Spending on Orphan Drugs for Common Diseases? Not Rare at All, Study Says

Pharmaceutical companies creating and launching orphan drugs for rare diseases do so under a landmark 1983 law intended to boost development for therapies that may have limited sales potential, conveying tax benefits as well as market exclusivity. The issue has come under scrutiny in recent years amid debate over rising drug costs and the intricacies of US patent laws.

A study published Monday in Health Affairs sought more detail about this issue by looking at the proportion of benefits intended for orphan drugs also extending to partial orphan drugs.

Partial orphan drugs are ones that were initially approved for rare diseases as an “orphan-first” drug. The authors note that these drugs can command high prices because of small patient populations and limited competition. Because the prices do not come down even after more common disease indications are added, companies may be induced to seek an orphan indication first; in addition, the approval for these drugs are more streamlined and faster, often relying on a different set of evidence for efficacy and safety compared with therapies moving through other pathways.

To gain more clarity around these distinctions, the authors, from the University of Michigan and Boston University, looked at how much spending on partial orphan drugs actually goes to treat rare diseases. Using national 2018 commercial claims of nonelderly individuals covered by employer-sponsored health insurance, they estimated the proportion for 15 top-selling partial orphan drugs, both overall and among orphan-first vs nonorphan-first drugs.

The 2017-18 IBM MarketScan Commercial Database yielded 301,329 patients who could be analyzed (the researchers excluded those patients covered under capitation agreements). The patients had had 1,907,534 orphan drug claims for 405 unique orphan drugs and accounted for $7.34 billion in spending.

The investigators found that just 21% of the total dollars spent in 2018 on the 15 top-selling partial orphan drugs went to the treatment of rare diseases as an orphan drug, while more than 70% went to the treatment of common diseases (not needing an orphan designation). Nearly 8% were not assigned to either category, indicating off-label use.

The blockbuster partial orphan drugs that have received some of the most attention in Congress and elsewhere are at the top of the list. Biologics account for the top 3 of these 15:

• Adalimumab (Humira; AbbVie) was approved as a nonorphan drug first in 2002 and then as an orphan drug in 2008; it has 6 nonorphan indications and 7 orphan indications, and it rang up $13.7 billion in US sales in 2018. Nearly 85% of the spending was for nonorphan indications.
• Infiximab (Remicade) was approved as an orphan drug in 1998 and then as a nonorphan drug in 1999; it has 5 nonorphan indications and 3 orphan indications. A little more than 54% of the spending could be assigned to orphan indications, and 37.8% to nonorphan indications.
• Etanercept (Enbrel) was approved as a nonorphan drug in 1998 and then as an orphan drug in 1999; it has 4 nonorphan drug designations and 1 orphan drug designation. Nearly 94% of its spending is for nonorphan indications.

A rare disease is defined as one that affects less than 200,000 people in the United States or one that affects more than 200,000 people but the sponsors are not expected to recover the costs of developing a new drug. To encourage that development, the Orphan Drug Designation, created by the 1983 Orphan Drug Act (ODA), provides orphan status to drugs and biologics defined as those intended for the safe and effective treatment, diagnosis, or prevention of rare disease.

In exchange, pharmaceutical manufacturers receive 7 years of marketing exclusivity. The ODA also made several grants available to be awarded annually to companies or academic-based researchers and a 50% tax credit for expenditures incurred while orphan drugs were being evaluated for their therapeutic potential.

Some believe pharmaceutical companies have taken advantage of the ODA. America’s Health Insurance Plans claims that the pharmaceutical industry has “gamed the system,” with manufacturers viewing the ODA as a way to maximize profits by turning products that treat a small number of patients into multibillion-dollar sellers. In 2017, Kaiser Health News published an investigation into orphan drug development that showed drug makers manipulate the system, with many drugs gaining orphan status after first having been approved for another disease.

The authors suggested that their findings provide some support for some of these concerns, and while they proposed some possible changes, they note that each will require a trade-off of some sort.

"The trade-off is that each of these changes could lower investment in discovering new treatment options for people with rare disease," Kao-Ping Chua, MD, PhD, lead author and a health services researcher at the University of Michigan, said in a statement.

Some of the proposals that could be used to dissuade manufacturers from pursuing an “orphan-first” strategy include:

• Reducing the level of orphan drug incentives for partial orphan drugs, such as by moving to indication-specific pricing by varying the price of orphan drugs between indications based on factors such as the availability of therapeutic alternatives
• Allowing the FDA to revoke Orphan Drug Designation status once the total patient population treated by the drug for all indications surpasses 200,000
• Passing legislation that forces sponsors to repay subsidies for clinical testing provided under the ODA once drugs are sufficiently profitable
• Reforming the 340B Drug Pricing Program, which provides pharmaceutical discounts for certain hospitals with a high proportion of low-income, underserved patients, but these hospitals are not eligible to receive discounts on drugs under the ODA, unless the drugmaker voluntarily decides to do so

The costs of granting orphan drug status to partial orphan drugs can be substantial, Chua notes, in part because insurance companies are hesitant to exclude orphan drugs from their formularies.

"On the one hand, it's good that common-disease drugs with established safety records are being repurposed for rare diseases," Chua said. "At the same time, it's less expensive to re-purpose an existing drug than to bring a new drug to market. It's not clear that sponsors should receive the same level of orphan drug benefits as a rare-disease drug that would not have been developed without these benefits."

Reference

Chua KP, Kimmel LE, Conti RM. Spending for orphan indications among top-selling orphan drugs approved to treat common diseases. Health Affairs (Millwood) 2021;40(3): 453-460. doi:10.1377/hlthaff.2020.01442