The Orphan Drug Act Turns 25

The legislation is credited with building biotech and spawning hundreds of drugs for rare diseases. So why do some analysts hesitate to call it a success?

Bob Grant
Bob Grant
Sep 30, 2008

Twenty-eight years ago, Abbey Meyers was at her wit's end. Her young son, who had Tourette's syndrome, had been cut off from the drug pimozide, which had begun to show promise in treating his debilitating condition. The doctor running the clinical trial told her the study was halted when McNeil Laboratories pulled out of producing the drug because it proved ineffective against schizophrenia, its primary (and more common) target. He told Meyers that pimozide would now be considered an "orphan drug," the term for products that target too few patients to bring in big bucks.

Now, her son's rare disorder was essentially untreatable. There was no recourse for the Connecticut housewife. "I was devastated," she says.

Meyers reached out to people experiencing similar pain and frustration. "We knew we had to solve the problem." Meyers and...

"Without the incentives of the ODA, many drugs never would have been developed." -Tim Coté

According to Meyers, attention from Hollywood was exactly the shot in the arm her movement needed. "That's what really started it, the Quincy episode," she says. "It was like an instant grass roots movement."

As public momentum gathered behind the cause, the orphan drug legislation made its way through Congress. On January 4, 1983, President Ronald Reagan signed the Orphan Drug Act (ODA) into law, which encourages the development and marketing of orphan drugs through incentives that lower costs to manufacturers.

Since the ODA's passage, more than 325 orphan drugs have been approved by the Food and Drug Administration, and more than 1,800 drugs have received orphan designation, meaning they treat diseases affecting fewer than 200,000 people living in the United States. In contrast, in the decade before the ODA became law, fewer than ten such products came on the market. Furthermore, the percentage of patients with rare diseases dying at a young age decreased by more than 6% from 1979 to 1998, according to a 2003 National Bureau of Economic Research working paper. Recently, the European Union and Australia have adopted statutes to encourage orphan drug development that mirror the ODA. Some analysts say that the ODA even helped to give birth to the biotech industry, which received 63% of all the orphan drug designations from 2000-2004, according to a report from the Tufts University Center for the Study of Drug Development. Two of the most well-known names in biotech - Genzyme and Amgen - both got their start from orphan drugs. "It turned out to be one of the most successful pieces of health legislation ever enacted," says Meyers.

However, some economists claim that the true benefits and costs of the act have not yet been fully assessed, making it premature to trumpet the act as an overwhelming triumph. "The conclusion that [the ODA's] a tremendous success is unwarranted based on available data," says Rob Rogoyski, an attorney specializing in intellectual property law.

The adoption process

Today's Orphan Drug Act looks slightly different from the act that was passed 25 years ago, thanks to several amendments added by Congress through the years. But the intent of the law remains intact. The ODA incentive commonly cited as the most important to drug makers is a seven year period of market exclusivity after approval. This assures drug companies full access to the market for their drug free from any competition without going through the patent process. The ODA also guarantees up to 50% of the cost of clinical trials in tax credits, grants to further defray the cost of clinical research, advice on designing clinical trial protocols, and a waiver of Prescription Drug User Fee Act filing fees, worth $1 million per application in 2008.

Tim Coté, director of the FDA's Office of Orphan Product Development, says that his office, which administers the ODA, receives about 200 applications per year. "Without the incentives of the ODA," he says, "many drugs never would have been developed." Case in point: After the morning sickness pill thalidomide was pulled for causing birth defects, a few researchers continued to study the compound and found that it was effective against some symptoms of leprosy and multiple myeloma. Still, says Meyers, "No drug company would go near thalidomide."

A success?

But with the incentives and protections of the ODA, a small biotech company, Celgene, applied for and got orphan drug status for thalidomide in the early 1990s, and is now testing thalidomide for its anti-cancer properties and its ability to alleviate symptoms of Crohn's disease.

Still, some experts hesitate to dub the ODA a resounding success. While studying law at Harvard in 2005, Rob Rogoyski conducted an economic analysis of the ODA and spotted what he calls a "correlation/causation problem." Specifically: "You can't explain the totality of the rise in drugs for orphan conditions by the ODA alone," Rogoyski says. "There's an absence of good evidence to show that that's happening."

Instead, Rogoyski argues that the passage of the ODA and the rise in orphan drugs may be simply coincidental, and based more on reforms to the patent system and leaps in biomedical technology that both occurred in the 1980s. For instance, of the 29 orphan drugs approved between 2001 and 2003, 79% already had some level of patent rights. This would negate the market exclusivity commonly cited as the main incentive offered by the ODA, and suggest that these, and many other orphan drugs, would have reached the market without the ODA, argues Rogoyski.

Frank Lichtenberg, a business professor at Columbia University, credits the ODA for encouraging innovation targeting rare diseases, but says that alone does not qualify the ODA as an overall economic success. "The aggregate benefit to society is not very big because of the small market size," he says. "The fact that [the ODA] did encourage more drug development does not necessarily mean that it succeeded," he adds. "That's a minimum requirement."

Additionally, Lichtenberg says it's possible the ODA has diverted resources away from common conditions. Since 1995, orphan drugs have accounted for about 20% of all the drugs approved by the FDA. "It is conceivable that [the ODA] caused firms to reallocate their investments towards orphan drugs and away from non-orphan drugs after the ODA was passed, but I doubt that effect, if it indeed exists, would have been very large."

Then there's the problem of drug companies charging exorbitant prices (See Box on p. 68) for orphan drugs in order to recoup R&D costs on a medication intended for a small patient population. Genzyme, for example, said in 2005 that the average cost to treat a patient with Gaucher's disease with Cerezyme - an orphan drug - was $200,000. Similarly, patients with mucopolysaccharidosis paid an average of $175,000 per year for BioMarin Pharmaceuticals' enzyme replacement therapy. Even thalidomide, one of the ODA's main success stories, sells for more than $150 per pill. Abbey Meyers, who founded the National Organization for Rare Disorders while helping to get the ODA signed into law, says her organization tried to tackle this problem by urging drug makers to offer prescription assistance programs, as the ODA matured.

As a result of her efforts in the early 1980s, Meyers's son was able to go back on pimozide, and today, "He's doing very well," she says. But in the end, it wasn't the ODA that saved her son: McNeil Laboratories eventually developed pimozide as a Tourette's syndrome treatment of their own accord, in response to the arguments about human responsibility that convinced Congress to eventually enact the ODA. "They changed their mind voluntarily and they developed it without getting it designated as an orphan drug," says Meyers.

Orphan Blockbusters

Generic Name Trade Name Sponsor Orphan Indication Price* (USD for 30 day supply) US Sales in 2007 (USD)
Topiramate Topamax Johnson & Johnson Pharmaceutical Lennox-Gastaut Syndrome in children $114 (60 25mg tablets) $1.837 billion
Lamotrigine Lamictal Glaxo Wellcome Lennox-Gastaut Syndrome $248 (60 100mg tablets) $1.717 billion
Etanercept Enbrel Immunex Polyarticular-course juvenile rheumatoid arthritis $179 (1 kit 25mg injections) $0.874 billion
Modafinil Provigil Cephalon Narcolepsy $237 (30 200mg tablets) $0.744 billion
Tacrolimus Prograf Astellas Pharma Prophylaxis of organ rejection in patients receiving allogenic heart transplants. $239 (60 1mg capsules) $0.515 billion
Raloxifene Evista Eli Lilly and Co. Reduction in risk of invasive breast cancer $92 (30 60mg tablets) $0.503 billion
Adalimumab Humira Abbott Laboratories Juvenile idiopathic arthritis $1,391 (2 kits 40mg/0.8 mL injections) $0.462 billion
Imatinib mesylate Gleevec Novartis Pharmaceuticals Various cancer-related symptoms $3,164 (30 400mg tablets) $0.384 billion
Glatiramer acetate Copaxone Teva Pharmaceuticals Relapsing-remitting multiple sclerosis $1,771 (1 kit 20mg/mL injection) $0.303 billion

* As per DestinationRx Price Index (