Even if the Orphan Drug Act were working properly, its enormous costs might outweigh its exiguous benefits. But it’s not working properly. Drug manufacturers are gaming the Act in at least three important ways. They’re recycling, they’re pushing their products for unapproved uses, and they’re salami slicing. I’ll talk about the first two today and the third tomorrow.
Here’s the game. Find a cheap drug with lapsed patents that is approved for one indication but is widely used off-label for an orphan disease. Run the drug through clinical trials for that disease and get FDA to approve it for the new indication. Voilà! You’ve got seven years of market exclusivity under the Orphan Drug Act. Then you jack up the price.
This happens a lot. One recent study, for example, surveyed all of the drugs (9 in the United States, 2 in the EU) that have received orphan drug approval for rare seizure conditions. They were not new drugs. Instead, they were “mainly compounds that were already approved to treat epilepsy or alternative routes of application for already approved orally available compounds.” Similar concerns have been raised with respect to rare neurological diseases, including 3,4-DAP, which I discussed here.
There’s some social value in clinical trials that demonstrate the safety and efficacy of off-label uses. But the point of the Orphan Drug Act was to reward novel research, not to foster the recycling of existing drugs. Seven years of market exclusivity is a blunt and excessive reward for trials that we could run much more cheaply.
Recycling isn’t the only trick manufacturers have up their sleeve. They can also secure approval for an orphan drug and exploit their seven years of exclusivity to market their products for unapproved uses. This kind of regulatory bait-and-switch may partly explain the paradox that so many blockbuster drugs are also orphan drugs.
A 2012 study by Aaron Kesselheim and others found that the off-label use of orphan drugs is rampant. The lidocaine patch, for example, was approved to treat painful hypersensitivity and chronic pain in postherpetic neuralgia. But it’s prescribed 82.3% of the time for different uses entirely. For just four orphan drugs from 1999 to 2005, the researchers concluded that state Medicaid programs spent a combined $495 million on off-label uses.
The Orphan Drug Act plays a complex role in this dynamic. Most orphan drugs—at least the non-recycled ones—are patented. (Lidocaine, for example, was under patent during the study period.) A patent already allows a manufacturer to get approval for one indication and secure a chokehold on the market for off-label uses. Regulatory exclusivity under the Orphan Drug Act may still be valuable given the possibility of a patent challenge, but it makes less of a difference than is sometimes assumed.
Things get more complicated when an orphan drug doesn’t have a patent. In that case, whether a manufacturer can dominate the market for off-label uses depends on whether the drug was previously approved for a different indication. Although competitors can’t market the drug for an orphan indication, they can still market the drug for that earlier-approved indication. They’ve just got to use “skinny labels” that omit information about the orphan use. When skinny-labeled generic drugs are in the market—sometimes they are, sometimes they aren’t—the orphan drug and the skinny-labeled drug can compete for off-label uses.
If a non-patented orphan drug hasn’t previously been approved, then orphan drug approval does give the manufacturer a clear field to market the drug for off-label uses. A competitor could always attempt to secure approval for a different indication—but, in general, no competitor will have adequate incentives to do so in the absence of patent protection.