Rare diseases — those afflicting fewer than 200,000 individuals in the United States — individually affect relatively small groups of patients. But taken together, rare diseases afflict as many as 30 million Americans, nearly 10% of the US population. To date, as many as 8,000 rare diseases have been identified, and roughly 250 new rare diseases are described annually.
Up to 80% of these disorders have a genetic origin; in fact, most are caused by defects in a single gene. Rare diseases take a large toll on children can be quantified by statistics which state that approximately 50% of those affected by rare diseases are children, 30% of children with a rare disease will succumb to it before reaching 5 years of age, rare diseases cause 35% of deaths occurring during the first 12 months of life.
Given the limited number of patients suffering from any one disease, rare diseases historically were not a common focus of mainstream pharmaceutical companies. But that began to change with the 1983 implementation of the US Orphan Drug Act, which provided several important business incentives to companies that develop drugs specifically for rare diseases. Early on, small biotechnology firms led the charge for orphan drug development, and biologics still account for up to two-thirds of the orphan drug market. However, as midsize and large pharmaceutical companies began to realize the revenue potential of orphan drugs, they started to increase their investment in the market. And as scientific understanding of rare diseases improves, the pharmaceutical industry continues to transform its approach to drug therapy, leading to new hope for millions who suffer from rare diseases.
Fresh from recent successes, the orphan drug marketplace continues to represent a significant opportunity for research-based biopharmaceutical firms. Many of these products become blockbusters; in fact, almost a third of orphan drugs generate more than $1 billion in annual sales. The emergence of this opportunity is largely the result of the confluence of several key factors which include:
Unmet Medical Need
The rare disease marketplace represents a massive unmet medical need. As noted earlier, rare diseases afflict as many as 30 million Americans, nearly 10% of the US population. Yet only 5% of rare diseases currently have FDA-approved drug treatments.
Groundbreaking progress in genomic science over the past 20 years has yielded a far clearer understanding of the molecular basis of diseases. Twenty years ago, scientists had identified the genetic etiology of just 50 diseases; today, the number is 4,500, a 90-fold increase. These breakthroughs give companies a roadmap to develop targeted drugs.
Continuing Revenue Stream
The vast majority of patients with rare diseases are battling chronic or recurring illnesses. As a result, those who gain access to effective, affordable, and well-tolerated therapy are likely to remain on therapy for extended periods. Orphan drug makers can often enjoy recurring revenue with little or no competition.
Of 2013’s new orphan drugs, most have prices exceeding $90,000 per patient per year. It’s not uncommon for new orphan biologicals to cost between $200,000 and $400,000 per patient per year. Several factors support such high prices. First, drug manufacturers need high prices to recover research and development costs and have only a small number of patients from which to draw that revenue. Second, many first-to-market manufacturers haven’t been forced yet to battle competitive products that could spur price reductions. Third, payers have limited negotiating power because of the high unmet need and profoundly negative optics that could result by blocking access to these life-saving therapies.
Whereas the typical non-orphan small-molecule marketing plan may target 50,000 prescribers, orphan drug marketers may target fewer than 100. But differences in scale are just the beginning; the orphan drug marketplace is fundamentally distinct. Rare disease researchers, advocacy groups, patients, and clinicians often form close-knit communities that can significantly alter — and sometimes simplify — the marketing mix. These communities are described in some detail in the Grassroots Stakeholders section.
Legal And Regulatory Incentives
The Orphan Drug Act includes a number of incentives, currently including expanded access to the Investigational New Drug Program, grants for drug development, a waiver of user fees charged under the Prescription Drug User Fee Act (PDUFA), fast-track approvals, tax credits, and 7-year market exclusivity. Through the Rare Pediatric Disease Priority Review Voucher (RP-PRV) program, any company that gains regulatory approval for a drug aimed at a pediatric rare disease is rewarded with an RP-PRV. The company can either use it to expedite the review of any future product in its own pipeline (rare or mass market), or sell it to another manufacturer, thereby generating a huge cash influx for the seller. When the voucher is applied to a downstream new drug filing, the FDA will make its approval decision within six months, rather than the usual 10 months.
Reduced Trial Size
Orphan drug development often includes smaller-scale clinical trials. For example, the median phase III trial size for non-orphan drug trials is 2,234 patients, while for orphan drugs the median is just 528 patients (and in some cases, far fewer).