This is why some of the most lucrative products in pharma and biotech are not the blockbuster drugs given to millions of patients (although those certainly are profitable), but rather, orphan drugs given to pools of patients numbering in the thousands.

Genzyme, for example, markets a drug called Cerezyme that treats Gaucher disease-a hereditary enzyme deficiency afflicting only around 10,000 patients in the world. It is estimated that at least half of them take Cerezyme. The cost? As high as $200,000 per year per patient.

Pundits debating the rising costs of healthcare can and do point to figures similar to this, but they might be missing the point when it comes to orphan drugs, which are no cheaper to develop than non-orphans. Companies in this arena-wanting to remain profitable or simply to stay in business-must charge higher prices.

"A lot of companies will tell you that there needs to be some ability to recoup an investment made in a product, but, by their very nature, orphan drug populations are 200,000 people or less," says Lori Reilly, vice president for policy and research, Pharmaceutical Research and Manufacturers of America (PhRMA). "It`s a very small number of people that are actually eligible to take a given drug."

There is such an opportunity to offset development costs-The Orphan Drug. Since 1983, when the act was ratified, more than 200 orphan drugs have been approved by the US Food and Drug Administration (FDA). There are now more than 300 orphan drugs in development according to Orphan Drugs in Development for Rare Diseases, a report issued by PhRMA.

"It`s a prime indication that when Congress puts incentives in place for a particular behavior, in this case drug development, our companies have responded," says Reilly. "In 1983 Congress passed The Orphan Drug Act. As a result we`ve seen an explosion of drugs approved for orphan diseases."
 

The Orphan Drug Act

The Orphan Drug Act of 1983, introduced by Representative Henry Waxman from California, lays out various incentives for companies developing these drugs. It provides a tax credit of 50% of the clinical testing costs, federal funding through grants and contracts for clinical trials, assistance in conducting research conforming to FDA requirements, and exclusive marketing rights for seven years from the date of FDA marketing approval.

Companies wishing to take advantage of these incentives must submit their drug candidates to the FDA for consideration of orphan status. Candidates need to demonstrate that the drug candidate`s patient pool is less than 200,000 in the US or, if it`s not, that sales revenues are unlikely to offset the development costs.

"It`s a combination of tax relief and market exclusivity that makes orphan drug status attractive to companies," says Reilly. "It`s hard to say whether one part of that incentive is more lucrative for a company, but the two of them working in tandem have been an incentive for companies to invest in this kind of research."

Opportunities in action

Hana Biosciences, South San Francisco, Calif., is one company that seeks to take advantage of these incentives. The FDA granted its candidate, Marqibo, orphan drug designation in January 2007 for treatment of adult-onset acute lymphoblastic leukemia, or ALL.

"This designation may provide for certain development incentives including tax credits related to clinical trial expenses, a possible exemption from the FDA-user fee, and assistance in clinical trial protocol design," says Mark J. Ahn, PhD, Hana`s president and CEO.

Four thousand adults are diagnosed with the disease annually. Currently, there are no approved agents for adult ALL, nor is there a consensus on the most appropriate regimen in the relapse setting. Hana thinks they might have a solution in Marqibo. And they should be finding out if they are right soon.

"We plan to conduct a multi-center, open label, phase II trial on relapsed ALL, and this trial has already been IRB [Institutional Review Board]-approved and will begin within a month," says Gregory I. Berk, MD, Hana`s senior vice president and chief medical officer.

Hana`s reformulation of the FDA-approved, standard chemotherapeutic vincristine encapsulates the drug in a rigid, lipid bilayer of sphingomyelin, from which the vincristine leaks out slowly, thus maintaining high blood levels of the drug for an extended period. This mimics a continuous vincristine infusion, and could result in greater activity in rapidly dividing cancers.

Though no price point has been determined yet, executives at Hana maintain that optimizing existing drugs to improve their clinical efficacy and safety warrants premium pricing in line with the incremental clinical benefit. With the investment it is now making, between $7 to $10 million for Marqibo`s most recent trial, it`s clear that the small numbers of ALL patients will have to shoulder much of this development cost. Companies like Hana wouldn`t be in business without an ability to earn back this cost-even with government-sponsored tax breaks.

"We know the costs are extremely high with any type of drug development," says Reilly. "There has to be some incentive or ability for companies to recoup at least some of their investment."

Help is on the way

Drugs are expensive. Drugs with few potential users are even more so. The pharmaceutical industry takes a lot of heat for the prices it charges, but the fact is that the industry is aware of these problems and has taken steps to adress them.

"Almost every company that has orphan drugs in their development cycle has some form of patient assistence progam," says Lori Reilly, vice president for policy and research, Pharmaceutical Research and Manufacturers of America (PhRMA).

One such program available for low-income patients who lack health insurance is The Partnership for Prescription Assistance. PhRMA has assisted the partnership in bringing together pharmaceutical companies, doctors, other health care providers, patient advocacy organizations, and community groups to help qualifying patients who lack prescription coverage get medicines through a public or private program. Through its site (www.pparx.org), the partnership offers a point of access to more than 475 public and private patient assistance programs-including more than 180 programs offered by pharmaceutical companies.

 
"There are a fair number of people who lack insurance and may not be able to afford their medicine," says Reilly. "These programs are available to assist people to afford the medicines they need."

© 2007 Advantage Business Media