Rare Solutions
by Leslie Whitaker
April 2007
The development of orphan drugs can be a boon for the business sector and a lifeline for patients.
When the U.S. Food and Drug Administration (FDA) granted specialty pharmaceutical company Shire plc marketing approval in July 2006 for Elaprase (idursulfase), a human enzyme replacement therapy designed for the treatment of Hunter syndrome, the medication became the first and only hope for children afflicted with the rare, debilitating genetic disease. Even though Shire estimates the Elaprase market at only 2,000 patients worldwide, the product has a potential for US$250 million to US$300 million in annual sales.
Pharmaceutical companies traditionally have avoided investing research and development costs in the production of treatments for rare diseases such as Hunter syndrome, which occurs at a rate of just one in 100,000 to one in 150,000. The rationale was that drugs need large potential markets to be profitable enough to offset the development costs. However, many biotech companies are proving that despite a small pool of potential patients, orphan drug development can not only improve the lives of patients with rare disorders, but also can be a profitable business model.
Dollars and Sense
The playing field changed in 1983, when strong lobbying from patient groups influenced the U.S. Congress to pass the Orphan Drug Act, which provides companies with incentives for developing treatments for rare diseases.
Elaprase is one of more than 200 orphan drugs that have been approved by the FDA since 1983. Approximately 1,500 more are in the research pipeline, according to Abbey Meyers, president of the National Organization for Rare Disorders (NORD), in Danbury, Conn., USA. To encourage orphan drug development, the FDA offers seven years of market exclusivity, a 50 percent tax credit equivalent to the cost of conducting clinical trials, research grants to support clinical trials and FDA assistance in developing protocols to ensure efficiency in the clinical trial process. “These incentives have been very, very successful,” Meyers says. They make it unlikely that drug developers will lose money, and even make it possible for them to profit, she says.
Biotech leader Genzyme was among the first to demonstrate the benefits of the Orphan Drug Act. Cerezyme (imiglucerase), a treatment for Gaucher disease, another rare genetic disorder that causes an enzyme deficiency, has generated billions of dollars in sales since its approval in 1994. Genzyme also manufactures and markets Fabrazyme (agalsidase beta), an orphan drug approved by the FDA in 2003 for the treatment of Fabry disease. Collectively, Cerezyme and Fabrazyme brought in more than US$1.2 billion in 2005.
Sometimes broader applications of an orphan drug are discovered, opening up the possibility for additional revenue. For example, Amgen’s Epogen (epoetin alfa), originally developed to treat anemia in patients with end-stage kidney failure, also was shown to restore red blood cells in patients treated with AIDS drugs or chemotherapy, and generated more than US$2.5 billion in sales in 2006.
Small Population, Big Payoff
The development of orphan drugs has several scientific and economic advantages over the search for treatments for diseases that afflict larger populations. “Part of the reason these orphan drugs work is that with a genetic disease you start out with a good understanding of the target,” says Dr. David Pendergast, president of Shire HGT, in Cambridge, Mass., USA, the genetic therapies business unit of Basingstoke, U.K.-based Shire. “There is no high-risk discovery period, unlike other diseases, when the cause is unknown and you are searching for a [drug treatable] target.”
The number of patients necessary for clinical trials of orphan drugs is small, which can save the sponsoring company both time and money. Clinical trials of treatments with the potential for large markets often require the recruitment of thousands of study subjects in multiple locations. In contrast, the 53-week, randomized, double-blind, placebo-controlled Phase II/III Elaprase trial had 96 patients. Although the numbers seem small, 100 patients would represent 5 percent of all available patients with the condition, Pendergast says.
Even sales and marketing expenses are more manageable for orphan drugs than for products with mass-market appeal. Because the target population is so small and specialized, “you don’t need a big infrastructure to promote these products,” says Phil Nadeau, Ph.D., a biotechnology analyst at Cowen & Company, in New York, N.Y., USA.
Business Savvy
As Genzyme and others have shown, the development of orphan drugs can be an effective business model. “When these drugs work, they meet an unmet medical need and improve the quality and length of life,” Nadeau says. That means companies “can price their therapy to recoup their investment.” One of the most expensive orphan drugs is Cerezyme, which can cost up to US$400,000 per year. Elaprase costs an estimated US$300,000 for a year’s treatment for the average patient.
Despite their high price tags, orphan drugs often receive insurance company coverage because they are the only treatments available for serious medical conditions. In addition, insurance companies rarely have many patients with those conditions to insure. “Any insurer is paying much more to cover Lipitor or treatments for diabetics,” Nadeau says. “These drugs do not represent a major public health expense.”
Profits and business models aside, orphan drugs provide an enormous benefit to the patients who need them. In hopes that more young scientists will enter the search for treatments and cures, which often are developed in academic settings and then licensed to for-profit companies, biotech firms are joining with NORD to fund academic fellowships. “Without a basic understanding, we don’t know how to interfere with many of the diseases,” Meyers says. “That’s why it’s important to get young scientists involved and to continue to raise money to fund the research.”
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