How Pharma Companies Manipulate Orphan Drug Rule to Create Monopolies

Drug makers “game” the system, report finds

A Kaiser Health News (KHN) investigation has found that the Orphan Drug Act (ODA), signed into law by President Reagan in 1983, is being manipulated by drug makers to maximize profits and to protect niche markets for medications already being used by millions of people. The companies aren’t breaking the law, but they are using the ODA to their advantage in ways that its architects say they didn’t foresee or intend, the investigators contend.

Today, many orphan medications, originally developed to treat diseases affecting fewer than 200,000 people, come with astronomical price tags. And many drugs that now have orphan status aren’t entirely new, according to the report. More than 70 were drugs first approved by the FDA for mass-market use. These medications, some with familiar brand names, were later approved as orphans. In each case, their manufacturers received millions of dollars in government incentives plus seven years of exclusive rights to treat their respective rare diseases––in other words, a monopoly.

More than 80 other orphans won FDA approval for more than one rare disease, and in some cases multiple rare diseases. For each additional approval, the drug maker qualified for new incentives. For example, Botox (onabotulinumtoxin A injection, Allergan) started out as a drug to treat painful muscle spasms of the eye and now has three orphan drug approvals. It is also approved as a mass-market drug to treat a variety of ailments, including chronic migraines and wrinkles.

Altogether, KHN’s investigation found that approximately one-third of orphan approvals by the FDA since the ODA was passed have been for either repurposed mass-market drugs or drugs that received multiple orphan approvals.

“What we are seeing is a system that was created with good intent being hijacked,” said Bernard Munos, a former corporate strategy advisor at Eli Lilly who reviewed the KHN analysis of several FDA drug databases. It’s “quite remarkable that it has gone on for so long.”

Moreover, the proportion of new drugs approved as orphans has ballooned. In 2015, 21 orphan drugs were approved, accounting for 47% of all new medicines, up from 29%in 2010. In 2016, nine more orphans won approval––40% of the total.

When a drug maker wins approval of a medication for an orphan disease, the company receives seven years of exclusive rights to the marketplace, which means the FDA won’t approve another version to treat that rare disease for seven years, even if the brand name company’s patent has run out. The exclusivity is compensation for developing a drug designed for a small number of patients whose total sales aren’t expected to be that profitable.

But exclusivity is also a potent pricing tool, the report says. Drug makers can charge whatever they want by shielding their medication from competition. The market exclusivity granted by the ODA can be a vital part of the protective shield that companies create. What’s more, manufacturers can return to the FDA with the same drug again and again, each time testing the drug against a new rare disease.

Critics have assailed drug makers in the past for “gaming” the orphan-drug approval process. But the extent to which companies have been winning approval for drugs that aren’t what advocates call “true orphans” hadn’t been documented until the KHN investigation.

The investigators examined how drug makers use the ODA to their advantage—often with the guidance of former FDA officials—and have made the development of medications that were once thought to be business backwaters into one of the pharmaceutical industry’s hottest sectors. Orphan drugs now account for seven of the 10 top-selling drugs of any kind, ranked by annual sales, according to EvaluatePharma.

“The Orphan Drug Act has been a great success because many people with diseases that affect very few people now have drugs available to them,” said former Representative Henry Waxman (D–California), a champion of the ODA. “But it’s been in some ways turned on its head when it becomes the basis of manipulating the system for the drug company to make much more money than they would in an open, competitive market.”

Turning mass-market drugs into orphans has been a familiar tactic for some of the most popular drugs ever discovered, according to the report. The authors cite Humira (adalimumab, AbbVie), the best-selling drug in the world, as an example.

Humira was approved by the FDA in late 2002 to treat millions of people with rheumatoid arthritis (RA). Three years later, AbbVie asked the FDA to designate Humira as an orphan drug to treat juvenile RA, which they told the FDA affects between 30,000 and 50,000 Americans. That pediatric use was approved in 2008, and Humira subsequently was approved for four more rare diseases, including Crohn’s and uveitis, an inflammatory disease affecting the eyes.

The ophthalmologic approval extended the market exclusivity for Humira for that disease until 2023. When KHN asked why AbbVie sought multiple orphan designations and approvals for Humira, the company declined to comment.

Another example is Repatha (evolocumab, Amgen), which won marketing approval and exclusive rights in 2015 for the orphan disease homozygous familial hypercholesterolemia, which affects approximately 300 people in the U.S. On the very same day, the drug was approved as a mass-market medication to treat up to 11 million people with uncontrolled levels of low-density lipoprotein (LDL).

Dr. Steven Nissen of the Cleveland Clinic, who ran a study of evolocumab, said, “It’s certainly not considered by any of us to be an orphan drug.”

Source: Kaiser Health News; January 17, 2017.