Loopholes Spark Concern Over Orphan Drug Prices

The 1983 Orphan Drug Act provides financial incentives to pharmaceutical companies to research and gain exclusive rights to sell drugs that have small markets and limited commercial value. Now Congress is considering reforms, amid well-publicized instances of some manufacturers appearing to be taking advantage of the law by charging unusually high prices for some orphan drugs.

Under the act, the U.S. Food and Drug Administration can grant orphan drug status to medications being developed for so-called “orphan” diseases--those that affect less than 200,000 people in the United States. The designation results in tax credits that subsidize the majority of expenses for human clinical research.

In addition, companies whose orphan drugs are approved for prescription sales by the FDA are granted seven years of exclusive American marketing rights.

Pricing of Hormone

Concern about loopholes in the orphan drug law has been sparked by the pricing of genetically engineered human growth hormone, which is used to treat dwarfism in an estimated 10,000 children. A year’s supply of this orphan drug costs about $17,000, making it one of the most expensive of all medications.

Human growth hormone is manufactured in slightly different forms by Genentech of South San Francisco and Eli Lilly and Co. of Indianapolis.

Perhaps the best-known orphan drug is AZT, the AIDS drug manufactured by Burroughs-Welcome Co. of Research Triangle Park, N.C., and approved for sale by the FDA in March. A year’s supply of that drug costs more than $10,000, a price that the company has justified by citing the high costs of research and production.

The proposed reforms were introduced by Rep. Henry Waxman (D-Los Angeles), the author of the original legislation. They would sharply curtail a manufacturer’s ability to maintain exclusive marketing rights for an orphan drug that turns out to be profitable.

Open Sales to Companies

This is because other drug companies would be allowed to sell any approved orphan drug during its first seven years on the market as long as they independently conducted the clinical studies required for FDA approval.

Waxman’s amendments have been approved by the House Energy and Commerce Committee and are expected to be taken up by the full House of Representatives within the next two weeks.

As of September, the FDA had designated about 150 orphan drugs for research and development; in seven cases more than one company is attempting to develop the same drug for the same use.

The FDA has approved 18 orphan drugs, including compounds to dissolve gallstones and drugs for rare liver diseases. About 90% of the approved medications are for diseases that affect fewer than 50,000 people.