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Until the Orphan Drug Act of 1983, the pharmaceutical industry was rarely interested in rare diseases. Defined as affecting fewer than 200,000 patients, rare diseases are estimated to number approximately 6,000 in the United States. Enacted to stimulate development of therapies for rare diseases, The Orphan Drug Act provides expedited regulatory approval and patent exclusivity for seven years for development of orphan drugs. Since the Act’s inception, more than 350 drugs and biologic products for rare diseases have been developed and marketed.1 From 2006–2008, 16 orphan products were among the 200 bestselling medications in the United States and had annual sales ranging from $200 million to nearly $2 billion each.2
The successes have not gone unnoticed. While initial development of orphan drugs was driven by small biotechnology companies and funding from patient advocacy groups, large pharmaceutical companies and venture capitalists have entered the space. Several aspects of orphan drug development make it attractive to potential investors: focused indications, open market space, premium pricing, support from patient advocacy groups, and lower development costs. These features are underscored by forecasts of the global market potential for orphan drugs, which is estimated to reach $112 billion by 2014.3
From Blockbusters to Niche Busters
“Traditionally, treatments for rare diseases were sought by biotech companies, while the large pharmaceutical companies focused development on products with blockbuster potential,” notes Christy Shaffer, PhD, venture partner and managing director of Hatteras Discovery. “Many of the research and development pipelines are not as robust as they were in the past, and the blockbusters of years ago are going to be harder to find. Big pharmaceutical companies are now pursuing niche busters—specialty products that may or may not be for rare diseases.”
Pfizer, GlaxoSmithKline, Novartis, and Eli Lilly have all set up stand-alone units dedicated to developing and commercializing therapies for rare diseases.4 In explaining GlaxoSmithKline’s entry into the orphan drug space, Patrick Vallance, senior vice president of drug discovery, stated in a press release,5 “The risk associated with product discovery and development in rare diseases is generally lower than other disease areas as disease definitions are very clear and clinical trials tend to be small with robust endpoints. In most cases the molecular target is known, making it easier for specialized physicians to diagnose patients.”
Attractive Features of Orphan Drug Development
Captive patient populations and focused indications. Many rare diseases are chronic, progressive, disabling, and life threatening. Examples include Huntington's disease, amyotrophic lateral sclerosis (Lou Gehrig's disease), Tourette syndrome, and muscular dystrophy. Among rare diseases, approximately 80% have a genetic origin, and half affect children.6
Thus, rare disease patient populations tend to have well-defined clinical symptoms and be highly motivated to seek available treatment. Dr. Shaffer asserts that for pediatric populations, parents are often very interested in having their children participate in clinical trials.
Because orphan drugs are marketed to small patient populations, an army of sales representatives is not needed to sell them. Although hundreds or thousands of sales representatives are needed to sell a traditional blockbuster drug, an orphan drug indicated for 30,000 patients would need a sales force of only 25 to 50 people.
Open market space. Although the Orphan Drug Act has prompted development of therapies for many rare diseases, thousands of rare diseases are still in need of novel treatments.7 Novel orphan drugs have a high potential for establishing early market share. Dr. Shaffer notes, “Many orphan diseases do not have cures yet and don’t have many treatment options, so the space is somewhat less crowded than in hypertension, for example, where there are a myriad of products being used.”
Lower development costs and faster time to market. Preston Campbell III, MD, executive vice president for medical affairs at the Cystic Fibrosis Foundation, asserts that with orphan drug development, “Costs are significantly lower because trials are smaller.”
In early 2012, The U.S. Food and Drug Administration approved Kalydeco for a subset of patients with cystic fibrosis. Having the advantage of expedited regulatory approval, Kalydeco was approved in only three months on the basis of two clinical studies involving 213 patients.8 In contrast, for traditional therapies, late-stage clinical trials often involve thousands of patients treated over months or years. Having lower drug development costs and a relatively quick timeframe for regulatory approval makes it easier to recoup capital investment in the marketplace.
Premium pricing. Treatments for rare diseases have some of the highest price points in the world and can thus become very lucrative franchises. Soliris, Alexion Pharmaceutical's monoclonal antibody for treating paroxysymal nocturnal hemoglobinuria, was the world’s single most expensive drug in 2010, with an annual price of $409,500. (Table 1).9
aHerper M. The World’s Most Expensive Drugs. Forbes.com. Available at: http://www.forbes.com/2010/02/19/expensive-drugs-cost-business-healthcare-rare-diseases.html. Accessed April 30, 2012.
bGenzyme. Gaucher Disease. Available at: http://www.cerezyme.com/patients/gaucher_disease.aspx. Accessed May 1, 2012.
cDaily Dose. Vertex’s Kalydeco drug approved for rare form of cystic fibrosis. Available at: http://www.boston.com/Boston/dailydose/2012/01/vertex-kalydeco-drug-approved-for-rare-form-cystic-fribrosis/COGyEmOU6IYS1vdipRaIRJ/index.html. Accessed April 30, 2012.
dGenzyme. The Cost of Enzyme Replacement Therapy. Available at: http://www.genzyme.com/commitment/patients/costof_treatment.asp. Accessed April 30, 2012.
eBiomarin. About Maroteaux-Lamy Syndrome. Available at: http://www.naglazyme.com/en/about-MPS-VI/about-MPS-VI.aspx. Accessed April 30, 2012.
Involvement of thought leaders. Often the experts treating a given rare disease form a tightly knit community that contains a wealth of expertise. That expertise is a valuable resource in initiating and maintaining a clinical development program. In addition, because the providing community is small, the investigators involved in clinical trials will also form the client base for marketed products.
Key opinion leaders and members of their study teams can provide advice on protocol development, such as whether study procedures are within reason and doable. They can also help define clinical endpoints and evaluate their relevance to the disease state.
Patient advocacy groups and venture philanthropy. Many rare diseases have patient advocacy groups, and these groups can have an instrumental role in developing orphan drugs. Because rare diseases affect small numbers of patients, finding patients to enroll in studies can be difficult. However, advocacy groups can use established lines of communication to generate excitement about a novel therapy and educate potential patients about the importance of participating in clinical research. In addition, advocacy groups often have patient registries that can be used as a resource in understanding a disease population, predetermining clinical trial endpoints, and powering studies.
For advocacy groups to generate excitement about a potential therapy, they will need to be informed of the overall research plan, including the therapy’s mode of action, and of potential benefits and adverse effects. Regulatory agencies, such as The FDA’s Office of Orphan Products Development, work with sponsors to set guidelines for communicating with advocacy groups so that sufficient and appropriate information is conveyed.
Some patient advocacy groups provide substantial capital investment in both preclinical and clinical research programs studying new technologies and therapeutic strategies for rare diseases. Disease foundations tend to have strategic outlooks and particular points of consideration in evaluating programs to invest in (Table 2).
Perhaps the biggest success story of venture philanthropy has been the Cystic Fibrosis Foundation’s investment in the drug Kalydeco. The Cystic Fibrosis Foundation provided Vertex Pharmaceuticals with $75 million in funding to develop the Kalydeco,8 which is the first drug to address the underlying cause of cystic fibrosis and not just resulting symptoms of the disease.
The drug Ataluren is being developed by PTC Therapeutics for patients with particular genetic mutations leading to Duchenne/Becker muscular dystrophy or cystic fibrosis. Ataluren, which has progressed to phase II clinical studies, has been supported by grants from multiple foundations: the Cystic Fibrosis Foundation, Parent Project Muscular Dystrophy, Muscular Dystrophy Association, the FDA’s Office of Orphan Products Development, the National Center for Research Resources, and the National Heart, Lung, and Blood Institute.10
In Fiscal Year 2011, the U.S. FDA approved 35 innovative new drugs, and 10 were for rare diseases.11 Even with the recent swell in orphan drug approvals, the market potential is wide open, considering thousands of rare diseases have no or inadequate treatment. Thus, the interest in orphan drug development is likely to continue, as Shaffer explains, “People get pretty excited about the orphan drug market because the approach is streamlined, the patient populations want to participate in clinical trials,” and there’s funding potential from government organizations and diseases foundations “who are trying to get to the finish line as quickly as possible in a capital efficient way.”
1. U.S. Food and Drug Administration. Developing Products for Rare Diseases & Conditions. Available at: http://www.fda.gov/forindustry/developingproductsforrarediseasesconditions/default.htm. Accessed April 30, 2012.
2. Dolgin E. Big pharma moves from “blockbusters” to “niche busters.” Nature Medicine. 2010. Volume 16, No. 837. Available at: http://www.nature.com/nm/journal/v16/n8/full/nm0810-837a.html. Accessed April 30, 2012.
3. Sharma A, Jacob A, Tandon M, Kumar D. Orphan drug: Development trends and strategies. JPharm Bioallied Sci. 2012;2(4):290-299.
4. Partnering News. Are orphan indications the only viable model for drug development? Available at: http://ebdgroup.com/partneringnews/2012/03/are-orphan-indications-the-only-viable-model-for-drug-development/. Accessed April 26, 2012.
5. GlaxoSmithKline. GSK launches new specialist unit to research and develop medicines for rare diseases. Issued: Thursday, February 4, 2010. Available at: http://www.gsk.com/media/pressreleases/2010/2010_pressrelease_10014.htm. Accessed July 6, 2012.
6. NIH Office of Rare Diseases Research. Rare Disease Day. Available at: http://rarediseases.info.nih.gov/RareDiseaseDay.aspx. Accessed April 30, 2012.
7. Neergaard L. Rare Diseases: A Huge Push for More Drugs. Available at: http://www.huffingtonpost.com/2011/04/26/rare-diseases_n_853865.html. Accessed September 14, 2012.
8. Daily Dose. Vertex’s Kalydeco drug approved for rare form of cystic fibrosis. Available at: http://www.boston.com/Boston/dailydose/2012/01/vertex-kalydeco-drug-approved-for-rare-form-cystic-fribrosis/COGyEmOU6IYS1vdipRaIRJ/index.html. Accessed April 30, 2012.
9. Herper M. The World’s Most Expensive Drugs. Forbes.com. Available at: http://www.forbes.com/2010/02/19/expensive-drugs-cost-business-healthcare-rare-diseases.html. Accessed April 30, 2012.
10. PTC Therapeutics. Ataluren for Genetic Disorders. Available at: http://www.ptcbio.com/ataluren/. Accessed July 6, 2012.
11. Kephart CL. Orphan drugs: Small markets, big opportunity. Specialty Pharmacy Times. Available at: http://specialty.pharmacytimes.com/publications/specialty-pharmacy-times/2012/February-2012/Orphan-Drugs-Small-Markets-Big-Opportunity. Accessed July 9, 2012.