The business of orphan drugs is booming

Pharmaceutical CommercePharmaceutical Commerce - September/October 2015

With competing products and pricing pressure, the rare disease market is starting to resemble the conventional drug market

The trickle of orphan drug

designations by FDA is turning into a rivulet: In 2014 alone, 49 new orphan drugs were approved (more than in any other single year), according to the National Organization for Rare Disorders; NORD); 467 additional orphan designations were requested (a nearly 25% increase over 2013); and 293 additional orphan drug designations were granted (a nearly 13% increase over 2013). Between 2004 and 2014, 65 separate companies received market approval for at least one new orphan drug, according to NORD. For nearly a third of them, the orphan approval was for their first successful product.

Nearly all of this activity is traceable to the Orphan Drug Act of 1983 (ODA). Since then, some 490 new orphan drugs have been approved (including some with multiple indications), more than 3,200 other investigational drugs have received the orphan designation from FDA (allowing them to benefit from the lucrative ODA provisions), and 4,738 orphan drug designation requests have been submitted for consideration, according to data compiled by the Washington law firm Hyman, Phelps & McNamara.

Today, more than 40% of all approved orphan drugs are intended to treat narrowly defined patient subgroups within oncology. “Cancer is now being viewed more and more frequently as a matrix of rare diseases, which are often highly differentiated based on the presence or absence of specific genetic biomarkers, and these smaller populations of cancer types with shared characteristics lend themselves to orphan drug development,” says Mary Dorholt, PharmD, clinical practice leader, Accredo (Memphis, TN), Express Scripts’ specialty pharmacy.

The ODA provisions include annual grant funding and tax credits (to defray the cost of qualified clinical research and testing), assistance in clinical research study designs, seven years of market exclusivity after the orphan drug is approved, and a waiver of the Prescription Drug User Fee Act (PDUFA) filing fees (that fee for FY2015 is more than $1.3 million per application). These benefits help companies to recover the hefty costs of developing a drug for a rare disease indication that has high unmet need but only a very limited patient population and thus less-lucrative market appeal.

“Gaining access to regulatory experts through the ODA is particularly important,” says Eric Anthony Floyd, MS, MBA, PhD, chief science officer, Dohmen Life Science Services (Milwaukee, WI), “because such access can help rare drug developers to design the most appropriate clinical trials and avoid pitfalls and obstacles on their pathway to approval, and this can accelerate a timely, successful product launch.”

Uncharted territory

Despite the progress, much work remains to be done. Today, 7,000 rare diseases have already been identified—many with a high mortality rate and considerable quality-of-life burdens—yet 95% of them still have no approved therapy available for treatment.

Orphan drugs tend to be extremely expensive—some on the order of $200,000 to $300,000/year per patient, with treatments lasting a lifetime—because the fixed developmental costs must be recovered from a limited patient population (“rare” disease means having fewer than 200,000 patients). Despite the premium price, payers have historically demonstrated relatively little scrutiny or pushback on coverage. This is partly because of the high unmet medical need associated with many rare diseases, and the fact that historically, the budget impact of orphan drug therapies for any given payer or health plan was relatively small (given the small number of impacted patients).

However, the payer landscape in orphan drugs is changing. As the number of orphan drugs grows, “the aggregate budget impact for many payers has grown, and this has brought increased scrutiny across the board related to pricing and reimbursement,” says Eric Faulkner, MPH, practice leader for Quintiles (Research Triangle Park, NC). By industry estimates, 30 million Americans are impacted by a rare disease today.

Today, as with many of today’s other high-cost specialty drugs, payers are increasingly considering options such as higher cost sharing by patients and more aggressive step-therapy protocols (especially where an approved biomarker-related test is available for even part of the label indication), and this causes great concern for some providers and patients.

“In the past, most orphan products did not face price discounts or scrutiny on formulary position, but today, with the need to control the escalating costs, payers look for opportunities to manage their budgets, and this underscores the importance of good negotiations for optimal formulary placement.” says Kelly Blinzler, VP, global market access at Kantar Health (Horsham, PA). “The existence of next-in-class orphan drugs helps to open the door for payer contracting in a space that has traditionally avoided contracting.”

First-mover advantages

FDA examines and adjudicates a new orphan drug filing based upon its active moiety, so once an orphan indication is approved and the sponsor receives seven years of patent exclusivity under the ODA, FDA cannot approve another drug in that designated orphan indication during that period. However, if another company pursues an orphan drug that has a different active moiety, FDA can approve it within same indication (as a next-in-class-treatment option), for the same orphan population.

“As biotechnology companies optimize their portfolios to assess their pipeline of promising orphan therapies, the question often arises—Does it make sense to pursue a first-in-class designation, or do we follow a proven pathway and an established price point and thus be content to launch as a ‘fast follower’?” says John Doyle, Dr.P.H., MPH, SVP at Quintiles. “Being first-in-class obviously creates the most economic power—you are, by definition, fulfilling the biggest unmet medical need and thus can justify a value-based price for the product.”

“Depending on the degree of unmet need, clinical effectiveness and tolerability, clinicians usually quickly do their utmost to ensure appropriate patient access to a first-in-class medicine, and such products are also likely to benefit from high patient demand and loyalty, often becoming the standard of care within the market,” says Angela McFarlane, senior principal, IMS Market Access (Parsippany, NJ).

Next-in-class orphan products must demonstrate clinical superiority over the existing therapy to demonstrate significant value,” says Floyd of Dohmen Life Sciences. “This raises the bar extremely high for manufacturers, and significantly increases the risk for any company that follows behind the initial orphan approval.” This standard was not in place in the early years of the ODA, notes Doyle of Quintiles; “as a result, we will likely be seeing fewer ‘fast followers’ in the orphan space in the years to come than we have seen to date.”

Interestingly, despite the fact that the totality of orphan drugs available today only addresses 5% of the total number of rare diseases identified, “many drug companies still insist on walking in the footsteps of others, rather than going out into the wilderness,” says Timothy Coté, founder of the consultancy Coté Orphan LLC (Silver Spring, MD), and former director of FDA’s Office of Orphan Drugs. “It does not necessarily make the best public health sense, but it does make commercial sense to be able to tell investors: ‘We can come in and take this slice of the pie and here is what our projected revenue will be.’” The first-in-class drug establishes a price point that can be undercut by follow-on drugs, and some aspects of the clinical approval process can be streamlined, he notes.

This is also an area where head-to-head comparative studies are sought by payers. However, because of the small size of the total patient population for any given rare disease, conducting such required comparator trials with first-to-market products “can be difficult in terms of recruiting treatment-naive patients and this can potentially lock out later-entering products from a trial perspective and extend the development time for the product,” adds Ramya Logendra, consultant, IMS Health.

In some indications, competition is already having an impact on prices. “We’ve seen that relatively undifferentiated products in highly competitive markets are sometimes forced to offer incentives like 50% rebates,” says Doug Paul, VP and partner of Medical Marketing Economics LLC (Oxford, MS).

An example: when Pfizer launched its late-entrant enzyme-replacement therapy Elelyso (taliglucerase alfa) for Gaucher disease at a discount to Genzyme’s Cerezyme in the US in order to gain payer support, according to IMS Health’s McFarlane of IMS Health. Elelyso must also compete with Shire’s Vpriv (velaglucerase alfa for injection).

IMS Health estimated the expenditures (based on ex-manufacturer price) of treating rare diseases in the US. “Partial orphan” refers to drugs that have both orphan- and non-orphan designations.

Best practices

With 30 years of ODA experience under its belt, the biopharmaceutical industry has started to see some best practices emerge:

Engage FDA and payers early. “Predicting FDA’s behavior is often one of the greatest variables for drug development, so to the extent that you can get ahead of this by talking to the agency early, it can help to reduce some of this variability,” says Paul of MME.

“Dare to be different—the environment is rapidly changing and the criteria in orphan drug development continues to evolve,” says Faulkner of Quintiles. “The door to conversation with regulators and payers is as open now as it’s ever been. The rule book is being written and rewritten right now.”

Support physicians early. For so many rare diseases, proper diagnosis can be elusive, creating delays in treatment. Many physicians have few if any patients with a given rare disease, or may delay or miss the diagnosis by focusing on individual symptoms rather than the totality of the symptoms associated with the condition. Today, it behooves orphan drug makers—as they develop their own deep understanding of the disease and its symptoms—to develop and disseminate educational materials that can be used to help physicians to quickly recognize symptoms and connect the dots earlier, in order to make a timely diagnosis.

This can come in the form of developing and publishing formal protocols or algorithms that physicians can use to better recognize symptoms during diagnosis. Even better, “the ability to leverage a clear diagnostic test or tool can help to properly diagnose patients,” says Faulkner of Quintiles, who notes that this has worked well with Gaucher disease and Pompe disease.

IMS Health epidemiologists are working in a number of rare disease conditions to develop methodology that supports accelerated diagnosis, using real-world evidence in combination with novel applications of predictive analytics. “The goal is to accelerate appropriate diagnosis of patients with a particular rare condition that may have a cluster of disparate symptoms,” says McFarlane.

Connect with patients early. “Rare disease patients are best served when life science innovators connect with them early in the drug-development and treatment lifecycle,” adds Floyd of Dohmen Life Services.

Within any given rare disease, patients and their caregivers tend to be highly organized and motivated, organizing databases, registries, working with charitable foundations, and using social media to circle the wagons and share information. Drug developers must make every effort to tap into this community—again, as early as possible. “Rare disease patients tend to develop knowledge-sharing websites and webinars, and they really rely on the knowledge base that comes from peer-reviewed scientific papers, key opinion leaders and so forth,” says Kathryn Starzyk, senior director of epidemiology for Quintiles. “Supporting these efforts with solid information, and tapping into these communities should be a high priority for all drug developers, as these patients represent not only their customers but potential clinical trial participants.”

Social media is playing a big role for patients, advocacy groups and researchers, helping these groups—which are often scattered worldwide—to come together for recruitment and organization, data collection, information sharing, and emotional support. “Accessing these groups can give drug developers truly global access, rather than just relying on, say, a US advocacy group or patient registry,” says Starzyk of Quintiles. “All biopharmaceutical stakeholders should think about how they can harness the power of these additional resources, which are arising organically.”

Engage with specialty pharmacies and hub programs that support the product in the market. “Orphan drugs are low-volume, high-cost products, so proper management and efficient distribution are essential to ensure an effective, unbroken supply chain,” says Jessica Black, a director at Xcenda, a unit of AmerisourceBergen. “Successful patient-support programs in orphan and ultra-orphan drugs exist due in large part to cooperative relationships with today’s specialty pharmacies.”

Specialty pharmacies have developed broad expertise in providing many value-added, high-touch services, including:

  • Benefit investigation/verification (BI/BV) for meeting prior-authorization requirements of payers
  • Reimbursement support
  • Clinical and nursing support
  • Patient education
  • Data collection for patient outcomes
  • Specialized storage, handling and delivery of the products

Most of these factors are common to most specialty pharmaceuticals; the rarity of patients, and the often higher medical needs simply make the attention more complicated to carry out effectively.

All this can be expensive, but for properly managed programs, the specialty services show promise in containing overall healthcare costs. Accredo’s clinical care for patients with rheumatoid arthritis results in 16% higher adherence over other traditional retail pharmacies, 23% lower risk of doctor’s office visits, 9% lower risk of emergency visits and $1,797 in annual medical cost savings per patient, according to Dorholt.

Address financial obstacles. Due to the high cost of most orphan drugs, many patients often rely on Patient Assistance Programs (PAPs) from drug makers or disease-related foundations to give patients access to free-or low-cost access to the medications, and coupons and copay-offset programs from drug manufacturers that can help to reduce patient out-of-pocket expenses. As part of their overall go-to-market strategy, Blinzler of Kantar Health says that drug developers should make a concerted effort to help providers and patients to be more aware of all financial-assistance programs that can improve patient access and medication uptake.

Utilize best-available technologies. Floyd of Dohmen Life Sciences notes that today, FDA encourages the use of clinical pharmacology tools and principles to help overcome some of the challenges of orphan drug development. “For instance, drug development for orphan drugs can be streamlined when population pharmacokinetic (PK) models and physiologically based PK (PBPK) models are incorporated with important patient covariates that can be evaluated without the need for formal trials,” says Floyd. Computational modeling and clinical trial simulation are other tools that can better characterize dose-response relationships and other trial variables—which can be important given the often small trial populations, he adds.

When orphans become blockbusters

For any drug makers, the ability to add additional indications for a drug, to grow the franchise beyond the initial orphan indication, provides an obvious win-win—more patients have an opportunity to receive treatment, while the drug maker can reap additional revenue streams to improve ROI on its original innovation.

Critics say that the ability to sell the product to huge numbers of patients across other indications eliminates the key justification for exorbitant prices on orphan drugs—namely, the fact that drug developers must be able to recoup the cost of development over a much smaller potential patient population. “Expanded indications create payer resistance and they will work the numbers much harder,” says McFarlane of IMS Health.

Several widely recognized specialty drugs have made headlines in recent years, as their annual sales have skyrocketed into the billions, far beyond their original orphan market potential, thanks to added label indications (as well as off-label use). According to Dorholt of Accredo, nearly 18 orphan drugs have received blockbuster sales on expanded US indications alone, and at least nine orphan drugs have received blockbuster status within one year of FDA approval as orphan drug. Examples include:

  • Gleevec (imatinib mesylate) from Novartis
  • Epogen (epoetin alfa) from Amgen
  • Soliris (Eculizumab) from Alexion Pharmaceuticals
  • Rituxin (rituximab) from Genentech
  • Humira (adalimumab) from AbbVie (Dorholt notes that Humira received orphan approval after the drug was already a blockbuster, and this limits competition for same indication from similar drugs in class.)
  • Taxol (paclitaxel) from Bristol-Myers Squibb (Dorholt notes that Taxol achieved blockbuster status within one year of approval).

“Rituximab has been referred to as “Vitamin R” by payers, in a negative way because of its multiple indications,” says McFarlane of IMS Health.

Is it right to begrudge these pioneering biopharmaceutical companies added market success? “ODA is completely agnostic about this,” says Coté. “This Act is about creating new products for people with rare diseases—if others can benefit from them too, then so be it.”

Generating blockbuster sales from an orphan designation calls into question the incentives allowed for orphan drug development; in Europe (where the European Medicines Agency has an orphan drug program comparable to the US’), pricing pressure has surfaced. “In some European markets, we’re already seeing shifts in volume-pricing agreements. When a company plants its flag with the high per-unit price for the initial orphan designation, it then must often renegotiate the price as the product expands to broader indications,” says Faulkner of Quintiles. “But in the US, we are not really seeing this happening yet.”

“Nonetheless, we are headed that way in the US in rare diseases—toward a more rational model of indication-specific pricing for orphan drugs,” says Doyle of Quintiles. He adds: “What was negotiated at launch in the orphan indication should not necessarily be the ‘forever price.’”

Express Scripts, the No. 1 PBM in the US, is explicit about its goals going forward: “Fairness in drug pricing for drugs that are approved for multiple indications — with pricing as a function of drug efficacy, mortality impact and more — is a significant area of focus for Express Scripts as we go into the 2016 plan year,” says Dorholt of Accredo.

However, McFarlane of IMS Health points out multitiered pricing for the same product brings its own issues. “One potential problem for drug manufacturers is that providers and payers don’t currently have a method to ensure that the various uses are reimbursed appropriately—so if a given product costs much less in one indication compared to another, one could imagine a scenario where the ‘cheaper use’ is submitted for reimbursement, when that’s not the real situation.”

The Priority Review accelerator

Rare pediatric diseases—defined as those for which half or more of all cases occur in children; in this case, defined as patients age 19 or under—tend to remain particularly underserved, in large part, because of the poor financial prospects that such markets offer, and the scientific, logistical and ethical challenges associated with conducting placebo-controlled clinical trials involving children. The Rare Pediatric Disease Priority Review Voucher (RP-PRV) program was created by FDA in 2012 to address this situation, but truly came into fruition in 2014—2015.

Through the program, any company that gains regulatory approval for a drug aimed at a pediatric rare disease is rewarded with a RP-PRV. The company can then monetize the voucher in one of two ways—it can either use it to expedite the review of any future product (orphan or mass market) in its own pipeline, or sell it (thereby generating both a huge cash influx for the seller, and the opportunity to gain first-mover competitive advantage for the buyer, again, for any single new drug filing in its pipeline, orphan or otherwise).

Importantly, the voucher can then be exercised at any time down the road (with a 90-day advance notice to FDA), to expedite the FDA review of any New Drug Application (NDA) or Biologics License Application (BLA). FDA will make its approval decision within six months, rather than the usual 10 months. Importantly, the holder of one of these vouchers can exercise it to speed the review of any product in its pipeline—not necessarily just another rare disease therapy.

While shaving four months off the developmental timeline may not seem like much, in many hotly contested markets, it can become a make-or-break factor for the product, in terms of its ability to achieve first-to-market status (with all of the pricing and market-share advantages that confers). To date, three of these new RP-PRVs have been awarded, and within no time, they very quickly demonstrated the market value of these vouchers:

  • RP-PRV #1 — to BioMarin Pharmaceutical (San Rafael, CA) in February 2014, after its new biological product, Vimizim (elosulfase alfa) injection was approved for the treatment of Morquio A syndrome, a rare, severely debilitating and progressive disease; five months later (July 2014), BioMarin sold its RP-PRV to Sanofi SA (Paris) and Regeneron Pharmaceutical (Tarrytown, NY) for $67.5 million
  • RP-PRV #2 — to United Therapeutics Corp. (Silver Spring, MD) in March 2015, for its orphan drug Unituxin (dinutuximab) injection, for the treatment of pediatric patients with high-risk neuroblastoma, a rare, extracranial solid tumor cancer; the company has not yet indicated whether it plans to use or sell its voucher
  • RP-PRV #3 — to Asklepion Pharmaceuticals (Baltimore, MD) in March 2015, for its product Cholbam (cholic acid), a treatment for a pair of ultra-rare metabolic disorders (bile acid synthesis and peroxisomal disorders). In a shrewd deal that demonstrated the value of these vouchers, Retrophin, Inc. (San Diego, CA) acquired Asklepion for $75 million, taking possession of the voucher as part of the deal. Less than three months later (May 2015), Retrophin sold the RP-PRV to Sanofi SA, for a whopping $245 million.

“If this early activity is any indication, the program is clearly working in terms of having developed a voucher that has real value for both buyers and sellers, and this should help to spur further innovation in the rare pediatric space,” says Coté.

“These vouchers are seen as a lifeline for many companies that are trying to develop pediatric rare orphan drugs—they almost develop the drug as a favor to the patient community and FDA, and that voucher provides the difference between being in the black and absolutely, positively being in the red,” says Paul of MME.

The sale of the first RP-PRV to Sanofi and Regeneron was a big win for BioMarin, whose CEO has stated that the company will reinvest the earnings to develop products to treat rare and ultra-rare diseases. Sanofi and Regeneron used the voucher to expedite approval of their so-called PSCK9 cholesterol treatment, Praluent (alirocumab), which was granted by FDA in late July. That decision put it some months ahead of Amgen’s PSCK9 product, Repatha (evolucumab), whose approval was expected as this issue went to press. Neither PSCK9 product is designated for orphan-drug status. Amgen has sued Sanofi/Regeneron for patent infringement, and there are other PSCK9 drugs in the pipeline.

There is speculation that the RP-PRV sold by Retrophin to Sanofi could be used for a diabetes treatment, Lixilan (again, not an orphan drug application); Sanofi is expected to file for FDA approval later this year.

The RP-PRV Program is based on an earlier program—the Tropical Disease Priority Review Voucher Program. To date, four PRVs have been granted thus far to reward new therapies developed for neglected tropical diseases. While trading has not yet been as robust (due in part to a variety of restrictions on the use of these earlier vouchers), in November 2014, Gilead Sciences (Foster City, CA) shelled out $125 million to acquire such a voucher from Knight Pharmaceuticals (Montreal). Knight had been awarded the voucher as a reward for bringing to market Impavido (miltefosine), a treatment for the parasite Leishmaniasis (the fourth voucher issued to date under the Tropical Diseases PRV program). Gilead has not yet specified how it will use its purchased voucher.

One important caveat of the RP-PRV program is this: Since its inception, the Rare Pediatric Orphan PRV program has been operating on a trial basis. According to the statute, once three RP-PRVs were awarded, the Government Accountability Office (GAO) would have one year to evaluate the program’s efficacy and impact on spurring drug development for rare pediatric indications, and report to Congress. (In this case, the GAO report is due by March 2016). “While the clock is running for the GAO assessment to be completed, FDA can still issue more vouchers until that deadline of March 17, 2016,” notes Coté, “but after that, the program will expire unless Congress makes it permanent.”

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