Senator Chuck Grassley, Chairman of the Senate Judiciary Committee, has opened an inquiry into potential abuses of the Orphan Drug Act by drugmakers, and whether these abuses contribute to high prices of commonly used drugs.

The purpose of the Orphan Drug Act is to mitigate the financial risk taken on by drug companies attempting to develop drugs to treat rare diseases (those afflicting less than 200,000 US citizens). Before passing the law in 1983, orphan disease projects were regularly abandoned during development because the low volume of sales were not likely to provide investors a competitive return on investment. Today, as a result of the Orphan Drug Act, drug companies that bring orphan disease drugs to market receive several benefits during and after the regulatory approval process. These include user fee waivers, a 50% tax credit for clinical trials related to the drug’s development, support from the FDA rare disease program, and seven years of market exclusivity (a.k.a. monopoly power) in treating that rare disease following FDA approval.

One gaming tactic likely to be under investigation, piquantly dubbed ‘salami-slicing,’ takes advantage of the fact that as a disease becomes more precisely understood by the medical community, subtypes of the disease are often identified. Subtypes are different versions of what was previously known as the same disease, and being able to identify and treat disease at the more granular level of a subtype is the hallmark of precision medicine as defined by Clayton Christensen in The Innovator’s Prescription.

Unfortunately, when drug companies ‘salami-slice’ by obtaining orphan approval to treat disease subtypes (the slices) with a drug originally approved as a treatment for the broader disease (the whole salami), they undermine precision medicine efforts and delay patients from receiving drugs that capitalize on the latest diagnostic discoveries. Drugmakers are awarded seven years of market-exclusivity for each orphan drug subtype approval, which prevents a new drug made to treat that orphan disease from being brought to market. This award of a monopoly over the orphan disease category grants drugmakers the ability to name their price without the threat of competition undercutting them—in 2014, the average annual price for an orphan drug was $111,820 versus $23,331 for a mainstream drug.

A recent subtype discovery that improved our understanding and potential treatment of Crohn’s disease (not actually an orphaned disease) may be instructive as we try to reward true innovation in precision treatment of orphaned diseases. Crohn’s disease is an inflammatory disorder of the intestinal tract that is notoriously difficult to treat. Researchers from the University of North Carolina recently discovered that Crohn’s disease actually has two subtypes with distinct underlying molecular causes that merely share similar symptoms. These newly discovered differential diagnoses explain why the medical community has struggled to successfully treat Crohn’s disease using a standard immunosuppressive therapy. Researchers concluded as much about the one-treatment-fits-all approach:

It’s plausible that this [variation in treatment success] is because only a subset of patients has the type of disease that responds to standard therapy, whereas, for the rest of the patients, we’re really not hitting the right targets.

The Orphan Drug Act should encourage drug companies to respond to these diagnostic breakthroughs with novel treatments proven to be more effective than the former one-treatment-fits-all solution. Unlike novel treatments, a drug already approved for clinical use that seeks regulatory approval in the US is more than three times more likely to achieve approval for a new indication than a new drug (classified as a new molecular entity or NME). This significant reduction in financial risk by having been approved before should deem these drugs unworthy of Orphan Drug Act benefits intended to mitigate the steep financial risk of marketing otherwise unprofitable new drugs.

Further, allowing the one-treatment-fits-all therapy to claim market-exclusivity over subtype diseases undermines precision medicine efforts. Doing so only further delays progress towards the goal of approving truly innovative drugs designed to fight disease at a more granular and precise level—as also seen in the case of Duchenne muscular dystrophy.

To avoid rewarding mere repurposing of old drugs, Japan has implemented a policy to prevent salami-slicing, requiring the orphan-drug candidate to prove their clinical superiority over drugs already available on the market. Thus, existing drugs cannot win orphan designation, nor obtain market-exclusivity for an orphan disease. In the case of Crohn’s Disease—were it an orphan disease—the one-size-fits-all immunosuppressive therapy would not be able to claim tax credits nor market-exclusivity for treatment of either of the two subtypes because it is already available on the market. In this case, the privilege of monopoly pricing power would remain up for grabs by novel treatments that could capitalize on new diagnostic discoveries to improve treatment.

As it stands, some drugmakers use the Orphan Drug Act to undermine precision medicine initiatives. We must find a way to reserve the program’s lucrative benefits for drugmakers who capitalize on new diagnostic discoveries to develop truly innovative new drugs. Employing a policy similar to Japan may hold promise as a potential solution to realign the Orphan Drug Act with the original goals of the program along with precision medicine initiatives taking place across the US.

For more, see:

Seize the ACA: The innovator’s guide to the Affordable Care Act


  • Ryan Marling
    Ryan Marling