WVU research shows how much pharmaceutical companies are capitalizing on rare drug incentives | WVU Today
So-called “orphan” drugs that treat diseases affecting fewer than 200,000 Americans earn pharmaceutical companies as much money as mainstream medications, according to research by Sean Tu, a West Virginia University College of Law professor.
(WVU Photo/Holly Leleux-Thubron)
Drugs used to treat rare conditions are earning
pharmaceutical companies almost as much as those marketed to the general
public, according to a researcher at West
Virginia University. Sean Tu, a College of Law professor found lucrative so-called
“orphan” drugs earn manufacturing tax credits, have longer patent exclusivities
and face easier Food and Drug Administration review.
Orphan drugs treat diseases that affect fewer than 200,000
Americans. In addition to tax credits, Congress has incentivized the
pharmaceutical companies that manufacture orphan drugs with a waiver of
prescription drug user fees and by offering seven years of market exclusivity
after the drug is approved, rather than the standard five years.
Orkambi is an example of an orphan drug used to treat cystic
fibrosis, a genetic disorder that affects the lungs and other organs. Only
around 30,000 Americans have been diagnosed, but Tu’s data shows the drug made
$5 billion over the last five years. In contrast, Entyvio, a drug used to treat
Crohn’s disease or ulcerative colitis, also made $5.5 billion over the last
five years, but treats around one million Americans.
“There has been a dramatic increase in the number of orphan
drugs over the past three decades,” Tu said.
In the late 1980s, 5% of new drugs were directed to orphan
indications. That number has risen to 43% in 2023.
Tu’s
findings are published in the Journal of the American Medical Association.
He said pharmaceutical companies have every reason to take
advantage of the range of incentives.
“They get fast-track FDA approval and also get to use
‘surrogate endpoints,’” Tu said. “These are signs that indicate a treatment is
working without having to conduct lengthy, large-scale clinical trials. Scientists
can use smaller groups of patients for shorter time periods, thereby
dramatically lowering the costs associated with FDA approval.”
However, the range of incentives has altered the manufacturing
and distribution of orphan drugs.
“I can either charge $1 to a million people or I can charge
one person a million dollars. I’m still making a million dollars at the end of
the day. The question is why we should be giving these drug companies all these
advantages and all these bonuses when they’re making just as much money on
orphan drugs as they are on their normal non-orphan drug indications.”
The purpose of the Orphan Drug Act — enacted in 1983 to spur
development of drugs for rare diseases such as Huntington’s disease, Tourette
syndrome and myoclonus — was to compensate pharmaceutical companies for doing
research and investing in orphan drugs. Congress assumed drug companies would
not make profits when investing in rare diseases.
“This assumption was incorrect,” Tu said. “The Orphan Drug
Act came from a good place and we still need companies to invest in orphan
drugs. However, we shouldn’t have a system where we only invest in orphan
drugs. Under the current system, we are getting more and more drugs developed
for rare diseases, leaving other populations increasingly marginalized.”
Another problem is that many rare diseases are only treated
by one drug. In such cases, insurance companies must cover them, so
pharmaceutical companies can charge high prices knowing they’ll be compensated.
“If I’m trying to maximize social welfare, I want to help
the most people I can with the limited resources I have,” Tu said. “So am I
going to invest my limited resources in drugs that affect only 200,000 people,
or am I going to invest in drugs that affect 300 million people? Right now, the
government is over-incentivizing drug companies to invest in the 200,000
people, and I don’t think that’s a great way to spend our money.”
-WVU-
lr/06/12/23
MEDIA CONTACT: Jake Stump
Director
WVU Research Communications
304-293-5507; jake.stump@mail.wvu.edu
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