It is important to understand the history of the Orphan Drug Act in order to appreciate its intent in relation to its goals, and to comprehend the motivations of the patient organizations that advocated for its enactment. It is also important to understand the reactions of the pharmaceutical industry, physicians, and politicians, as they dealt with patient’s lofty expectations over nearly two decades of orphan disease progress.
The Beginning
During the late 1970s, non-profit patient organizations representing individual rare diseases were doing much as they do today; they were raising money for research on their disease. The goal is to invest in biomedical research that will discover the cure so that each patient organization will eventually go out of business.
Several patient organizations had actually financed research on new treatments that were successful. But the academic investigators could not find pharmaceutical manufacturers that would make the drugs commercially available. Companies felt that the target population for each drug was too small, and thus would not be profitable enough.
The 1963 Kefauver-Harris Amendments to the Food, Drug and Cosmetic Act (FDC) required that manufacturers prove their drug was effective. Until that time, companies simply had to prove their drug was safe. The resources needed to prove efficacy greatly escalated the cost of drug development after 1963. By the late 1970s, the pharmaceutical industry was making decisions about which compounds they would develop, based not on scientific importance, but on the size of the potential market and the likelihood of larger returns on investments.
The patient organizations that knew effective therapies for their disease were languishing in academic laboratories, decided to do something about this. They spoke to many other rare disease patient organizations that did not yet have potential treatments, and showed them that the “orphan drug” dilemma would eventually affect them too. As a result, these non-profit consumer groups joined together in an informal coalition aimed at fixing the problem, and paving the way for new treatments and cures to be developed for rare diseases in the future.
That informal coalition eventually incorporated and became the National Organization for Rare Disorders (NORD). Today, NORD is a unique federation of voluntary health organizations and individuals dedicated to helping people with rare “orphan” diseases, and assisting the organizations that serve them. NORD is committed to the identification, treatment, and cure of rare disorders through programs of education, advocacy, research, and service. But in the late 1970’s and early 1980’s, we were a group of individual patient organizations dedicated to single diseases, who were willing to forget their individual differences in order to solve the orphan drug dilemma for all of us.
The patient organizations were urged on by many academic scientists who wanted us to pave the way for development of their discoveries, and political leaders who recognized that the standard economic rule of “supply and demand” had created an inhumane void in our health care system. Rare disease patients were falling through the cracks, and the government needed to save them.
Industry Response
Unbelievably, the pharmaceutical industry initially opposed our efforts. In several congressional hearings from 1980 through 1982, the industry testified that there were no orphan drugs, that the industry often developed “service drugs” without government intervention, and they did not want the government to intervene now. It was the beginning of the Reagan era, and “deregulation” was the holy grail of politics.
The response of the drug industry was so astonishing that we decided to appeal to the American people. Newspaper and magazine articles educated the public about the problem, and major television shows (specifically Quincy with Jack Klugman) elicited a public outcry. This brought the industry to the table, and a compromise was forged that became the Orphan Drug Act of 1983.
Creating the Law
The main goal of any orphan drug legislation would be to create a partnership between the pharmaceutical industry, academic scientists, patient organizations, and the federal government, that would encourage development of “drugs of limited commercial value” for the treatment of rare diseases. In return for financial incentives provided by the government (e.g., tax credits, research grants, exclusivity, etc.), we hoped the industry would invest in development of these products because it would have assurance that companies would not lose money on their investment, and they would have a reasonable chance to earn a profit.
When the initial concept of orphan drug legislation was being developed, the first legislation was drafted by Representative Elizabeth Holtzman of New York. It would have created a pool of government money that would be used by pharmaceutical manufacturers to pay the costs of research and development of orphan drugs. But once the drug was approved for marketing, the manufacturer would have been required to give any profit back to the government. This proposal seemed preferable to another concept that would have put the federal government into the drug manufacturing business. The government, however, did not want to go into the pharmaceutical business, and politicians on both sides of the aisle felt that the industry should be encouraged to adopt these products. Unfortunately, the Holtzman proposal was based on a premise that the pharmaceutical industry would not mind giving its profits to the government.
Several pharmaceutical manufacturers did not agree with their trade association, which continued to deny that orphan drugs existed. These individual companies recognized that orphan drugs were a problem, and felt that a creative solution was possible. They came to the table to talk about free market incentives that might entice companies into the orphan drug arena. First, the companies wanted to earn a profit, and if they did so, they wanted to keep their profit. Secondly, if they could be promised a period without competition, they would have a guaranteed time period to get back their investment and earn a profit. Thirdly, small companies with limited resources wanted research grants from the government to cover at least some of the costs of clinical trials, while big companies wanted tax credits to reduce their investment in clinical research.
There were other incentives written into the law, but these were simply icing on the cake. For example, companies complained that when they submitted clinical trial data to the FDA, the agency sometimes changed their mind about the adequacy of the trial design, even when FDA personnel had originally helped the company to design the protocol. So the Orphan Drug Act contains a section requiring FDA to provide written protocol assistance when a sponsor requests it. However, in the 17 years since the law was enacted, few companies have apparently requested this privilege.
Progress Since Enactment
After the law was enacted, orphan drug adoptions started slowly. It wasn’t until the biotechnology industry began to understand the significance of orphan drug exclusivity that the numbers of designations began to swell. Patent protection for biotech products can sometimes be in the gray zone, but orphan drug exclusivity is a sure thing. The biotech industry has used the Orphan Drug Act very creatively. But the biotech industry was in its infancy when the law was enacted, so no one could predict its significance to orphan diseases.
Over the years there have been many proposals for amendments to the law, and each proposal has had a major effect on orphan drug activity, both good and bad. For example, in some years individual companies may try to pass an amendment that will benefit their individual drug, but they are guaranteed to meet with opposition from the patient community. The uncertainty elicited by such amendments is extremely harmful because they usually try to make an exception that will benefit the loser of an orphan drug race. Under the law, when more than one company is developing an orphan drug, the first drug to obtain marketing approval receives the exclusive marketing rights. Therefore, any other manufacturer that invests in development of the same drug for the same orphan disease, will have to wait seven years before it can reach the American market.
Sometimes these companies feel if they invest enough money in the best lobbyists, they might be able to get their orphan drug on the market. However, if they were able to accomplish this they would destroy the essence of the Orphan Drug Act, so the patient community has to oppose these efforts.
As in competitive sports, in order to have a winner, there must be a loser, and no one wants to be a loser. If you are in a horserace for orphan drug exclusivity, and if your company cannot prove that your drug is “clinically superior” to the drug that you are racing against, then you have the following options:
1. Make an agreement with the other company to share exclusivity no matter which company wins the race.
2. Study the drug for another disease or condition (because the drug does not get exclusivity; the exclusivity is awarded for the USE of the drug on a specific disease).
3. Learn how to lose gracefully and save your lobbying money.
Amendments have also been suggested to control some of the perceived abuses of the intent of the Orphan Drug Act. In fact, one amendment was actually passed by Congress in 1990, but it was vetoed by President Bush. That amendment addressed some of the extraordinarily profitable orphan drugs that have been developed over the years. Politicians were asking why the taxpayer is subsidizing some very profitable drugs that even appear on the list of the top selling drugs in the world. To solve the problem, Congress passed an amendment that would have reviewed the sales record of orphan drugs; and if it was determined in the 5th year of marketing that the drug was no longer a “drug of limited commercial value,” it would lose the remaining two years of marketing exclusivity. Ultimately, competition would bring the price of the drug down.
Even though President Bush vetoed this amendment, the European Union adopted the concept in its recently enacted legislation. In Europe orphan drugs will receive ten years of exclusivity. But if a member country calls for a review of sales in the 6th year, and finds that the drug is extraordinarily profitable, the product will lose the remaining four years of market exclusivity.
It is important to remember that no one opposes pharmaceutical manufacturers earning a profit on orphan drugs. In fact, the law was written to assure that manufacturers will earn profits on these products. The question is whether companies should be able to earn reasonable profits, or extraordinary profits on an orphan drug. Politicians get involved because the taxpayer is subsidizing products that would otherwise have little commercial value. Yet it is the attraction of a few notorious blockbuster orphan drugs that has provided the impetus for other companies to get involved in this area of research. This conundrum persists today, and it will probably never be solved.
There have been other very significant amendments. For example, the tax credits were not a major incentive until a few years ago when Congress enacted an amendment that allows companies to carry the tax credits forward for 15 years, or backward for five. (Note: The tax credit was later changed to provide a 20-year carry-forward and a one-year carry-back). The reason this was important was because most large multi-nationals are not really interested in developing orphan drugs, and the little companies that do adopt them tend to be small and medium-sized firms that are not yet profitable. These small companies were greatly attracted by this amendment, and designations surged when it was enacted.
To expand the tax credits the patient community worked closely with the industry, and the industry admits that enactment would not have been possible without our support. On the other hand, there are many instances when we agree to disagree with the industry as a whole, but we continue to cooperate with individual companies in areas of mutual concern. For example, we disagree with the industry in general about medical privacy legislation, gene patenting, and prescription drug coverage for Medicare beneficiaries. These issues will greatly affect rare disease patients for generations to come, and we are very concerned that the voices of patients are not being adequately heard in the political debate .
Orphan Diseases Today
Overall, the success of the Orphan Drug Act has been remarkable. Millions of people have been helped by more than 200 orphan drugs that are on the American market today. Extraordinary hope has been raised by the hundreds of orphan drugs that are in the research pipeline. Orphan drug statutes in Singapore, Japan, Australia and the European Union gives us a sense that the entire world is finally working in concert to fuel the engine of orphan drug development. Other countries, such as South Korea and Israel, have already established government offices for orphan diseases in preparation for future legislation. We can safely predict that the progress of the past 17 years will be miniscule in comparison to the progress we expect in the next decade.
The fact is, the orphan disease patient community spans the world, which is exactly how corporate sponsors should view the market for any potential orphan product. Because the United States has led the discovery effort up until now, orphan disease patients throughout the world have relied on exports of American orphan drugs. We are hopeful, however, that the European Union’s involvement will now bring the massive resources of European companies and academic experts to join with us, resulting in a quantum leap forward for orphan disease progress. With the new technologies of gene therapy, xenotransplantation, stem cells, etc., and especially the impact of the Human Genome Project on biotechnology, we predict it won’t be long before we Americans will be importing orphan treatments from Europe and Asia for many diseases that are currently hopeless and untreatable.
We in the patient community clearly understand that we will not have access to new orphan drugs unless pharmaceutical companies develop and commercialize them. It is therefore more important now than ever before to build on, and strengthen the partnership of industry, government, academia and consumers, that was so carefully crafted in 1983 by the Orphan Drug Act.
For more information, contact: Diane E. Dorman, Senoir Director for Public Policy at (301) 421-0018 or via e-mail at ddorman@rarediseases.org.
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