© iSTOCK.COM/POGONICIWhen Eileen Shore, a geneticist at the University of Pennsylvania, started investigating a rare bone disease in the early 1990s, it was a small group of patients that helped make her work possible.

Along with Frederick Kaplan, an orthopedic surgeon and molecular geneticist at the university, Shore was focused on finding the cause of fibrodysplasia ossificans progressiva (FOP), an extremely uncommon disorder that transforms soft tissues to bone. “One person in particular, Jeannie Peeper, just decided that it was really important to have research done,” Shore says. “One person can make a pretty big impact in pushing things along.”

In the 1980s, Peeper, who was born with FOP, started gathering a small group of individuals with the same disorder. This was not a trivial task, given the low prevalence of FOP—it affects an estimated one in 2 million people worldwide. Still, with the help of...

That money helped Shore and Kaplan, after more than a decade of research, to pinpoint the gene underlying FOP, ACVR1.1 This discovery set the stage for tracking down a potential treatment, palovarotene, a compound that inhibits a signaling pathway involved in bone formation and has been shown to prevent abnormal growth in the soft tissues of mice.2 In 2015, Clementia, a Canadian biotech firm, raised USD $60 million from investors to develop the drug for FOP, which is currently in a Phase 3 clinical trial.

Rare disease research has undergone some changes since the early years of Shore’s work. Not only have advances in sequencing made it faster and cheaper to find associations between genetic mutations and diseases, but other developments, such as the growth of gene therapies, have drawn increased commercial interest to the realm of rare, or orphan, disorders. In addition, legislation incentivizing the pharmaceutical industry to invest in therapeutics for rare diseases has been incredibly successful. “When I started working on rare disorders, the first question was, ‘Why study a rare disease that impacts so few people?’” Shore recalls. “But in recent years, the pharmaceutical industry has become very interested in studying rare diseases as a drug discovery strategy.”

As a result, hundreds of new rare-disease treatments have entered the market over the past few decades, and orphan drug development has become a highly profitable industry. While this has undoubtedly helped patients, there are downsides to this trend. Some economists and scientists suggest that companies have abused the financial incentives for rare-disease drug development, and they predict a coming backlash to the hefty price tags of these medications.

More than meets the eye

To date, around 7,000 rare diseases have been identified. In the U.S., they are defined as conditions that affect fewer than 200,000 Americans (in the E.U., disorders occurring in fewer than one in 2,000 Europeans fall into this category). (See “Rare Disease: By the Numbers” here.)

In total, these conditions end up being quite common—they affect an estimated 25 million people in the U.S. and 30 million in Europe. “In your circle of friends and family, there is certainly somebody who is affected that may not have told you about it,” says Heather Etchevers, a developmental biologist who studies rare congenital malformations, such as giant congenital melanocytic nevus, a large, pigmented birthmark, at the French National Institute of Health and Medical Research (INSERM). “And not all diseases are easily visible.”

The result of this sea change is that nowadays, firms with marketing authorization for orphan products are more profitable than those without.

Still, while rare diseases are common in the aggregate, each condition is unique. And before the mid-1980s, when governments began passing legislation that encouraged companies to invest in these uncommon conditions, industry was reluctant to pour its money into products with such minuscule markets. “If you look at it from an economic perspective, at the time there was a clear market failure—there was no incentive for companies to develop [an orphan] drug, it just didn’t make sense,” says Dyfrig Hughes, a health economist at Bangor University in the U.K. who is involved in clinical trials for rare conditions. “That was in the era of high-volume and low-cost treatments.”

In the decades since, the pharmaceutical industry has changed in numerous ways. For one, some studies suggest that the cost of drug development has increased across the board—one analysis by researchers at the Tufts Center for the Study of Drug Development estimated that the average research and development (R&D) costs per drug went up from $802 million for products approved in the 1990s to $2.6 billion for those approved between 2005 and 2013.3 It’s important to note, however, that the price tag of drug R&D is a contentious subject with little consensus: a subsequent examination by another group generated a much lower estimate—a median of $648 million per drug, based on medications approved between 2006 and 2015.4

In addition to rising prices, advances in science have yielded a greater understanding of the complexity of diseases—which, according to Andrew Lo, an economist at the MIT Sloan School of Management, has led to a trend in recent years of investors shying away from drug development in general, particularly in the early stages. “The irony is that as we’ve gotten smarter about the nature of these diseases, that’s actually caused the risk for investing in these therapies to increase,” Lo says.

Despite higher costs and less-certain returns, investments in drug development on the rare disease side appear to be bucking the trend affecting the greater biomedical industry, Lo says. “Rare diseases have actually done well, thanks to the incentives that the Orphan Drug Act provides.”

With a little help from the fedsThe US Orphan Drug Act (ODA), enacted in 1983, was a game changer for rare diseases. Before the law passed, only 10 orphan drugs had entered the market. By the end of 2017, more than 450 products for 668 orphan indications were FDA-approved.

The European Union passed a similar policy in 2000. Both pieces of legislation created incentives for pharmaceutical companies—which would normally be averse to investing in a drug that might benefit only a tiny patient population—such as market exclusivity (seven years in the U.S. and 10 years in Europe, plus extra time for pediatric indications), reduced regulatory fees, and, in the U.S., subsidies for clinical trials.

Prior to the introduction of this legislation, “there was no motivation for industry to invest in treatments for rare conditions,” Hughes explains, whereas afterwards, firms were driven to create more products. “There’s a stark contrast.” One study reported that 41 percent of the products green-lighted by the FDA in 2014 had orphan designation—the growth in popularity, the authors noted, had also corresponded with mounting evidence that some companies were gaming the ODA for their own benefit (See “Abusing Incentives” here).5

The result of this sea change, according to a 2016 analysis of 86 publicly listed pharmaceutical companies by Hughes and his colleague Jannine Poletti-Hughes of the University of Liverpool, is that nowadays, firms with marketing authorization for orphan products are more profitable than those without. Between 2000 and 2012, orphan drug companies had a 9.6 percent higher return on investment than non-orphan drug producers.6

“I think the traditional model of a blockbuster drug, [such as] statin, where you’ve got low cost and [you’re] prescribing to hundreds of millions of people, has changed,” Hughes says. While government incentives certainly played a role, other factors, such as the characteristics of the diseases themselves, may have contributed as well, he adds, “because with rare conditions it’s arguably somewhat easier to find a pharmacological target and an effective drug to interrupt [it].”

See full infographic: WEB | PDF


The revival of gene therapy

Although commercial incentives codified by the ODA and laws like it may be the primary drivers of orphan drugs’ success in industry, other factors have contributed as well. The very nature of rare diseases—many are severe and linked to a single gene—have made them attractive targets for drug development.

An oft-cited statistic suggests that approximately 80 percent of rare diseases are monogenic (or Mendelian), which means they arise from a single mutated gene. “The rare, Mendelian genetic disorders have a very well-defined cause,” says Stylianos Antonarakis, a geneticist at the University of Geneva Medical School in Switzerland. As a result, he adds, researchers often have a more clearly defined path toward a disease-modifying treatment. For instance, phenylketonuria, which is caused by a mutation that makes the body unable to break down the amino acid phenylalanine, was once a devastating disease that could lead to issues ranging from intellectual disability to severe brain damage. Nowadays, physicians can screen for the condition at birth and prevent complications by prescribing a phenylalanine-free diet.

Recent advances in gene-editing technologies and improvements in gene therapies have widened the range of possibilities for treating monogenic rare diseases. “The revival, in a way, of gene therapy because of the progress in making it safer has given us new tools that have created new avenues of investigation,” says David Adams, a medical geneticist studying rare pigmentation disorders at the NIH. “So certainly there is new work going on based on tools like CRISPR that allow editing of genes in model organisms and that, maybe in the future, will have therapeutic benefits.”

Last December, Spark Therapeutics’s voretigene neparvovec-rzyl (Luxturna), a treatment for patients with a rare form of retinal dystrophy caused by a biallelic RPE65 mutation, became the first gene therapy for a genetic disease to be approved by the FDA.

Of course, gene therapies are not the only approach to treating rare diseases, and some biotech companies, such as Cydan, which helps launch startups focused on orphan-drug development, have decided to steer clear of them. “It’s too expensive and too competitive right now,” says Chris Adams, the company’s founder and CEO. “We’re focusing on small molecules, peptides, proteins, and there’s still enough opportunity there, we believe, to have impact on genetic disease.”

That strategy is beginning to pay off. According to Adams, the company has successfully spun out three startups. The first of these, Vtesse, launched in January 2015 to develop a treatment for Niemann-Pick type C, a rare lysosomal storage disorder, using sugar molecules called cyclodextrins. It was acquired by Sucampo Pharmaceuticals for $200 million last April.

Abusing Incentives

While incentives provided for pharmaceutical companies by the Orphan Drug Act (ODA) have helped hundreds of treatments for rare diseases enter the market, ethicists, scientists, and many others argue that some pharmaceutical companies have exploited the law to gain profits.

A key provision of the ODA is that each time a medication gets approved by the FDA to treat a rare disease, it gains an additional seven years of market exclusivity for the specified condition, giving companies the ability to charge high fees for an extended period of time. In 2015, a Kaiser Health News (KHN) investigation revealed that a number of pharmaceutical companies gamed the system to sell orphan drugs at astronomical prices by using two key strategies: repurposing commonly used drugs and getting approval to use one product for multiple orphan diseases.

For example, AbbVie’s Humira, which was FDA-approved in 2003 to treat rheumatoid arthritis, a condition that affects around 1 million adults in the U.S. alone, later gained additional approvals for multiple indications with orphan designation, including juvenile rheumatoid arthritis and pediatric Crohn’s disease—giving the company market exclusivity for some of these conditions until the early 2020s. Peter Saltonstall, president of the National Organization for Rare Disorders, told KHN in 2015 that Humira is “not a true orphan drug.” In fact, Humira is currently one of the world’s best-selling medications: in 2017, it raked in $18 billion in sales.

Another technique is to identify additional populations to gain orphan drug approvals in a practice dubbed “salami slicing,” in which a more common condition is divided into smaller, biomarker-defined categories. A 2016 study found that 13 of the 84 drugs approved with orphan designation between 2009 and 2015 were for subsets of more prevalent diseases and that some of those medications were also approved for other, related conditions (PLOS Med, 14:e1002190, 2017). For example, pharma firm Boehringer Ingelheim received FDA approval for afatinib (Gilotrif) to treat non-small cell lung cancer (NSCLC) patients with an EGFR mutation in 2013. Then, in 2016, the company received approval to use the same drug to treat NSCLC patients with squamous histology. The firm was awarded seven years of market exclusivity for both of the specified indications.

“[The ODA] doesn’t discriminate between genuinely rare conditions where there’s [usually a] hereditary component, almost always in children, versus personalized approaches to cancer where clearly they still are rare but they are a different end of the spectrum,” says Dyfrig Hughes, a health economist at Bangor University in the U.K. “Arguably, the legislation wasn’t really drawn up to cater for [the latter].”

Clinical trial cost savings

In general, regardless of whether a rare-disease drugmaker is designing a gene therapy or working on another treatment approach, the severity of many rare monogenic diseases means effective drugs often yield dramatic benefits.

“There’s an opportunity to generate convincing clinical safety and efficacy data with very limited patient populations,” says James Wilson, director of the Orphan Disease Center at the University of Pennsylvania. “There could be a quick path to [regulatory approval], which means the cost of development would be a fraction of what it could be for more-common diseases.”

The very nature of rare diseases—many are severe and linked to a single gene—have made them attractive targets for drug development.

According to Wilson, a company could achieve approval for an orphan drug with as few as 20 individuals, whereas a treatment for a common cardiovascular condition or a vaccine to prevent infection might need to be tested on thousands of people. For example, the Phase 3 trial for Luxturna included only 31 participants. And the FDA greenlighted vestronidase alfa-vjbk (MEPSEVII), an enzyme replacement therapy for another rare lysosomal storage disorder, in November 2017 after testing in just 23 patients.

In addition to requiring a smaller number of participants, according to a 2012 study by Thomson Reuters and Pfizer, clinical trials for orphan drugs tended to be shorter and had a 5 percent higher probability of regulatory success than those for non-orphan products.7

Pricing backlash

The question now is whether patients—or their insurers—will foot the bill for the newer rare-disease treatments. Orphan drugs are already some of the most expensive medications on the market—many costs hundreds of thousands of dollars per year—but gene therapies come with some of the heftiest price tags: Luxturna, for instance, costs approximately $450,000 per eye. “There’s a raging debate right now for how you pay for that,” says Wilson. Some scientists and economists have suggested alternatives to a one-time payment. For example, Wilson, along with Troyen Brennan, the chief medical officer at CVS Health, proposed a “pay-for-performance model,” in which payments are made on a yearly basis as long as the therapy continues to be effective.8

There’s already evidence to suggest that one-time payments may not be the best choice. Last year, alipogene tiparvovec (Glybera), a gene therapy for lipoprotein lipase deficiency, a rare metabolic disease, was withdrawn from the market due to lack of demand. The treatment, which was developed by Amsterdam-based UniQure, became the first gene therapy to enter the market in Europe when the European Commission approved it in 2012. Glybera was a one-time injection that cost approximately $1 million.

Spark Therapeutics, which treated the first patient with Luxturna this March, has been considering methods to soften the financial blow, such as providing rebates or allowing payments in installments.

“There is going to be a backlash to some of the ultra-high prices for some of these rare-disease therapeutics,” says Lo, who, like Wilson, has proposed alternative payment models for treatments, including gene therapies.9 “I think we’re far away from that, because there’s still a lot more we can do, given the current pricing system—but at some point we’re going to reach a limit.”

From rags to riches

Despite the upswing in rare-disease drug development, researchers studying such disorders in academia say that it’s nevertheless a challenge to get their work funded. “It’s definitely still a struggle for most of the 6,000 to 8,000 estimated rare diseases,” Etchevers says. And although some rare diseases are targeted by a number of drugs on the market, there are plenty of conditions for which no treatment yet exists, she adds. “There are lots of promising preclinical studies ready to be translated to the clinic, in which therapeutic targets have been identified and even validated initially, that do not find industry takers.”

See “The Challenges of Rare-Disease Research

Accordingly, many academic researchers studying rare diseases still rely heavily on patient foundations to support their work, particularly at the early stages, when it’s more difficult to receive funding from agencies such as the NIH (See “Crowdfunding for a Cure” here). “Research on rare disorders is mainly promoted by the families and by the lobbying of associations,” Antonarakis says. “Families need to continue to lobby, organize, and drive the agenda of funding agencies to the benefit of the disorder in their family.”

Still, technological advances in recent decades, especially in sequencing, have allowed academic researchers to stretch their limited dollars. “When I started out, we were dependent on more family-based studies [and] linkage analysis. I worked on trying to identify the cause of FOP for about 15 years,” Shore says. “Now, we would just take a handful of patients, do exome sequencing, and in less than a month have the answer.” (See “Answers in the Exome” here.) But even for Shore, whose work on FOP has led to a promising drug currently in development, funds from patient foundations remain crucial. “Funding for basic and preclinical research from any source has become more difficult in recent years,” she says, “It’s a continual struggle and concern for most researchers.”

Rare diseases, common insights

Rare-disease research—like rare diseases themselves—doesn’t occur in a biological vacuum. It’s often intertwined with investigations into fundamental cellular activities. “I think it’s now a reflex of anybody working on any rare condition to see what else might be represented by the same mechanisms but in a different part of the body, at a different time in life, or [in the context of] cancers,” says Heather Etchevers, a developmental biologist at the French National Institute of Health and Medical Research (INSERM).

For instance, her work on giant congenital melanocytic nevus (CMN)—a large, pigmented birthmark—could be helpful in understanding common cancers, such as adult-onset melanoma, as well as other developmental disorders. “There are a couple of genes [known to cause CMN] whose proteins work together to tell cells when to proliferate,” she explains. “When those mutations happen early in development and in a particular set of lineages, it turns out that it can lead to a whole bunch of different disorders, including many other kinds of skin malformations, vascular malformations, and brain malformations.” She adds that the reason those genes initially appeared on scientists’ radars was because they “came up over and over again in cancers.”

Such unexpected associations between rare and common diseases are uncovered “more often than [those outside the orphan disease community] realize,” says Ellen Sidransky, a physician and molecular geneticist at the National Institutes of Health (NIH). Her work revealed that mutations in the gene encoding glucocerebrosidase (GBA), which causes Gaucher disease, were also present in many individuals with Parkinson’s disease—a discovery that launched more than a decade of research into the link between the two conditions (Neuron, 93:737-46, 2017). For most rare disease researchers, this is one of the key arguments justifying investments in conditions that affect far fewer people than common ailments such as heart disease, lung cancer, and obesity.

There are dozens of examples of rare disease–related insights that have led to breakthroughs for more frequently occurring conditions. Perhaps the most-cited case is that of familial hypercholesterolemia, which is caused by an extremely rare mutation in the gene encoding the low-density lipoprotein (LDL) receptor that can lead to fatally high cholesterol levels. Research into this condition, conducted in the 1970s by geneticist Michael Brown and biochemist Joseph Goldstein, led to a greater understanding of LDL’s role in cholesterol synthesis (PNAS, 71:788-92, 1974). These findings helped reveal the mechanism of action of statins, the widely used cholesterol-lowering drugs that help prevent cardiovascular disease, and earned the duo the 1985 Nobel Prize in Physiology or Medicine.

“That, to me, is a perfect example of how the worst aberration of a pathway has revealed how you can intervene for milder aberrations and interfere with a population risk that’s enormous,” says William Gahl, head of the Undiagnosed Diseases Program at the NIH. Statins went on to become some of the best-selling drugs of all time, still earning billions of dollars in sales every year.

Biotechs such as Perlara, based in the Bay Area, are seeking to develop treatments for both rare and common conditions by mapping the genetic connections between them. To accomplish this goal, the company is creating genetically engineered animal models of ultra-rare monogenetic conditions with the aim of generating new treatments and identifying how the genetic mutations are associated with more prevalent maladies.

For example, insights into NGLY1 deficiency, a rare, congenital condition Perlara researchers are investigating, may lead to better treatments for certain cancers, such as multiple myeloma (ACS Cent Sci, 3:1143-55, 2017). “Our premise is that we’re not scared of the economics of these diseases, because if you realize that these rare diseases are connected to something more common, there is not an economic problem anymore,” says Ethan Perlstein, the company’s CEO. “You just have to figure out what that connection is.”

ORPHANS FIND A HOME: Legislation passed by the US government in 1983 provides financial incentives for pharmaceutical companies to develop drugs for rare diseases. Orphan designation for a product comes with perks such as tax credits for clinical research and eligibility for seven years of market exclusivity after the drug is approved. However, orphan designation does not guarantee marketing approval, which requires firms to establish that the treatment is safe and effective in controlled trials. The data presented here come from the FDA.THE SCIENTIST STAFF


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  2. K. Shimono et al., “Potent inhibition of heterotopic ossification by nuclear retinoic acid receptor-γ agonists,” Nat Med, 17:454-60, 2011.
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  6. D.A. Hughes, J. Poletti-Hughes, “Profitability and market value of orphan drug companies: A retrospective, propensity-matched case-control study,” PLOS ONE, 11:e0164681, 2016.
  7. K.N. Meekings et al., “Orphan drug development: an economically viable strategy for biopharma R&D,” Drug Discov Today, 17:660-64, 2012.
  8. T.A. Brennan,  J.M. Wilson, “The special case of gene therapy pricing,” Nat Biotechnol, 32:874-76, 2014.
  9. V. Montazerhodjat et al., “Buying cures versus renting health: Financing health care with consumer loans,” Sci Transl Med, 8:327ps6, 2016.

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