Orphan Drugs: What Can Their Role Be in the Strategy of Pharma Companies and Payers?

PRINCETON, N.J. - Nov. 10, 2014 - PRLog -- Having worked with a great number of companies developing orphan drugs over the past 20 years, Alcimed – an Innovation and New Business consulting firm – gives an overview of the orphan drug market and addresses the sustainability of its model in the future

Orphan drugs[1] currently available on the market cover less than 5% of the 6,000 known rare diseases, yet their sales are consistently growing and now represent 13% of the prescription drug market worldwide. While most Big Pharma companies have seized opportunities in this market, payers around the world have been more and more reluctant to grant the industry the high prices that characterized this market for many years.

A growing market expected to reach $127 billion in 2017 at a 7% annual growth rate

In Europe and the US, more than 55 million people suffer from a rare disease.[2] In 1983 and 1999 the US and EU respectively passed regulations defining and fostering the development of “orphan drugs” (i.e. drugs that address fewer than 200,000 patients in the US or with a prevalence lower than 1/2,000 in the EU). Incentives range from regulatory and scientific assistance to tax benefits and market exclusivity (7 years in the US, 10 in the EU). In 2013, 33% of FDA-approved drugs were orphan drugs.[3] A similar trend was observed in Europe where more than 1,000 drugs were granted orphan status since the regulation was adopted, 74 of which have reached the market, knowing that 15 of them did so in the past 2 years. In 2012, sales of orphan drugs accounted for $83 billion, i.e. approximately 13% of the global market for prescription drugs. The annual growth rate between 2012 and 2018 is projected to be 7.4% (as opposed to 13.6% between 2004 and 2011).[4]

A market that caught the eyes of Big Pharma

Historically, most orphan drugs were developed and launched by biotechs (Genzyme, Shire, Actelion…). Nowadays, Big Pharma is becoming more interested in this promising market. Numerous examples illustrate this trend. For instance, Novartis is the market leader both in terms of number of drugs on the market (7) and sales ($10.9 billion in 2012). Sanofi acquired a strategic position when it purchased Genzyme in 2011 and strengthened this position with its deal with Alnylam in January 2014. Roche also became a player in 2013 when it bought the rights to a drug targeting acromegaly.[5] Strategy-wise, Novartis has adopted a translational research strategy that aims at developing a proof of concept in a small number of patients suffering from a rare disease, which molecular mechanism is known and then widens the development of the drug to indication that have the same mechanism.

Pricing is at the heart of the controversy

In the past, orphan drugs received high prices for two main reasons. First, they have a high therapeutic value; second their development costs can be prohibitive with respect to the small target population. Until recently, payers were relatively inclined to accept those high prices. This is no longer the case. Payers now often consider orphan drugs as specialty drugs and only the so-called “ultra-orphan drugs” (five times as rare) obtained very high prices. Indeed, in most European countries orphan drugs have to undergo health-economic analyses and companies often have to reduce their prices. This is what happened to Vertex’s Kalydeco[6], a drug that targets a mutation specific to cystic fibrosis. Novartis/Incyte’s Jakavi for myelofibrosis and InterMune’s Esbriet for idiopathic pulmonary fibrosis have also been restricted in terms of access, pricing and/or target population, because they were considered too expensive by payers.

Are orphan drugs victim of their own success?

As the orphan drug market has been strongly developed in recent years, an important distinction has to be made when discussing orphan drugs and their cost on society. The case of the first drug addressing a rare, fairly unknown condition for which there were few or no treatment options is very different from the arrival on the market of a drug that has the orphan status in an indication already covered with “orphan drugs” . The latter case is indeed closer to a specialty competitive market situation. “We need to think about the level of price that our society is willing to accept for these medicinal products. And we need to keep this market attractive so that companies keep on trying to find a cure to the 95% of rare disease that still have limited therapeutic options” says Nadège Penhaleux, Project Director at Alcimed.

A first step towards harmonization had been taken in 2007 when the FDA and the EMA agreed to utilize a common application process for both agencies, while maintaining separate approval processes. Further harmonization is being carried out at the European level regarding the requirements during clinical studies. On top of avoiding discrepancies from one country to another, consistent regulations and access frameworks could make pricing and reimbursement processes smoother for orphan drug sponsors and ultimately sustain market attractiveness with a relatively small effort.

About Alcimed

Alcimed (www.alcimed.com) is an Innovation and New Business consulting firm, specializing in innovative sectors: life sciences (food, biotech, healthcare), energy, aeronautics, ICT, chemicals, cosmetics, materials, transportation, space and defense. Thanks to a team of 180 highly skilled people, Alcimed’s mission is to help our clients in the private and public sectors explore and develop uncharted territories. This mission covers four types of uncharted territories: New Technologies, Market Innovation, High growth geographies and Strategic Foresight. The company, headquartered in Paris, has seven offices in Europe, one in the United States and one in Asia.

[1] Source: Orphanet 2014 - http://www.orpha.net/consor/cgi-bin/Education_AboutOrphan...
[2] http://www.clinuvel.com/en/pharmaceutical-development/orp...
[3] Source: FDA, Novel New Drugs 2013 Summary, Jan.  Summary, Jan. 2014
[4] Source: EvaluatePharma 2012
[5] Acromegaly is a syndrome that results in disfigurement and abnormal growth of feet and hands when the anterior pituitary gland produces excess growth hormone
[6] Kalydeco is a prescription medicine used for the treatment of cystic fibrosis in patients age 6 years and older who have one of the following mutations: G551D, G1244E, G1349D, G178R, G551S, S1251N, S1255P, S549N, or S549R.