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Dec 14, 2009

Big Pharma Adopting Orphan Drug Strategy

Potential for profitability in small markets is beginning to lure companies away from the failing blockbluster model.

Big Pharma Adopting Orphan Drug Strategy

Lymphoma is one of the many cancers considered a rare disease along with various hereditary enzyme deficiencies.

  • By anyone’s standards the Orphan Drug Act (ODA) of 1983 has proven remarkably successful in effecting the developmetnt of unique therapies for rare human diseases. It provides several economic incentives including tax credits on clinical trial expenses, grant funding by FDA, seven years of marketing exclusivity for a designated orphan drug, and a waiver of PDUFA fees. The act makes it possible for biotechnology and pharma companies to reap a return on investments made on therapies for rare diseases, considered to be those that affect fewer than 200,000 people in the U.S. or, in the EU, five or fewer per 10,000 people.

    Such diseases include hereditary enzyme deficiencies such as Gaucher and Fabry disease as well as multiple types of cancer. Oncology is the most frequently investigated therapeutic area, with nearly half of all such treatments in development designated as orphan drugs. In the 10 years prior to 1983 when the ODA was passed, fewer than 10 pharmaceutical drugs or biologics for orphan diseases saw the light of day. As of April 2009, of the 1,994 orphan designations, 339 resulted in approval with market exclusivity.

    The ODA, however, has also been heavily criticized by opponents ranging from advocacy groups to pharma executives and politicians for creating the opportunity for some pharmaceutical companies to profit from drugs with small markets by selling them at a high price. Drug developers have argued that they are entitled to profit after making enormous investments of time and money.

    Major Development Expenses Lead to Higher Priced Drugs for Small Populations

    Pedro Cuatrecasas, M.D., formerly an executive at Parke Davis Warner Lambert and currently at the University of California, San Diego, argued that “some companies now apparently feel that desperate patients (and society) will pay whatever is charged.” For example, Rituxan for lymphoma costs about $13,000–$25,000 per cycle, and Cerezyme for Gaucher costs between $200,000 (children) and $600,000 (adults) per year.

    “The ability to commercially exploit small sectors in the cancer field (e.g., 5,000 patients) by pricing and high profits has stimulated spectacular success in discovery research and rapid development…demonstrating, cynically, the current technical capacity of major companies to apply modern science to many diseases,” Dr. Cuatrecasas says.

    Biotech and pharma company analysts have pointed out that without significant resources, orphan drugs would probably never get developed. While they believe that their profits are justified, most companies including Shire and Genzyme have programs that offer financial assistance to qualified patients.

    “But for Genzyme and its three orphan drugs, patients suffering from Gaucher, Fabry, and Pompe would have nowhere to go,” remarked Montgomery & Co. analyst Shiv Kapoor about Genzyme’s high-priced enzyme-replacement therapies. He estimates that Genzyme spent nearly $4 billion on R&D of its orphan drug pipeline and that its 30% profit margin is similar to other biotechs.

    Advantages of Entering the Orphan Drug Space

    Market opportunity combined with the decreasing likelihood of success with the blockbuster drug-development model is increasingly focusing big pharma companies on small-market, high-value therapies. U.S. orphan drug revenues reached $32.5 billion accounting for 55% of the market in 2006. Additionally, the U.S. market is expected to grow at a compound annual growth rate of 8%, reaching  $47.8 billion by 2011.
    Acquiring orphan drugs also gives pharma new science, technology, and manufacturing processes that have the potential to reinvigorate rusty pipelines. In addition, a higher percentage of orphan NMEs, according to one analysis reported in Orphanet Journal of Rare Diseases by Ohio State University and University of Massachusetts, were approved under priority review and accelerated review procedures.

    As gifts that keep on giving, orphan drugs can also be re-launched for nonorphan indications. For example, Rituxan was first approved in 1997 as a single agent for patients with relapsed or refractory, low-grade or follicular CD-20 positive, B-cell non-Hodgkin lymphoma. Then in February 2006, it was sanctioned for use in combination with CHOP (cyclophosphamide, doxorubicin, vincristine, and prednisone) or other anthracycline-based chemotherapy. The mAb was also approved as a first-line treatment for patients with diffuse large B-cell lymphoma and for refractory rheumatoid disease. Biogen-Idec and Genentech (now part of Roche) are currently seeking FDA approval for Rituxan in combination with fludarabine and cyclophosphamide as a treatment for people with chronic lymphocytic leukemia.

    Pharma’s Latest Interest

    Pfizer’s November acquisition of Protalix’s drug, taliglucerase alfa, for Gaucher disease bought it an instant Phase III stake in the hereditary enzyme disease arena, as did Shire’s 2005 takeover of Transkaryotic Therapies (TKT), now Shire Human Genetic Therapies. These transactions put Pfizer and Shire in direct competition with Genzyme’s Cerezyme when that company ran into manufacturing issues due to a plant closing last June.

    With the TKT purchase, Shire also obtained recombinant DNA technology and a protein-based drug pipeline, a significant departure from its pill-based heritage. The firm already markets Elaprase, originally developed at TKT, for Hunter syndrome; it received FDA approval in 2006. The drug costs between $300,000 and $400,000 annually.

    The rapid pace of orphan drug designations will continue to fuel new drug development and deal making, particularly given the commitment of Timothy Cote, M.D., director at FDA, Office of Orphan Products Development, to deliver on ODA’s promise to “identify and address even more challenging opportunities that might ultimately translate into hope for people with rare diseases or conditions.” According to Dr. Cote, that means continuing and expanding one of the federal government's most successful grant programs and increasing the number of promising compounds receiving orphan designation.

     


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