Part 1: Understanding Rare Diseases, Orphan Drugs, and Government Incentives for Research and Development

Definition of a rare (or orphan) disease

According to EURORDIS, (Rare Disease Europe), in Europe, a disease or disorder is considered to be “rare” when it affects less than 1 in 2,000 people. Another “numerical” definition that is more commonly cited in the literature is 5 cases or less per 10,000. (Note that the terms “rare disease” and “orphan disease” are used interchangeably in the literature and the press.)

In the United States, for a disease to be designated as a rare disease by the FDA, it must affect fewer than 200,000 people, which works out to about 7.5 per 10,000.

The word “orphan” is defined as “lacking support, supervision or care.” The term is used for both rare diseases and drugs because the pharmaceutical industry historically has had little motivation for developing and marketing products for the small patient communities affected. In short, the cost of developing an orphan product for market would be greater than the expected sales using current marketing models.

To address the needs of this underserved patient population, governmental bodies and rare disease advocacy organisations in the US and in Europe including EURORDIS, have come together to advocate and lobby for economic incentives to make it worthwhile for pharmaceutical manufacturers to develop and bring to market orphan drugs.

The table below (adapted from Datamonitor CMHC2548) compares the key differences between the policies in place for orphan drugs in the United States and in the EU.

Incentivising orphan drug development

In 1983, the United States passed the Orphan Drug Act to incentivise pharmaceutical companies to develop and market orphan drugs. The orphan drug “revolution” reached Europe in 1999, with the passing of Regulation EC n° 141/2000, adopted by the European Parliament on 16 December 1999 and published in January 2000. Legislated incentives include:

• Market exclusivity: Once an orphan drug is approved by the EMA (European Medicines Agency), competitive agents or “similar” products cannot be marketed for 10 years after marketing authorisation has been granted. For paediatric drugs, this extends to 12 years. In the US, marketing exclusivity is granted for 7 years.
• EMA and FDA provide protocol assistance by offering scientific advice about the various tests and clinical trials necessary for marketing authorisation. This assistance either costs nothing or there is a fee reduction.
• In the EU, fees are either waived or reduced for orphan designation, marketing authorisation, inspections, variations, and protocol assistance. In the US a 50% tax credit is given for clinical studies.
• Companies developing orphan drugs may be eligible for grants or initiatives for research and development from EU Member State programmes and the FDA.
• In the EU and US, orphan drugs may be granted an accelerated marketing procedure.

Designating a drug as an orphan drug

An “orphan drug” label is granted if the product fulfills the following criteria:

• Intended for an indication with a prevalence not exceeding 5 in 10,000 persons in the EU or less than 200,000 affected individuals in the US
• For the EU, the rare disease must be life-threatening, seriously debilitating, or a serious chronic condition
• In the EU, no satisfactory method of diagnosis, prevention, or treatment of the condition is currently authorised. If any other method does exist, then the proposed orphan drug has to provide a significant benefit over the currently approved product for the same rare disease

Orphan designation can be granted at any time prior to market authorisation

The designation of a product as an orphan drug can be made at any stage of drug development, as long as it is medically plausible. The drug may be in the preclinical (not yet tested on human subjects) or in the clinical trial phase.

A full list of designated and authorised orphan drugs in Europe is available at: ec.europa.eu.  In addition, a searchable database for orphan drugs is available from the FDA.

Growing focus on orphan drugs in the pharmaceutical industry

The blockbuster model that has dominated pharmaceutical marketing has become increasingly vulnerable to genericisation. When the blockbusters fall off the “patent cliff” manufacturers may not have equally lucrative replacements. As such, orphan drugs have become attractive alternatives.

For example, the FDA reports that close to 200 orphan drugs enter development each year. Also, about one-third of drugs approved by the FDA are designated as orphan drugs. In fiscal year 2012, 33.3% of priority NMEs (new molecular entities) and 21.7% of standard NMEs approved by the FDA were orphan drugs. In the EU in 2012, 15.38% of all marketing authorisations were for orphan drugs.

Becoming increasingly prevalent is the acquisition of small development companies or their products in development by big pharma. The advantage for the acquirers is avoidance of the expensive early discovery work. The advantage for the aquirees is newfound resources and expertise to devote to successfully bringing the product to market.

A challenging space for marketers

It is important to understand some of the hurdles that face orphan drug development, approval, and marketing. They include, for example:

• Obtaining an orphan drug designation (probably the easiest item on this list)
• Designing clinical trials that meet regulatory needs and those of the medical community
• Recruiting a sufficient number of study patients—a very real challenge for some orphan and ultra-rare diseases

But the most important hurdle to overcome concerns pricing and reimbursement. Member states may be reluctant to reimburse costly orphan drugs that may have to be given for the patients’ lifetimes. But other factors also exist:

• Budgetary issues: is the rare disease recognized as a priority (or not) and has provision been made in the overall health budget?
• HTA issues: are authorities able to monitor and manage use, in order to control budgets despite high prices?
• For the UK in particular, orphan drug cost-effectiveness review will be taken over by NICE in 2013, which is likely to be a perturbing market factor, as many other European countries look to NICE for access guidance.

Our next post, “The Challenges of Bringing Orphan Drugs to Market” will dive deeper into the marketing challenges facing pharmaceutical companies in the orphan drug space.

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