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Orphan drug development may take a back seat to profit and loss concerns.
Orphan drug development may take a back seat to profit and loss concerns.
The most delicate aspect of European Union regulation of orphan drugs was pushed center-stage right at the end of 2004: how much money companies are entitled to for these products.
It came as no surprise. For all the pious talk of meeting unmet needs for neglected sufferers of minority illnesses, the tough reality is that money is the principal motivator for filling in the gaps in the therapeutic arsenal, just as it is for the development of more mainstream treatments. This is no negative reflection on the drug industry. Most new medicines come from private enterprise, and private enterprise has to be profitable, or it collapses-taking with it the chances of new medicines.
The awareness of this central challenge was at the heart of the European Union initiative earlier this year to commission a study into the commercial aspects of orphan drug development-and particularly whether prices are reasonable. The EU had already in 2000 put in place a procedure to stimulate orphan drug development, because it sensed a duty to assist European patients suffering illness without treatments. Reluctantly, it recognized that if the money isn't right, new orphan drugs won't appear.
The reluctance sprang from a competing duty the EU sensed: to keep down the costs of health care, including the costs of orphan drugs (the orphans currently on the EU market cost from E6,000 to E300,000 per treatment per year). So it set up the study in the hope that it would help find the happy medium between reward for health care innovation and thrift for health care funding-by, for instance, checking on profitability levels after an orphan has been five years on the market, or limiting the market exclusivity conferred on it. As the study points out, member states have little negotiating leverage: these medicines have no therapeutic alternative and are often still investigational new drugs.
The European Union's official hopes, of course, conflict directly with the instincts of the pharmaceutical industry producing (or thinking of producing) orphan drugs. Drug firms in Europe gave a broad welcome to the 2000 mechanism for promoting orphan development. They are reluctant to admit, however, that so soon after the scheme was up and running, the EU should be seeking to find out how it can get more bang for fewer bucks, or more efficacy for fewer Euros. The drug industry's experience of pricing control mechanisms in Europe is long and bitter, and there is suspicion over the discussions now starting over how a new set of controls might be introduced.
The "Study on Orphan Drugs,"1 which appeared in late November from the health care consultants Alcimed, says the situation is confused: the conditions for marketing orphan drugs with European status in the EU 25 "are poorly understood and are a source of concern" for everyone in the market-member states, patient associations, and industry. "As yet," it says, "there is no consensus among the parties on an acceptable and feasible tool for measuring the profitability of an orphan drug."
It points to wide differences in prices paid by health care systems across the EU-Austria ranks highest in an assessment of annual cost per patient, followed by Germany and Denmark, with Finland, France, and Ireland representing the median, and Spain, Portugal, the United Kingdom, and Sweden at the bottom end of the scale.
In France (where conventional drug prices are notoriously low), a system allowing authorizations for temporary use permits companies marketing designated orphans to set their own price, with a guarantee of 100% reimbursement-leading, unsurprisingly, to high prices. By contrast, in the United Kingdom (where drug prices are normally comparatively high), the authorities exert strong pressure to keep orphan drug prices low. Meanwhile, Spain and Portugal retain their classical position of European countries with very low medicine prices.
The estimated potential annual turnover for the products covered by the study varies from E100 million to E1.5 billion. It demonstrates that some orphans may become small-time blockbusters, but are still well below the E7 billion turnover of the world's best-selling conventional medicine in 2002.
The industry may derive some comfort from the report. Europe's complex national pricing and reimbursement systems are largely to blame for wide price differences across countries, says the study. Typically, the ex-factory price of an orphan drug does not vary much from country to country-but once the various mark-ups and on-costs are taken into account, the price in the most expensive countries can be 70 percent more than in the cheapest countries.
And while it concludes that the average cost per patient of an orphan is higher than that of other medicines considered expensive in Europe, it points out that this cost is no higher than that of treatments with the same therapeutic target. The total cost of orphans currently accounts for only a small part of total medicinal product budgets.
Right from the outset, it dares to ask the key question: is this the right time to pose the question of profitability of orphan drugs? Given the relatively little experience with the scheme, an attempt to claw back some of its incentives may be premature, the study warns.
And it suggests that penalizing successful orphans by withdrawing or reducing the key incentive of market exclusivity "would risk substantially reducing the attractiveness of the regulation for the pharmaceutical industry." It could even have a spill-over effect on other orphan drug developers, discouraging the initiatives of new potential sponsors.
Calculating "profitability" is fraught with difficulties too, the study concludes. How should it be conducted, it asks, for medicines such as Glivec that currently have two orphan indications? Or for products such as Onsenal, which has been granted an orphan indication but is already widely used for non-orphan indications? If the measure of profitability must involve only an orphan indication, for Glivec this means that profitability should initially be evaluated for chronic myeloid leukemia five years after the marketing authorization, granted on November 7, 2001, followed by another evaluation 6 months later for gastrointestinal stromal tumors, for which the marketing authorization was granted on May 24, 2002.
The study also casts doubt on the validity of the reasoning behind the proposed claw-backs for success. A member state might conceivably seek to withdraw marketing exclusivity in order to control health expenditures, it speculates. It goes on to argue that "the correlation between withdrawing market exclusivity and the price decrease of orphan drugs has not been established." If the aim is to seek price reductions by allowing direct competition, this is hardly likely to be successful in "a sector in which by definition it is not possible at the current time"-since the very nature of orphans is that they are for diseases for which treatments do not exist.
Withdrawing exclusivity at five years would not help competition, the study goes on. Most orphans are protected by patents or the data protection system, so copies could not be marketed, and there is little incentive for development of a direct competitor with no prospect of market exclusivity as a reward.
Overall, the study goes a long way beyond its brief. Its key conclusion is that discussions of definitions of profitability of an orphan product are not only premature, but are also distracting attention from a more important challenge: providing patients with better access to orphan drugs via improvements to national reimbursement systems.
The EU scheme is still young, and all its aspects have not yet been implemented-in particular national incentives. "We have very little experience with the actual marketing of orphan drugs," it says, and those on the market have not yet had an opportunity to realize their potential. But, it says, it is accessibility to orphan drugs in the EU that "still requires considerable work and is undoubtedly the current priority."
1. "Study on Orphan Drugs," Aclimed, 2004, http://pharmacos.eudra.org/F2/orphanmp/doc/pricestudy/Final%20final%20report%20part%201%20web.pdf.