March 8, 2011—A record 460 orphan drugs are in late-stage development in the United States, either in clinical trials or awaiting Food and Drug Administration (FDA) review, according to a new report by Pharmaceutical Research and Manufacturers of America (PhRMA).
That’s a roughly 50 percent increase above the number under development in 2007 and about three and a half times the number in 1989, the first year that PhRMA began reporting on the drugs, which are for diseases affecting fewer than 200,000 people. Overall, FDA has designated 2,340 medicines as orphan drugs, of which 363 have been approved for use.
Of those now in the pipeline, PhRMA said, 107 are for cancer, 67 for genetic disorders, 37 for neurological disorders, and 31 for infectious diseases.
Importance to Industry
With many of their blockbuster drugs due to lose their patent protection and few new blockbusters in the works, manufacturers are turning to orphan drugs as a vital source of future profits. To protect those revenues, they negotiated last-minute changes to health care reform that barred children’s, rural and cancer hospitals from obtaining 340B discounts on the drugs. Congress lifted the ban for children’s hospitals in December but it remains in place for rural and cancer hospitals.
Regulations fleshing out the scope of the ban are awaiting final approval from the White House Office of Management and Budget. The rules are expected to be published by late spring.
Profits Drive Innovation
During the recent 340B Coalition winter meeting in San Diego, Donna Yesner, a partner with the McKenna Long and Aldridge law firm who represents several drug manufacturers, defended the industry’s decision to seek the prohibition.
It costs manufacturers millions of dollars to develop orphan drugs, Yesner observed, and those expenses can only be recouped through sales. “We are a capitalist society, and what drives innovation is profit,” she said.
The prohibition on orphan drug discounts was a compromise, Yesner continued, in recognition of the “big hit” manufacturers took by agreeing to 340B’s expansion to rural and cancer hospitals as well as to deeper 340B discounts due to an increase in the Medicaid rebate percentage.
Some drug companies stopped providing the discounts without waiting for regulations to be published, she explained, because they feared setting a lower best price on the medicines. Companies also fear that if they voluntarily provide a discount on a drug that is used off label, they could be accused of promoting the drug’s unapproved use.
Limiting the exclusion strictly to the indication for which the drug was granted its orphan status, as some provider groups are advocating, would be impossible to implement and would also lack a legal basis, she added.
“You cannot fund innovation without revenue and profit,” said Yesner. “It’s not that industry is rapacious or greedy. But if you’re going to rely on the private sector [to develop new drugs], that is how it’s done.”
“High-Dollar Items”
Speaking on the same panel as Yesner, Gary Merchant, the administrative director of a group of rural hospitals in New Hampshire and Vermont, said that due to the exclusion, nearly 70 percent of the drug spend of critical access hospitals in the network is off limits to 340B discounts.
“These drugs are high-dollar items for us and they’re used for a lot of different indications,” said Merchant of the New England Pharmacy Collaborative. In the absence of federal regulations and with confusion in the marketplace over the ban’s extent, he said some drug manufacturers and wholesalers have been blocking 340B discounts on all orphan drug sales to hospitals covered by the ban, regardless of how the drugs are used.
“It’s been a huge hit for us,” he said.
“We Really Are at Risk”
The exclusion on orphan drug discounts “has ruined our ability to benefit from” in 340B, added Deb Bainbridge, the chief executive officer of Via Christi Hospital in Pittsburg, Kan., a 140-bed sole community hospital that houses southeastern Kansas’ only comprehensive cancer center. “Because of it, the value of the program to us has eroded tremendously.”
Addressing Yesner during the session’s question and answer segment, Bainbridge said, “I want the pharmaceutical industry to be able to continue to invest in creating cures that make people well.”
“But for us,” she continued, “it’s not about profit, it’s about taking care of people. We desperately need access to 340B pricing to be able to continue our mission. We really are at risk.”