The maturing rare-disease market

Pharmaceutical CommercePharmaceutical Commerce - November/December 2014

As rare diseases have emerged as a market opportunity for pharma over the past several years, industry practices are beginning to stabilize

The Orphan Drug Act of 1983 (ODA) opened the doors, business-wise, for pharma companies to pursue drug development with some assurance that the business could be profitable. Activity percolated in the following years, but has significantly ramped up in the past few years. An eye-catching 17 of the 39 drug approvals granted by FDA in 2013 were for orphan drugs exclusively (generally defined as treatments for diseases with fewer than 200,000 patients in the US). Thanks to fast-track review protocols and reduced development timelines, a variety of tax breaks, marketing exclusivity (seven years for the first drug approved for a given orphan designation), and other financial incentives, and the opportunity for label extension later, many biopharma companies are now viewing these small market opportunities as big business.

The ODA provisions are clearly working. Orphan drugs represent a larger part of the world’s overall medicine cabinet. For instance, in 2012, orphan drugs represented 35% of all new drug output (revenue-wise), according to the 2013 EvaluatePharma Orphan Drug Report, which also reports that today, 41 of the 100 top drugs serve patient groups of 100,000 or fewer—up from just 23 in 2010. Given the small target patient population for any given orphan drug, it’s not unusual for these specialized therapies to be priced between $100,000 and $400,000 per patient per year.

FDA’s Orphan Grants Program also encourages sponsors to develop products for orphan indications. “Since the ODA launch in 1983, this program has received more than 1,800 applications,” notes Terry Dagnon, MS, VP of regulatory affairs for Dohmen Life Science Services (Wheat Ridge, CO).

While many consumers would balk at the astronomical prices, many in the industry argue that they are justified. “At the end of the day, it costs the same billion dollars whether you are bringing to market a drug that targets a million patients or just ten thousand patients,” says Mick Kolassa, founding partner of Medical Marketing Economics (MME; Oxford, MS). “Drug makers that are willing to take on the risk to address the needs in rare diseases must be allowed to recoup their development costs.”

“The power of premium pricing is often based on lack of competition,” says John Doyle, DrPH, MPH, SVP and managing director with consultingfor Quintiles (Hawthorne, NY). “Limiting the eligibility for those financial benefits to the therapies that are first to market continues to spur innovation and drive speed to market,” adds Evelyn Sarnes, Pharm.D., MPH, Senior Director, Global Health Economics and Outcomes Research for Xcenda, the strategic consulting arm of AmerisourceBergen company (Chesterbrook, PA).

“Orphans are incredibly hot right now, and this has led to strong venture capital support for the orphan pathway in recent years,” adds Timothy Coté, MD, MPH, founder of Coté Orphan Consulting (Silver Spring, MD), who is the former Director of FDA’s Office of Orphan Product Development and former Chief Medical Officer for the National Organization for Rare Diseases.

Competition changes markets

When it comes to reimbursement, products launching into a rare disease indication that already has a first approved orphan therapy have a higher bar to overcome to provide value because there is less residual unmet medical need—the strongest factor in drug valuation and pricing, says Doyle of Quintiles. “Later-arriving therapies will need to be properly differentiated from the original drug—in terms of being safer, more efficacious, or more convenient to the patient or provider compared to the original drug.”

Orphan drugs not first-in-class are appearing, so the market is already changing, Doyle notes. “Now that we’re 30 years past the original act, we’re beginning to see the first signs of competition in some rare diseases—and in those cases, the marketplace is beginning to act in a more traditional way,” he says. “Over the last year or two, we’ve seen payers really begin to push back in indications with multiple treatment options and react more elastically to pricing.” He cites Gaucher disease and cystic fibrosis as examples of this.

“The fewer therapeutic options there are for an orphan condition, the less pushback there is about premium pricing,” says Nancy Young, a director at Xcenda. “However, most payers still tend to use prior authorizations in these cases to ensure appropriate utilization.” Xcenda, which provides consulting services on pricing and prior-authorization policies to manufacturers, emphasizes the need to have an appropriate market-access strategy. “It’s important to educate stakeholders about the reasons for imposing prior authorizations and other controls on your drug, since this strategy is often imposed by the payer to help with cost planning and to ensure appropriate use of a high-cost product—not just to bar access to the drug and act as a gatekeeper,” adds Jessica Black, another director at Xcenda.

ODA: The curse of its success

An interesting wrinkle that has emerged as the ODA has completed its third decade is the phenomenon of the “orphan blockbuster.” While orphan drugs are initially pursued to address the high unmet medical need of a specific rare disease, some drug makers often seek to develop parallel indications that would create larger market opportunities down the road. Rituxin (rituximab) from Genentech and Biogen Idec is considered by many to be the poster child of this phenomenon. First approved in 1997 for a specific subset of non-Hodgkin’s lymphoma with all of the benefits of the ODA incentives and sterling treatment from payers, Rituxin is now one of pharma’s biggest blockbuster drugs through label extension.

Today, Rituxin has so many additional approved indications (for the treatment of, among other things, several hematologic cancers and autoimmune diseases, and as an anti-rejection treatment for organ transplants) that its sales now exceed $3 billion/year—and industry analysts expect sales to exceed $7 billion/year by 2015.

“Some complain it was not the initial intent of the ODA to give competitive advantages to drugs that would eventually enjoy blockbuster sales, but it’s not typical for US market dynamics,” says Doyle of Quintiles. “It’s important that biopharma companies be able to secure their rightful ‘return on innovation.’” He adds: “Rituxin has been a game changer across multiple indications, so it wouldn’t be fair to roll back the clock and complain now, otherwise orphan drugs will become the victim of their own success, dampening the ODA’s initial catalyst effect of triggering innovation.”

To date, more than 7,000 rare diseases have been identified, and collectively, these impact an estimated 25—30 million patients worldwide. However, with just 470 approved therapies to date for rare diseases, “we haven’t even scratched the surface yet,” says Kevin Rohrbach Jr., director of business development for Dohmen Life Science Services (DLSS; St. Louis, MO).

A spate of recent mergers and acquisitions aimed at helping established biopharma companies to get a leg up in orphan drug development underscores this trend. Pfizer and GSK turned heads in 2010 when they established dedicated rare disease units. What followed was Sanofi’s acquisition of Genzyme, and Roche’s acquisition of Genentech companies, and in the early part of 2014 alone, AbbVie was in the process of acquiring Shire at press time; Roche has continued its trend by acquiring Seragon Pharmaceuticals, Santaris Pharma, and InterMune; Daiichi Sankyo Co., Ltd. has acquired Ambit Biosciences Corp.; Janssen affiliate Cilag GmbH International has acquired Covagen AG; Baxter International has acquired AesRx, LLC; and Acorda Therapeutics has acquired Civitas Therapeutics. In all cases, the acquired company has a distinct focus on orphan drug development.

These new affiliations bring obvious synergies. For instance, narrowly focused biotech firms tend to be nimble and bring specialized, innovative clinical expertise focused on a given rare disease or technology platform. However, they often lack regulatory experience, and do not have the types of resources and experience that is needed to design global clinical trials and carry out global marketing, distribution and patient support that is so critical when dealing with orphan drugs.

“It has been a repeating story line—the smaller biotech startups succeed because they don’t yet believe that it’s ‘clearly impossible’ to succeed on an imagined pathway. Rather, they’re making it happen,” says Coté. “Big Pharma needs to let go of certain long-held beliefs—namely that ‘it can’t be done for that little money’ or that ‘you can’t secure approval with that kind of data.’” However, Coté also urges caution with these mergers. “There needs to be some way to preserve the spark of innovation when these mergers come about,” he says. “The larger company should be asking itself ‘how do we integrate our new acquisition in a way that does not stifle it and ruin its innovation and autonomy?’”

Reimbursement: A different set of rules

While the prevailing wisdom is that insurers should reflexively balk at the types of prices typically seen for orphan drug therapies, “when it comes to rare diseases, most payers take their premium prices in stride for several reasons,” says Kolassa of MME. “Most plans typically have just a few such patients among their whole patient base and that’s built into their models, and the market understands that opportunity costs for programs with low revenue potentials (in the face of small total patient cohorts) will force the company and its owners in other directions.”

However, many agree that the pendulum is beginning to swing in the opposite direction. “In the past, orphan drugs were not a focus area for payers because the treatments and the patients were few and far between,” says Young of Xcenda. “Today, payers are looking more closely and adjusting the business model in anticipation of a larger total aggregate of orphan drugs and patients with rare diseases.”

“And as more is learned about these diseases and new drugs continue to be developed, the populations will be further divided into subtypes based on causes, genetic defects or other aspects. This will contribute to increasing numbers of orphan drugs on the market,” adds Mary Dorholt, Pharm.D., VP and clinical practice leader, Accredo (Memphis, TN), Express Scripts’ specialty pharmacy.

As a result, many industry experts are expecting tighter scrutiny on formulary designation, reimbursement, and other forms of controls (such as higher copays or co-insurance from the patient, or enacting strict step edit or prior authorization protocols). While some critics charge that these controls are simply meant to cap costs, others argue that they are meant to ensure the most appropriate use of premium price drugs that are only manufactured in small amounts.

For instance, according to the most recent Xcenda PayerPulse study (with 61 payers responding from private payers and Medicare and Medicaid), 1.84% of the total plan population represented by the study involved orphan drugs in 2013, and that percentage is expected to rise to 3.11% by 2015—2016. Similarly, survey respondents reported that in 2013, 7.38% of the total plan costs (including pharmacy, specialty pharmacy and medical costs) came from orphan drugs—a figure they expect to rise to 10.25% by 2015–2016.

“Today, the average co-insurance for many orphan drugs is as high as 30%,” says Doyle of Quintiles. “The only way to reduce that is to get these drugs on a better formulary tier, and this requires building the evidence base early and fortifying it after launch to demonstrate value to the healthcare system.”

When it comes to formulary designation for orphan drugs, “we’re also seeing more payers taking a closer look at the drug pipeline—to gauge whether a given drug will truly be the only drug for this patient population for a long time, and assess whether additional indications for a given drug might be coming down the road,” notes Doyle of Quintiles. “Whether it’s fair or not, payers are getting more sophisticated at trying to use such long-term predictions to decide what would be an appropriate price for the first indication and for a simulated set of future indications. They are using this information to push back on premium prices, because once a company has set a price for a given drug, it pretty much sticks to that price in the marketplace, even if it is able to benefit from expanded markets down the road.”

“Manufacturers must understand that single orphan diseases are losing their ability to avoid management scrutiny simply because they do not impact a larger plan population,” says Young of Xcenda. “They should become familiar with typical management tools that are used by payers and understand the implications for their product and for competitive products.”

Specifically, during reimbursement and formulary-designation negotiations, drug developers must work to develop solid pharmacoeconomic information and data-driven models “that demonstrate the cost to the healthcare system of the patient not taking the drug,” says Wendy White, founder and CEO of Siren Interactive (Chicago, IL), a marketing agency specializing in rare diseases. For instance, data and models should be presented to showcase how the drug will not only impact patient outcomes (to manage symptoms and extend life expectancy), but also help to offset other costly medical interventions, such as hospitalization, emergency room visits, and reliance on other costly medical interventions and drug therapies.

Specialty pharmacies play a key role

Because patients affected by any given rare disease tend to be scattered all over the world, specialized, high-touch effort is critical for the distribution of these costly medications and communication of essential information to ensure proper use and sustain adherence over time. “Given the small size of the patient population and the complexity of these drugs, most rare drugs are handled through exclusive arrangements with a single specialty pharmacy, and this helps them to really become part of that medical community,” says Kolassa of MME.

Such entities typically provide counseling before initial shipment, refill- and testing-reminder calls, provision of clinical support from a dedicated nursing staff, and reimbursement-advocacy support to explore all possible avenues for insurance reimbursement, patient assistance and other forms of financial support.

When an orphan drug is handled exclusively by one specialty pharmacy, that entity ends up handling the largest patient population for a given rare disorder and centralizing all related resources, Dorholt of Accredo notes that it can leverage its specialization to ensure:

  • Standardized communication, counseling, education and care for the patient
  • Specialized patient support by teams that have an in-depth understanding of the drugs, conditions and the individual patient
  • Support for physicians who may not be familiar with the drugs

Similarly, Dorholt of Accredo says “Many of our clinicians are dedicated to a single disease state—giving them in-depth understanding and breadth of experience. In a generalized care environment, many pharmacists rarely if ever see patients with some of these disorders, so they simply cannot provide the same level of care.”

“The beauty of such an exclusive arrangement with a designated specialty pharmacy is that it can also help to strip down the complexity associated with distribution and management of these drugs in the marketplace, which helps to reduce healthcare costs by cutting out some of the traditional ‘middle men’ in the supply chain,” says Rohrbach of Dohmen Life Science Services. “And a tighter supply chain lets you gather better data and measure and quantify the outcomes more efficiently.”

Similarly, “because of the rare nature of the diseases, the medications are likely not regularly stored near patients, so this requires additional coordination with the healthcare providers and suppliers to ensure that these high-value medications are where they need to be when the patient needs them,” says Black of Xcenda.

Patient-advocacy groups and patient registries

In recent years, highly organized and motivated patient groups have evolved for many rare diseases, and they traditionally function as a critical clearinghouse to connect patients and caregivers to one another and to key resources related to diagnosis, treatment options, side effects, reimbursement and other forms of financial assistance. Today, many such patient advocacy groups have expanded their reach and are taking a more active role at the table. “Patients and families are often in a desperate state and their needs are not being met by a traditional model—this is particularly true for parents trying to save their child’s life—so patients and their families are stepping in to do whatever they can,” says White of Siren Interactive.

“We’ve seen a shifting paradigm, whereby some patient-advocacy groups are now even working directly with FDA, and helping to fund industry and academia for critically needed research,” White adds. “Rare disease patients tend to be held highly motivated, highly social and hyper-connected so they are able to create effective, multi-stakeholder partnerships that can speed the development and funding of treatments, improve clinical trial design, and expand access to care and reimbursement, and can help to uncover new indications for industry.”

Meanwhile, a growing number of rare diseases are being studied through patient registries, which are typically initiated by a sponsor, such as a drug developer, medical association or patient foundations, and often designed, implemented and maintained by a third-party partner. These registries aim to enroll (through an opt-in process involving signed informed-consent forms) each and every patient who is afflicted with the disorder in question, and then gather very specific information related to the disease, treatment options, patient-reported outcomes, life expectancy and more.

“Sometimes patient registries are initiated around the start of a new drug-development effort; other times they already exist and can help with clinical trial enrollment,” explains Priscilla Velentgas, MS., PhD., senior director of epidemiology at Quintiles Real World Late Phase Research (Durham, NC). When used for data analytics, the data are typically de-identified, and the findings analyzed and reported at the group level. In some cases, patient registries can be used to gauge the effectiveness of new treatments as compared to patients not taking them. She notes that the Lyposomal Storage Disorders disease registries maintained by Genzyme and Shire have had success doing this. In other cases, a patient registry can be used to support analyses of the effectiveness of different therapy options. This is currently being done with the US Cystic Fibrosis Foundation’s patient registry.

“When multiple companies are making orphan drugs for a given condition, you can have competing interests in terms of establishing parallel patient registries,” says Velentgas. She notes that “while it would often be ideal to have multi-sponsor registries share the expenses and findings, that would require competing companies to be cooperative in a very competitive space. Since the drug company sponsor of these registries typically wants to use the rich cache of patient- and drug-specific information for their own competitive advantage, such cooperation is not always feasible.”

Flexible clinical trial design

“Recruiting patients for a trial for a disease with a genetic prevalence estimated to be less than 10,000 people is much different than for a disease of one million currently diagnosed patients. Everything about these diseases is different from more typical markets—except the cost of developing new treatments,” says Kolassa of MME.

Specifically, recruiting eligible patients for orphan drug clinical trials is “like finding a needle in a haystack” not just because patients may be scattered all over the world, and because so many rare diseases are not properly recognized or diagnosed. This underscores the importance of patient-advocacy groups and patient registries that can help connect the dots.

And clinical trials for orphan drugs face several challenges beyond recruitment, adds Rohrbach of Dohmen Life Science Services, including:

  • Inventory management—since these rare drugs are so costly and are typically manufactured in small quantities; this underscores the importance of proper repackaging them to patient-specific dosing
  • Transportation to clinical sites—compliance with protocols for follow-up and assessments is important, and patients often have to travel to the limited number of sites, which can be quite a burden
  • Adherence to the study—non-safety-related issues that can cause patients to dropout of the study must be monitored and managed

“The bottom line is that we need to think of creative but compliant ways to make participation in clinical trials more convenient, and can we bring elements of the study to the patient rather than requiring them to come to the site?” says Rohrbach.

When it comes to working with regulators during the orphan-drug-approval process, “seeking flexibility from both FDA and EMA is essential, in terms of evaluating surrogate markers and non-traditional or novel endpoints for novel therapies, rare diseases, especially in cases where clinical studies for prolonged number of years may not be clinically or financially viable and where patient populations are so small that recruitment, enrollment and retention becomes a viable challenge,” says Sarnes of Xcenda. “The process should include interim measures that both the FDA and manufacturers agree on.”

“Given the unmet medical needs, there is no cookbook approach when it comes to orphan drug,” says Coté. “The guidelines are not set in stone in terms of the number of clinical trials, the size of the clinical trials or the design of clinical trials.”

Because clinical trial design around orphan drugs is so challenging, Doyle of Quintiles notes that there’s growing interest in using a “progressive authorization” approach, which could allow for earlier approval of drugs during the development stages, with the agreement that the drugmaker will continue to validate the real-world effectiveness and safety of the product as use in the marketplace grows. “You can see the latest accelerated approval in malignant melanoma, designed at ‘Breakthrough Therapy’ based on early-stage clinical trial data,” he says.

FDA launched its Breakthrough Therapy program in mid-2012, establishing new, expedited workflow for those investigational drugs whose preliminary clinical evidence shows substantial improvement on at least one clinically significant endpoint. “A major benefit of the Breakthrough Therapy program is that it provides for more robust interactions with FDA (including guaranteed meetings with FDA senior managers) and the ability for drug developers to participate in NDA rolling review (which allows them to submit modules when ready and FDA will begin review),” explains Dagnon of Dohmen Life Science Services.

“Patients with rare diseases want rapid access to drugs that are shown to be safe and effective. But speed to market is important because all patients facing a disease are impatient if a new treatment is being developed that might help,” says Peter Saltonsall, president and CEO of the National Organization for Rare Disorders (NORD; Danbury, CT). “An appropriate balance must be drawn—we want drugs to be adequately tested, which we know takes time, but we want the process to move as quickly as possible. We support innovative ways to study drugs, whether through surrogate markers or shorter clinical trials as long as the research is not compromised in the interests of speed.”

“Coming to FDA with your ideas for flexibility on pathways to market is key,” adds Coté. “You will find them flexible, as they are interested in bringing treatment options for rare diseases to market.”

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