Will the Orphan Drugs Bubble Pop?

In Market Access, Uncategorized by Cameron

Last week we reported on how the orphan drugs industry was avoiding the sort of R&D costs associated with taking non-orphan drugs to market thanks to looser clinical trial requirements from the FDA. For big pharma, the cost of taking a non-orphan drug to market was as much as $6 billion thanks to strict rules governing phase III clinical trials. But for orphan drug developers these trial costs are reduced greatly by both the smaller patient numbers required  for trials and tax breaks on offer (up to 50%).

The financial benefits of orphan drug development have caused the industry to grow extensively over the past few years, and it is set to reach $127 billion by 2018. But a recent report has suggested that the massive costs associated with non-orphan development have created financial burdens and risks so great biotechs are being pushed towards the orphan sector in order to remain afloat.

The problem? If biotechs are being pushed towards the orphan sector in the big regulatory regions (Europe and America), competition within the sector will continue to increase. This is not necessarily a bad thing, given that there are over 7,000 rare diseases of which only a handful are catered for. But the attraction of orphan drug development lies in the financial assistance provided by regulators.

From waived fees and technical assistance, to 50% reimbursement for clinical trial costs, these benefits are what make orphan development attractive. If more and more companies join the orphan drugs bubble, will the support offered by regulators dry up? Will the orphan developers have to pay full price for their clinical trial costs? If so, given the small patient populations and potential for profit without regulatory assistance, the orphan bubble will pop.

In a recent article we discussed whether the Orphan Drug Act is sustainable given the large number of designations being given to oncology products aimed at small subsets of specific cancers. This problem could perhaps be avoided by a change in the Orphan Drug Act to allow the designation of a particular technology platform just once. But if regulators are put under financial strain due to large numbers of developers producing genuine orphan drugs, there is no clear way for the regulator to push back, without reducing funding across the board.

If the orphan drugs market becomes saturated with biotechs who have been priced out of non-orphan development, chances are regulators such as the FDA and the EMA will have to cut back on the assistance given to orphan developers. This will put orphan development on a similar level to non-orphan development (with the exception of trial sizes). The result will be either biotechs moving out of the rare diseases because of the small patient populations, or rare disease patients will have to pay even higher prices.

The solution: regulators need to be more flexible when it comes to approving clinical trial designs. By getting rid of the ‘all or nothing’ approval model currently practised by the FDA and EMA, small biotechs will not be made bankrupt by the slightest blip in development, and companies will move back into the non-orphan space.