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Orphan Drug Act Treatments Deserve Full Insurance Coverage

MANAGED CARE September 2004. © MediMedia USA
Tomorrow's Medicine

Orphan Drug Act Treatments Deserve Full Insurance Coverage

An important federal law encourages development of drugs for populations so small that the market would otherwise ignore them. Should they not then be covered?
Thomas Morrow, MD
MANAGED CARE September 2004. ©MediMedia USA

An important federal law encourages development of drugs for populations so small that the market would otherwise ignore them. Should they not then be covered?

Thomas Morrow, MD

The Orphan Drug Act (ODA) will soon celebrate its 21st birthday. Most readers of this column are now dealing with the results of this act on either the payer or provider side.

This act is the largest single source of clinical grants from the FDA and it has had a significant impact on the health of thousands of people. The act expanded the role of the FDA from simply overseeing the safety and efficacy of drugs, biologics, medical devices, veterinary products, cosmetics, and food to assisting in the actual development of drugs.

This act set its sights on the 20+ million Americans with 1 of about 6,000 rare diseases that are termed orphan diseases because they typically lacked a commercial manufacturer to develop treatment for the victims.

Now available

Many of these diseases are caused by genetic disorders. At the time of the passage, most physicians would not have even recognized these diseases. But because of this act, grants as well as financial incentives are now available to encourage the development of effective treatments. Before this act, there were few incentives for companies to invest vast sums to develop drugs for small populations. Other obstacles to development included not having patent protection for various reasons and paucity of clinical experts.

Because of grants provided through this act, 34 orphan drug products have been developed and approved. About 20 percent have been biotechnology products. In fact, nearly half of the biologics approved for marketing in the United States since 1982 have been designated orphan drugs. These products include monoclonal antibodies, cell therapy, enzyme replacement therapies, and novel drug delivery biomolecules. Also of great interest to patients with cystic fibrosis are orphan designations for gene therapies. Although no gene therapies have been approved by the FDA, there are several gene therapy proposals that have been awarded the "orphan" designation.

Incentives drive development

The act provides seven-year marketing exclusivity to the sponsoring organization, as well as a 50 percent tax credit towards the cost of conducting the clinical testing in humans, and the exclusivity is potentially more valuable than even a patent. Thus, these incentives have truly driven development. In 1997, Congress provided an additional incentive by waiving the usual drug application fee charged by the FDA. It amounts to approximately a half-million dollar savings to potential developers.

Before the enactment of the ODA in 1983, a rare disease was a difficult category to define. The ODA defined it as having fewer than 200,000 people in the United States with the condition. In reality, all of the drugs developed under the ODA have affected far fewer — in some cases only hundreds or thousands. This has led to some people proposing the term "ultra-orphan" for those rare diseases that only affect 1 to 10,000 patients in this country.

Since 1983, more than 250 applications have been approved for designated orphan products. This act also provides for more than a dozen grants yearly, primarily to academic researchers.

More than 400 grants

These grants provide up to $150,000 for phase 1 studies and up to $300,000 for phase 2 and 3 studies. More than 400 grants have been funded since enactment. In fiscal year 2004, the FDA awarded a total of $13.3 million in grants.

The orphan drug designation has not relieved developers of their responsibility to prove safety and efficacy but because many of the drugs are the only available treatment for some of the diseases, the FDA often grants priority review and the therapy may also be considered for a rapid approval under the special accelerated process. However, some of the diseases granted orphan status have so few patients that double blind randomized controlled trials are not possible. Thus other trial designs are used.

Historic-control trials are often the only mechanism of determining efficacy.

One example involved trial testing a therapy for severe combined immunodeficiency (SCID). Only six SCID patients were enrolled in the pivotal trial. Of course, this number would be laughable for most diseases, but in the late 1980s, only 12 patients were estimated to be affected in the entire United States. The enzyme adenosine deaminase, also called pegademase (Adegen), demonstrated efficacy in all 6 patients during the trial and was approved on this basis. Another example where historical-control trial design was used is algucerase injection (Ceredase) for Gaucher's disease.

In small populations, safety issues are more difficult to discover. Thus, reporting of adverse drug reactions is vital in the after-market period.

ODA and managed care

First, remember that this act was passed to help our fellow humans who have rare diseases. It was not passed to drive up medical costs. The people with these rare diseases had no treatment options and no hope. The priority review and accelerated approval process was the government's way of ensuring that these people were offered access to research for their condition that had been available to those suffering from more common diseases.

But the paradox is that some health plans have used this approach to suggest that the products that reached the market are somehow less "proven" than those developed through traditional pathways. As a result, some insurers have placed obstacles to coverage of these treatments. These drugs should be considered in the same light as other FDA-approved drugs: They have been, to the best of our ability, proven safe and efficacious. In addition, the rather exorbitant cost of these drugs is not attributable to manufacturers' greed; these drugs have very high development and manufacturing costs per unit sold.

We may all soon be orphans!

Also, the ODA will most likely see much more activity. As our understanding of genetics and pharmacogenomics continues, we will find specific patient genotypes that require truly personalized medical therapies. All humans contain "defects" in our genome. In many of us, these express themselves as medical conditions or diseases. Common diseases are not homogenous but are actually specific genetic subtypes or combinations of genetic subtypes that express themselves in the same or similar manner. How else can we explain the diverse response of people with hypertension to the various antihypertensive drugs, or diabetics to the various hypoglycemic drugs? Thus, we will most likely be dividing some of our common diseases into categories of fewer than 200,000 patients, thus enabling scientists to apply for the benefits of the Orphan Drug Act.

Thus, Tomorrow's Medicine may view all of us as orphans ... but that is another story!

Thomas Morrow, MD, is president of the National Association of Managed Care Physicians and vice president and medical director of Matria Health Care. He has 20 years of managed care experience at the payer or health plan level.