Orphan drugs attract rich returns for pharmaceuticals
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When the US biotech company Genzyme started selling its treatment for a rare disorder called Gaucher’s disease at up to $300,000 per patient a year, the price provoked senate hearings, government audits and sharp criticism from Hillary Clinton, then the US First Lady.
That was in the early 1990s, and, if adjusted for inflation, Genzyme’s drug — Ceradase — would still be one of the most expensive medicines ever launched. Since then, despite continued arguments over drug affordability, the business around rare diseases has expanded sharply.
At the time, Henri Termeer, a pioneer in the rare or “orphan” drug sector who continues to advise biotech companies, ran Genzyme. “There was a high cost [for the medicine] and I had a lot of explaining to do,” he recalls.
He explained then that the price tag reflected the extreme difficulty of producing some orphan drugs. The manufacture of Ceradase, for example, required extracting enzymes from 22,000 human placentas for each patient’s annual treatment. Before Genzyme, Mr Termeer had worked on the laborious extraction of clotting agents from blood to treat haemophiliacs and on producing human growth hormone to treat dwarfism from the pituitary glands of cadavers.
The small number of individuals with each orphan disease — sometimes just a few people in a country — often makes research, identification and recruitment for clinical trials difficult. But today there is surging interest in a sector focused on a growing number of rare diseases that had been neglected.
According to a new report by research group EvaluatePharma, there have been nearly 4,000 orphan drug designations granted by regulators in the US since the early 1980s, with more than 300 last year alone. Worldwide sales of orphan drugs in 2016 rose to $114bn and accounted for 16 per cent of all prescription drug revenues. By 2022, the consultancy forecasts that the proportion will rise to 21 per cent.
Large pharmaceutical companies such as Bristol-Myers Squibb and Novartis are taking an interest. So are many of the smaller biotechs, some of which have been acquired along the way. Once example is Genzyme, which was bought by Sanofi in 2011.
A number of factors explain the commercial appeal of orphan drug development — and hold implications for the industry as it searches for new models for growth.
The first is the economic angle. The Orphan Drug Act enacted in the US in 1983, along with its equivalents in Europe and elsewhere, has provided strong incentives. These legal frameworks have granted quicker regulatory approval for orphan than non-orphan drugs, setting a lower bar on patient numbers in clinical trials and providing monopoly protection from competitor products for as long as a decade.
While prices are still high, the small number of patients with each condition means the overall burden for health systems and insurers in paying for treatments is still relatively modest.
A second factor is scientific progress, which has allowed advances such as cheaper and safer manufacturing. Breakthroughs have been helped by initiatives including the UK’s 100,000 Genomes Project, which has expanded DNA sequencing to provide insights into rare diseases that are often genetically inherited.
Third, there has been increased co-ordination between patient groups and doctors, which has strengthened advocacy and made it easier to recruit patients for clinical trials and share knowledge of diagnosis and treatments.
For a number of rare conditions, from haemophilia to Fabry’s disease, which can cause kidney and cardiac problems, these factors have already helped bring treatment options that can extend life and quality of life for decades.
But with an expansion in both the identification of new rare diseases — there are now about 7,000 — and the number of expensive medicines in response, there are growing concerns over the sustainability of the industry.
In a recent report, Jack Scannell, pharmaceuticals analyst at the investment bank UBS, highlighted signs of “skirmishes” on both sides of the Atlantic and concern that some rare disease treatments are providing only modest benefits for such high prices.
The UK’s National Institute for Health and Care Excellence (Nice), which advises the National Health Service on drug purchasing, has increased its scrutiny of orphan drugs, proposing rejection for those that cost more than £100,000 per “Qaly” or quality-adjusted life year — a measure of the health benefit they bring.
Nice recently advised against prescribing Alexion Pharmaceutical’s drug Kanuma for the inherited genetic disorder lysosomal acid lipase deficiency. It argued that the annual price of £500,000 per patient was not justified by the clinical benefits.
In the US, the health insurer Anthem last year refused to pay for Sarepta’s Exondys51 for Duchenne muscular dystrophy; Anthem and insurer Humana also tightly restricted reimbursement for Biogen’s Spinraza for spinal muscular atrophy.
“It’s a high risk, high reward model,” says David Brennan, interim chief executive of Alexion, which charges up to $700,000 a year for use of its drug Soliris to treat the rare blood disease paroxysmal nocturnal hemoglobinuria. He stresses that the company offers “compassionate use” donation programmes for the uninsured and plans to reduce prices over time.
Such arguments are wearing thin with politicians. The German and French authorities have questioned reimbursement of several rare disease drugs in recent months. During The Netherlands’ stint as president of the Council of the European Union last year, Dutch health minister Edith Schippers called for scrutiny on incentives for orphan products. In the US this month, Republican senator Chuck Grassley opened an inquiry into potential abuses of the Orphan Drug Act, following an investigation that suggested some companies had been exploiting loopholes.
There is also the concern that the small number of patients limits the likelihood of rivals developing competitor products that would bring down prices over time. Even Mr Termeer admits that the number of really effective orphan drugs, is still very limited. “But in almost every case, people with enormous passion and compassion will try to figure out solutions,” he says.
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