The development of orphan drugs was financially incentivised through US law via the Orphan Drug Act of 1983. Its success led to it being adopted in other key markets, most notably in Japan (1993) and in the EU (2000).
Hear Frank J. Sasinowski, Abliva’s US regulatory consultant, talk about the Orphan Drug Act, and what it means to the development of drugs for rare diseases.
Interview from Abliva’s Mitochondria Day, 16 Sep, 2020.
The National Organization of Rare Disorders (NORD), which was instrumental in establishing the US Act, currently estimates 30 million Americans suffer from 7,000 rare diseases, according to EvaluatePharma. According to Global Genes, approximately 400 million people globally are affected by rare diseases. The main areas of interest in the industry are cancer, infections and neurology, making up about 60% of all R&D resources among orphan drugs.
ODD is a way of encouraging research and development of pharmaceutical products for rare diseases. Following successful clinical testing of the pharmaceutical product and the authorities’ review of an application for approval, authorities will review whether the grounds for orphan drug status have been fulfilled. If a pharmaceutical product receives orphan drug status they will have market exclusivity for seven and ten years in the US and the EU respectively.
Prior to the 1983 Act, merely 38 orphan drugs were approved. In 2016 alone, 16 orphan drugs were approved in the US (out of a total of 22), and it is estimated that more than 4,500 pharmaceuticals were under development during that year. Over the years, about 600 orphan drugs and biological products have been developed and marketed in the US alone (fda.gov).
Despite the rapid growth in recent years, the combined area of rare diseases remains underserved; about 95% of all rare diseases still lack approved pharmaceuticals, according to Global Genes..
Developing a pharmaceutical product with orphan drug designation presents a series of advantages, including the possibility of free of charge advice from e.g. the US authorities Food and Drug Administration (FDA) or the European Medicines Agency (EMA) on the development program and lower registration fees when applying for approval.
The average cost of taking an orphan drug through a Phase III program is approximately half the cost of developing a pharmaceutical product that does not target a rare disease. In addition, regulatory advice and support throughout the development process is higher and the median time for filing to approval with the FDA is also, on average, three months shorter for orphan drugs compared to other pharmaceutical products.
Orphan disease populations (as required for such designation) have slightly different definitions depending on geography:
- US: Prevalence <200,000 patients (<6 in 10,000 based on US population of 314 million)
- EU: Prevalence <250,000 patients, (<5 in 10,000 based on EU population of 507 million)
- Japan: Prevalence <50,000 patients (<4 in 10,000 based on Japan population of 128 million)
Overview of the orphan drug market
The orphan drug market has shown significant growth over the last couple of years, and in 2016, orphan drug sales increased by 12.2 percent year-on-year and reached USD 114 billion, according to Evaluate Pharma. In comparison, overall prescription drug sales (excluding generics) grew by 2.8 percent during the same period, and amounted in 2016 to a total of USD 692 billion.
Sales of orphan drug are expected to almost double between 2016 and 2022 to USD 209 billion by 2022 (CAGR 2017 to 2022: +11.1%). Excluding generics, orphan drugs are set to be 21.4% of worldwide prescription sales by 2022. This rapid growth and current willingness of payers to accept the huge price tags are two main reasons why the sector has become more and more attractive to some of the industry’s biggest players. In fact, seven of the top 10 companies by orphan drug sales are global industry players.
The growth of the worldwide orphan drug market also indicates that governments’ initiatives have been successful. It also reflects the fact that advances within research and development have strengthened pharmaceutical companies’ ability to develop treatments for rare diseases.
Differentiating factors for orphan drugs
There are several forces driving the growing sales of orphan drugs. Overall development cost is typically lower than with non-orphan indications due to the smaller size of clinical studies. Given the high unmet need in rare diseases, the often-limited treatment options, and the limited impact on the overall pharmacoeconomic environment, pricing is relatively high.
This is reflected by a more than four-fold annual cost per patient for orphan drugs compared to non-orphan drugs. Average pricing for orphan drugs in the US is currently established at USD 140,443 per patient per year, compared with USD 27,756 for a non-orphan, according to Evaluate Pharma.
Also, due to the relatively small number of patients affected by a rare disease, these patients are often cared for by a relatively small number of specialist physicians at a relatively small number of hospitals/sites per country rendering it possible to effectively target these physicians with a relatively small sales and marketing organization.
Orphan drugs also benefit from financial incentives such as market exclusivity, which is seven and ten years from approval in the US and EU, respectively. Moreover, orphan drugs also appear to have a higher likelihood of approval (“LOA”), i.e. probability of the drug reaching the market, than the average drug. According to Monocl Strategy Services, more than 25% of all orphan drugs go all the way from clinical Phase I studies to market launch compared to less than 10% success rate for other drug projects.