Battle Builds Over Who Manufactures Drugs to Treat ‘Orphan Diseases’

When Julie, the daughter of a State Department development official, packed for an overseas post with her parents in 1989, part of her luggage was a small ice cooler carrying $20,000 worth of hGH, a drug designed to aid the growth of children who lack certain hormones.

Julie, a 14-year-old with the stature of an 8-year-old, is one of perhaps 15,000 children who suffer from a rare disorder, an abnormally low growth rate, and who use the recently developed biosynthetic hGH to treat their disease.

For some, the availability of hGH for Julie is one of the blessings of the 1983 Orphan Drug Act, a law designed to provide drug manufacturers with incentives to develop and produce drugs for a small, potentially unprofitable market.

But for others, the prices paid by the families and insurance companies of patients such as Julie--and the hundreds of millions of dollars in profits to be realized--are signals the law’s good intentions have sometimes gone wrong.

Those differences have prompted a high-stakes lobbying campaign over efforts to modify the Orphan Drug Act. The struggle has cost hundreds of thousands of dollars, reached into the White House, reportedly involved threats to refuse to develop drugs for certain diseases, and pitted some of Washington’s fanciest and highest-priced lawyers against one another.

The next key round in the fight is expected to come in the Senate when the Labor and Human Resources Committee takes up legislation re-authorizing the 1983 law.

At issue is the Orphan Drug Act’s key provision: a grant of a seven-year monopoly to any drug company that wins an orphan drug designation for a product.

There are, according to Abbey Meyers, executive director of the National Organization for Rare Disorders, approximately 5,000 “orphan diseases” that individually affect only a small number of people but combined afflict as many as 20 million Americans.

Under current provisions of the law, in order to win an orphan drug designation, a company must show that the number of patients who might be helped is under 200,000 people. While an unlimited number of companies may receive federal research grants for developing an orphan drug, only one--the first to win Food and Drug Administration approval--is given the seven years of market exclusivity. Remaining sponsors must wait until the end of the seven-year period to market their products and start making money.

“The Orphan Drug Act has been a tremendous success in stimulating research on drugs for rare diseases,” said Rep. Henry Waxman (D-Los Angeles) chairman of the House Subcommittee on Health and the Environment.

He notes that, since 1983, the FDA has approved 45 orphan drugs for marketing and that another 133 are in the final stages of testing.

“However, in a small number of cases, the act has provided monopoly protection for drugs that are very profitable and that would have been developed without the incentives of the act,” he said. “In these situations, the act has the unintended effect of increasing prices for otherwise profitable drugs.”

Of particular concern to Waxman and other reformers--including drug companies such as Novo-Nordisk and Serono, who were shut out of the market--are three drugs:

* hGH, the human growth hormone, which costs patients between $10,000 and $30,000 a year and was under simultaneous development by several drug companies at the time it was given orphan drug designation.

* EPO, a drug approved for treatment of anemia associated with chronic renal failure, including patients on kidney dialysis. EPO costs about $8,000 a year per patient and the federal government, which foots the bill for its use, will spend $100 million for it in 1990.

* Aerosol pentamidine, approved for treatment and prevention of a pneumonia that is the most common complication of AIDS. It costs about $1,000 a year for each patient.

In April, Waxman introduced legislation that he said would “fine-tune” the orphan drug law by barring a marketing monopoly when similar drugs are being developed simultaneously. Drugs would also lose their exclusivity if the disease they treat is no longer designated as rare, that is, if it no longer afflicts fewer than 200,000 people.

Some drugs for AIDS, for example, have been given the monopoly under the act but would lose it once the total number of patients at any given time goes beyond 200,000.

The proposal would also have been retroactive, for example, allowing other companies who were in the neck-and-neck race with Eli Lilly and Genentech in developing hGH to now enter the market instead of waiting until those firms’ exclusivity expired.

Waxman’s proposal escalated what had already been an intense lobbying wars, as companies such as Genentech and Lily, who share an annual $200-million captive market with their slightly different versions of hGH, work to block any changes, and companies shut out of the market, such as Serono, Novo-Nordisk and others, back the changes.

Like many legislative battles, the intense fight attracted little public attention. Much of it was waged behind closed door.

But an example of the intensity and the high stakes involved can be found in lobbying records.

Genentech, for example, paid former Sen. Paula Hawkins (R-Fla.) $95,000 for six days of lobbying work in Washington on potential amendments to the orphan drug act.

Outside lobbyists, law firms, trade associations and consumer groups were hired and courted and weighed in on the issue.

So did the White House Council on Competitiveness, headed by Vice President Dan Quayle, a former senator from Indiana, which, critics note, is also the home of Lilly, one of the firms with potentially the most to lose if the reforms are adopted and made retroactive.

A working group of Quayle’s council, at the prompting of White House chief of staff John H. Sununu, quietly came out against the reform proposal, with a letter to the Pharmaceutical Manufacturers Assn. that quickly made the rounds on Capitol Hill.

Quayle’s group said the reforms would not foster competition. The vice president’s imprint also appears on a letter--which opposes changes while recognizing “anomalies” in the present law--from Health and Human Services Secretary Louis Sullivan. The letter was distributed just before House subcommittee members were to vote on the Waxman bill.

Eventually, a compromise of sorts was fashioned that would allow competition where two or more drugs are developed concurrently from now on.

But the provision would not be retroactive, thus continuing to shut out other makers of hGH, EPO and aerosol pentamidine.

As the battle moves across Capitol Hill to the Senate, groups representing the various patient populations are divided on the reform proposals.

One group, the National Multiple Sclerosis Society, has accused Genentech of falsely telling members of Congress the society supports its position.

But another, the Cystic Fibrosis Foundation, has decided to support the current law without any changes, fearing amendments now would be a disincentive to development of drugs for its patients.

Companies such as Novo-Nordisk, pushing for change so they can get in the market, argue the current law’s provision unfairly penalizes companies who lose a development “race” by a few months.

“Genentech and Lilly have had four and three years respectively to cultivate a very small group of prescribing physicians and patients and gain a commanding position in the marketplace, but at least a change now could help restore the level playing field that should have existed all along,” the company said in testimony earlier this year.

But Genentech argues that changing the rules in the middle of the game--especially making them retroactive--is unfair.

Ironically, Genetech once supported the position it now so vigorously opposes. In 1987, it filed suit against the government’s designation of Lilly’s version of the human growth hormone as an “orphan drug.”

At that time, the company argued that, where there had been simultaneous development and there was little question about profitability--Genentech estimates that it spent $34 million in development of hGH although the current market approaches $200 million annually--it was a “cruel joke on the sufferers of orphan diseases and their families” to apply the “orphan drugs” status to hGH.

Now, however, with its share of the monopoly market locked in, the company argues the other side, saying changes in the act would be “unfair, bad public health policy and . . . would establish a bad precedent.”