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How Drug Companies Game The Orphan Drug Act

by AHIP

September 10, 2018

The Orphan Drug Act passed as a way to encourage pharmaceutical companies to invest in treatments for rare diseases—so-called “orphan diseases” that had been ignored because their small patient populations made them unprofitable.

The intent was that through incentives included in the Orphan Drug Act, pharmaceutical companies could break even or possibly post modest profits for developing and manufacturing drugs to treat orphan diseases. These incentives included market exclusivity for seven years, tax breaks, and the waiver of FDA user fees.

By some measures, the Orphan Drug Act has been a success, with hundreds of new drugs approved for rare diseases, many of which had no treatment options. Before the law’s enactment in 1983, the FDA had approved only ten drugs for rare diseases. Now, more than 400 orphan products have FDA approval.

But over the years, the pharmaceutical industry has taken advantage of the Orphan Drug Act’s good intentions, turning these “niche” drugs into multibillion-dollar sellers.

Consider these facts:

  • Worldwide orphan drug sales forecast to reach $262 billionn by 2024—a fifth of worldwide prescription drug sales, according to EvaluatePharma.
  • The top-selling orphan drug in the United States in 2017 was Revlimid, with $5 billion in sales. Celgene, the company that makes Revlimid, made more than $184,000 in revenue for each patient who takes this drug.

A Kaiser Health News investigation calls attention to pharmaceutical companies gaming the Orphan Drug Act to maximize profits. For example, while the orphan drug Rituximab was approved to treat a subtype of non-Hodgkin lymphoma, doctors prescribe it for a wide variety of common medical conditions. The drug still benefits from the financial incentives of orphan drug status.

Are these the kinds of profits Congress expected to see when the Orphan Drug Act was passed? We don’t think so. It’s time that important programs like the Orphan Drug Act are refocused to their original intent—encouraging companies to invest in treatments that will help patients with rare diseases and unmet medical needs.