Price Rise Laid to Orphan Drug Act : Health: A 1983 law to help fight rare diseases gives developer a 7-year monopoly--even if sales soar and others want in.
The Orphan Drug Act was created to motivate drug companies to develop treatments for an estimated 5,000 rare diseases, some of which afflict only a few hundred people. To compensate for the extremely small markets, the law provides a 7-year monopoly to the first firm that discovers and manufactures a so-called orphan drug.
What the lawmakers did not foresee in enacting the 1983 legislation, however, was the possibility that a company with such exclusivity might charge whatever it wanted because of the absence of competition. Nor did they anticipate that a rare disorder might burgeon, or that scientists might find expanded uses for the drug.
These unexpected situations appear to have occurred with several drugs, including a widely used treatment to prevent a life-threatening pneumonia associated with AIDS.
Congressional sponsors of the act--which by all accounts has been enormously successful in stimulating development of drugs for rare diseases--admit that they have legislated themselves into a dilemma for which there is no obvious solution.
“We don’t want the Orphan Drug Act to serve as an artificial and unnecessary barrier to competition,” said Rep. Henry A. Waxman (D-Los Angeles), chairman of the Energy and Commerce subcommittee on health, which sponsored a hearing on the subject Wednesday. “On the other hand, we don’t want to alter the act’s incentives in a way that would jeopardize research on truly orphan drugs.”
To qualify for orphan status, a disease must afflict fewer than 200,000 people. Since the act was passed, the Food and Drug Administration has granted 333 orphan designations to drugs in development and has approved 42 drugs for marketing. Eight of these drugs are for conditions that strike fewer than 1,000 persons, and 18 have populations of less than 10,000. Only six are for ailments that affect more than 50,000 persons.
The act does not provide for a change in drug designation if the number of patients afflicted by the disease surpasses 200,000.
The most dramatic example of this legislative Catch-22 may be the case of pentamidine. Originally, pentamidine was administered intravenously to an estimated 300 persons in this country suffering from pneumocystis carinii pneumonia, a life-threatening respiratory infection that often occurs in individuals whose immune systems are compromised.
Lyphomed Inc., a Rosemont, Ill., drug company, agreed in 1983 to manufacture the drug, which received orphan status a year later. That gave the company seven years of market exclusivity.
Since then, however, the AIDS epidemic has accelerated, and an aerosol form of the same drug subsequently developed by Lyphomed, which received orphan-drug status in 1989, has been shown to have a significant impact in preventing the infection. That development could benefit hundreds of thousands of individuals infected with the AIDS virus whose immune systems have begun to deteriorate.
The price of the drug has quadrupled since 1984, and now costs more than $1,000 a year for most AIDS patients, according to the subcommittee.
Brian Tambi, a Lyphomed official, told the subcommittee that his company has spent more than $23 million on pentamidine research, and said costs continue to grow.
“No one could expect to recover that cost in a market in which prices were set by generic competitors whose costs do not include research and other costs associated with an (innovative) product,” Tambi said. “Only the system of exclusivity . . . may be expected to motivate investors . . . to take the risk associated with the development of innovative orphan drugs.”
Two other orphan drugs that have entered the debate because of their high cost are a human-growth hormone approved for the long-term treatment of children who fail to grow because of a hormone deficiency, and erythropoietin (EPO), which is used to treat anemia associated with chronic kidney failure. The human-growth hormone costs between $10,000 and $30,000 a year and EPO about $8,000, according to the subcommittee.
Most patients taking EPO are on kidney dialysis, which makes them eligible for Medicare. Thus, the cost of the drug is borne by the federal government, and is projected to cost $200 million in 1990, the subcommittee said.
Other companies are eager to market their own versions of these drugs, which presumably would lower the price of the drugs, but the competitors are barred by the law from doing so. Officials from several of the companies told the subcommittee that they strongly support the law but believe it “has had some unforeseen and unintended consequences.”
“A few companies have cleverly exploited the law to protect themselves from competition, and the patient is paying the price,” said Thomas Wiggans, president of Serono Laboratories, which wants to sell its own human-growth hormone.
But other witnesses urged lawmakers not to tamper with the act.
“I personally believe very strongly in the (exclusivity) incentive,” said James S. Benson, acting FDA commissioner. “Without it, I feel many of these drugs would never have come to market.”
Legislators have not yet proposed remedies. But Waxman suggested one possible option--that exclusivity be removed when the market for an orphan drug reaches more than $100 million a year.
Abby S. Meyers, executive director of the National Organization for Rare Disorders, insisted in her testimony that “exclusivity must remain intact” to continue to stimulate research into new drug development.
