worth bearing? How do we think about the tradeoffs between extended regulatory exclusivity and the development of new drugs for neglected diseases? I’ll cover that in my next installment in this series.


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