Do Biopharmas Abuse the Orphan Drug Act? Debate Resurfaces

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By John T. Aquino

New claims that biopharma companies abuse federal incentives to develop drugs for rare diseases have rekindled the debate, but the FDA and other stakeholders still say the Orphan Drug Act program is a success.

A recent Kaiser Health News report concluded, "[T]he system intended to help desperate patients is being manipulated by drugmakers to maximize profits and to protect niche markets for medicines already being taken by millions. The companies aren’t breaking the law, but they are using the Orphan Drug Act to their advantage in ways that its architects say they didn’t foresee or intend.’ The study’s findings echo similar allegations levied in recent years, incuding those by former Rep. Henry Waxman (D-Calif.), the law’s chief sponsor 10 LSLR, 6/10/16 .

Food and Drug Administration spokeswoman Sandy Walsh told Bloomberg BNA in a Jan. 27 e-mail, “The FDA’s Office of Orphan Products Development takes seriously the mission to help incentivize drug development for rare diseases. Overall, we feel the Orphan Drug Act has been a success and that patients are benefitting from the research and development, both on new drugs and re-purposed drugs, for rare diseases. There are still thousands of rare diseases with no treatment options, and we are committed to working toward the development of safe and effective therapies for these diseases.”

She added, “We have been aware of the concerns that have been expressed recently in the news and are continuing to look at the appropriate application of the laws and regulations.”

The debate raises the issues of whether drug companies are profiting unreasonably in utilizing the ODA, the extent to which the law is helping drugs reach the small populations that have these diseases, and whether the law needs to be changed.

Incentives Needed

Judith Hasko of Latham & Watkins, Menlo Park, Calif., told Bloomberg BNA in a Jan. 25 e-mail, “This legislation has provided critical incentives for investment in treatments for diseases that otherwise likely would not merit that investment, in light of the limited numbers of patients affected.” She added, “Given the complexity of both this law, other protections for these products and the process of drug development, one would need to break down the data summarized in the article into more specific components than it does to determine whether the law is really being used outside/beyond its ‘intended purpose.’”

A spokeswoman for Johnson & Johnson’s Janssen Pharmaceutical, whose rheumatoid arthritis drug Remicade is cited in the KHN article, told Bloomberg BNA in a Jan. 26 e-mail that Remicade “has received 16 FDA approvals in the areas of gastroenterology, rheumatology and dermatology. Only two of these 16 FDA approvals are for the treatment of orphan diseases.” She noted that those designations “operated as intended to provide incentives to do the clinical development work needed to meet significant unmet needs for relatively small populations.”

Kevin Noonan, partner and biotechnology attorney with McDonnell Boehnen Hulbert & Berghoff LLP, Chicago, concurred with Hasko in a Jan. 27 e-mail to Bloomberg BNA, suggesting a critical look at the KHN data.

He added, "[T]he report has the benefit of bringing the government’s attention to the ‘problem,’ which is exactly right. If there needs to be some greater scrutiny by FDA, or Congress needs to tweak the law to prevent any ‘abuses,’ then that’s what should be done. But I suggest regulators or legislators tread lightly. To me, it would be worse to prevent true orphan status for drugs that otherwise would not be available for folks with rare diseases than for a company to make more than Kaiser or someone else thinks they should. These are value judgments after all, and it is easy to raise the clarion call against ‘obscene profits.’ But many times it isn’t that simple, and I suggest someone—FDA, GAO [Government Accountability Office], FTC [Federal Trade Commission]—look into it.”

‘People Have Hope Now.’

The ODA gives these incentives for development of drug products that affect small numbers of patients:

  •  a seven-year period of exclusivity, during which the FDA is prohibited from approving an application for another product that is the same drug intended to treat the same disease or condition;
  •  tax credits;
  •  grants for drug development;
  •  fast-track approvals of drugs indicated for rare diseases;
  •  expanded access to the Investigational New Drug Program; and
  •  a waiver of user fees the FDA charges biopharmas under the Prescription Drug User Fee Act.
To qualify for these incentives, the drug must first obtain orphan drug designation and then be approved for the rare disease or condition that is the subject of the designation.

According to FDA data, the agency has granted 3,983 orphan drug designations since 1984. It granted 333 in 2016, nearly double what it granted in 2007 and 75 percent more than in 2012.

Waxman told Bloomberg BNA in a June 2016 interview, “People have hope now that they didn’t have before for pharmaceutical therapies to help them and cure the diseases.”

The FDA revised its ODA regulations in 2013 07 LSLR, 6/14/13 , offering clarifications to avoid the possibility that some companies could “potentially ‘game’ approvals by seeking successive narrow approvals of a drug.”

Law Manipulated, Report Says

The KHN report said, “Today, many orphan medicines, originally developed to treat diseases affecting fewer than 200,000 people, come with astronomical price tags,” often at little cost to the biopharmas because some are mass market drugs re-purposed to take advantage of the incentives of the ODA and the subject of multiple ODA submissions.

According to the KHN report:

  •  more than 70 of the 450 FDA-approved orphan drugs were first approved for mass market use and later approved as orphans;
  •  more than 80 other orphan drugs were approved for more than one rare disease, with separate and additional incentives for each approval;
  •  seven of the 10 top-selling drugs in 2016 received orphan drug designations: AbbVie’s Humira (initially approved for treating arthritis), Amgen’s Enbrel (autoimmune diseases) and Neulasta (chemotherapy infections and side effects), Johnson & Johnson’s Remicade (rheumatoid arthritis), Genentech’s Rituxan, Celgene’s Revlimid (multiple myeloma) and Teva Pharmaceuticals’ Copaxone (multiple sclerosis);
  •  other drugs that have received orphan designations include AstraZeneca’s cholesterol blockbuster Crestor, Bristol-Myers Squibb’s Abilify for psychiatric conditions and Roche’s cancer drug Herceptin; and
  •  altogether, a third of orphan drug approvals since the program began have either been for re-purposed mass market drugs or drugs that have received multiple approvals.
Dr. Gayatri Rao, director of the FDA’s Office of Orphan Products Development, said the agency would investigate these issues and consider a regulatory change, according to the KHN report.

Criticism Previously Raised

The KHN’s criticism wasn’t entirely new. A 2015 commentary published in the American Journal of Clinical Oncology focused on cancer drugs including Novartis’s Gleevec, which treats chronic myeloid leukemia and received nine orphan drug designations. The commentary argued that the drug was never meant to serve an orphan population. A Washington Post article citing the criticisms appeared nine months later, and the KHN report five months after that.

Waxman in June 2016 told Bloomberg BNA some companies are applying for multiple orphan drug approvals for the same drug by narrowing a disease into smaller subsets. “There are new cancer drugs that are narrowed down to treat people with a form of cancer or form of cancer treatment that affects relatively few people,” he said, affording drug companies an extra period of exclusivity.

In addition, many drugs that received orphan drug designations have become blockbusters and are being used off label in a much broader population of patients than the law intended, Waxman said, adding, “Orphan drugs are orphans no more; they’re very popular. There are pharmaceutical companies that handle their whole business plan to make sure their drug can be categorized as an orphan drug.”

Biopharma Associations’ View

A spokeswoman for the Pharmaceutical Research and Manufacturers of America (PhRMA) told Bloomberg BNA in a Jan. 26 e-mail that the importance of the ODA is underscored by the fact that only 5 percent of all rare diseases have an approved treatment

Responding to the KHN report, she said only one in five orphan medicines approved in the last decade have a non-orphan indication in addition to their orphan indications. “What is not often considered is the uncertain path of scientific discovery. The ODA provides incentives for the long, complex and costly clinical trials that are needed to demonstrate safety and efficacy.”

She added, “In some cases a company researching a compound for a rare disease may find potential for another indication and pursue clinical trials for broader or additional orphan indications, each of which requires additional clinical trials and are conducted with no guarantee of FDA approval.”

The Biotechnology Innovation Organzation (BIO) previously addressed issues raised in the KHN report in response to the August 2016 Washington Post piece, citing a study by BIO, the National Organization for Rare Disorders (NORD ) and Ernst & Young that found there would have been one-third fewer orphan drugs on the market treating patients with rare diseases over the last 30 years without the incentives found in the ODA.

BIO declined Bloomberg BNA’s request for comment on the KHN article, noting its previous comments on the issues.

Sufficient Analysis Needed

Latham & Watkins’ Hasko noted, “Rao’s statement that she wants to understand better the multiple approval scenario before forming an opinion on whether it is being used inappropriately, for example, makes sense. Her observation that the agency lacks resources to run appropriate analyses of the orphan drug database is, however, going to hinder her ability to do so, and whether in our current political environment legislators will be willing to perform thoughtful analyses before implementing changes to the law is questionable.”

She added, “The Orphan Drug Act has provided valuable incentives for developing products benefitting patients without alternative treatment options in a high risk industry, and given the success of those incentives to date, any adjustments to the law should be undertaken carefully after sufficient analysis and discussion with all stakeholders.”

The Johnson & Johnson spokeswoman noted to Bloomberg BNA when Remicade was approved for its two orphan drug designations—for pediatric Crohn’s disease in 2006 and pediatric ulcerative colitis in 2011—it became the first treatment option beyond conventional therapy available for an estimated 150,000 children age six to 17 living with these diseases.

Roche, which acquired 454 in 2007, closed down 454’s DNA sequencing technologies unit in October 2013, laying off most of the staff.

To contact the reporter on this story: John T. Aquino in Washington at

To contact the editor responsible for this story: Randy Kubetin at

For More Information

The Kaiser Health News study is at

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