orphan drug

A Note To Techdirt and The Street: Read Up on the Orphan Drug Act

In Regulation & Government by Chris Hackett

Catalyst Pharma Accused of ‘Abusing’ the Orphan Drug System

Abuse is the improper usage or treatment of an entity.

Techdirt put out an article this week which highlights what they call “More Abuse of the Orphan Drug System:” a damning indictment of Catalyst Pharmaceuticals and their quest to bring Firdapse, a drug for rare disease Lambert-Eaton Myasthenic Syndrome (LEMS), to the market.  This was in turn a reaction to an article in The Street which discussed this very topic, calling what Catalyst is doing “unconscionable.”

So what, exactly, is Catalyst doing that has drawn the ire of these journalists?

It goes back to that drug Firdapse, which Catalyst is currently bringing forward for LEMS. According to the journalists, Firdapse has been available free or cheap for LEMS for more than 20 years. Now, they say, Catalyst is taking advantage of labeling Firdapse an orphan drug to gain market exclusivity and premium pricing – in this case, $80,000 per year.

So essentially they are calling Catalyst reverse-Robin Hood: stealing from the poor to give to the rich, just for the sake of making them richer. But is that really what is going on? Is it truly an egregious abuse of the orphan drug system? I’ve spoken to Catalyst in preparation for their visit to the World Orphan Drug Congress, as well as many other companies and regulators involved in the space, and I actually disagree with my fellow bloggers about this. Here’s why.

The Orphan Drug Act (ODA) was passed to spur and speed up development in rare diseases, something the pharmaceutical industry had ignored prior.  The key was to give the pharma industry a way to recoup their R&D investment from a drug that will be reaching less that 200,000 people. The most obvious carry-through of this is a company developing a drug, accruing R&D costs along the way, and subsequently using premium pricing to get that investment back. Nobody can fault pharma for that, and indeed these articles aren’t claiming to.

However, these complaints are about something else entirely: a company taking a drug that they didn’t develop, gaining orphan designation on that asset, and subsequently reaping the rewards. This isn’t the first case of this, and it certainly won’t be the last. Essentially, aside from perhaps a minor investment in licensing the Firdapse rights from Biomarin, Catalyst spent no money and yet is about to make a ton. To add icing on the proverbial cake, payers and patients who were getting this drug before are now going to have a much larger expense when that price shoots up.

Objectively, this sounds terrible. But before we start picketing, we have to remember that nothing happens in a vacuum.

Catalyst will certainly make some good money from this drug, but we have to look at where it is going: R&D. Catalyst is not “big pharma.” They do not have cash reserves with which to invest heavily in R&D, which is a very expensive undertaking. Instead, they are using cash that Biomarin gave to them as part of the licensing agreement and expanding access to Firdapse. As if that wasn’t enough, they are researching more indications for the drug as well, almost as if to try and defend themselves from this very criticism. From their website:

In addition to LEMS, Catalyst is exploring other potential Orphan Drug indications for Firdapse™ including Congenital Myasthenic Syndrome and downbeat nystagmus.

Two important points – first, Firdapse is in-licensed from Biomarin, who had been developing this long before Catalyst took it. Second, Catalyst is not simply taking a free drug and charging people, they are expanding access to it and increasing indications through their own set of R&D which is currently funded by a finite about of investment money.

If you look at the rest of the company pipeline, Catalyst has two additional drugs in early stages: CPP-115 for infantile spasms (also an orphan indication) and CPP-109 for PTSD and Tourrette’s. CPP-115 in particular is promising because there is currently only one approved treatment for infantile spasms, and CPP-115 has shown an increase in efficacy over it. They don’t have Biomarin as a sugar daddy for these two, so where will the money to continue to develop these come from?

Money from sales of Firdapse.

Essentially, Catalyst took something which was being used in limited amounts for free, is expanding access to that drug, and then is going to use the money from that now expanded drug to develop additional drugs for rare diseases. We’ve gone from one orphan treatment to four, and that is just one company.

That sounds to me like the ODA is working as designed – encouraging companies to take leaps like this into developing more and more orphan drugs. Ultimately, the act’s goal was to get more treatments to more patients, not to keep those treatments cheap.

Granted, there are some issues here, mainly that an industry that operates like this – taking the inexpensive to make the expensive – could be unsustainable. The sustainability argument is an important one, however it is a very different one from abuse of the laws as they are written. In fact, pharma and payers are talking about that in a debate at the World Orphan Drug Congress USA 2015. And as for Catalyst? They are going to be at the conference too, talking to potential investors and partners about CPP-115.

However, as far as “abuse” of the orphan drug system? I would have to say that assessment is off base – these companies are doing exactly what the ODA wanted them to do. Whether or not that should be changed is another story entirely.

Responses or comments? Tweet me @chrishackettcp