Orphan Drugs: Small Market, Big Opportunity?
Updated: Nov 9, 2020
While there are no universally agreed criteria for what constitutes an orphan disease, the US classifies it as one that affects fewer than 200,000 people. Where treatments exist, these are logically called orphan drugs. But with global health spending equating to $7.8 trillion in 2017, according to the WHO, how is it that thousands of diseases still lack therapeutics?
Fundamentally, this is an issue of market failure. A recent study, led by the LSE, estimated the average cost of bringing a new drug to market at $1.3 billion. This in itself is a conservative figure, as far as estimates go, with other studies placing the average cost as high as $2.8 billion. Yet despite such high costs, the market size is, by definition of orphan diseases, tiny. How possibly can a pharmaceutical company expect to turn a profit? It's no wonder that orphan drugs are underproduced by the industry, which chooses to focus on mass-market treatments instead.
The Orphan Drugs Act (ODA) enacted in 1983 and mirrored by a similar policy from the EU in 2000, aimed to address the lack of motivation for producing orphan drugs. As per the ODA, US companies received 7 years of market exclusivity, reduced regulatory fees and subsidies for clinical trials. The impact was profound. Pharmaceutical companies felt more inclined to explore the market they had previously considered too small. Whilst before the ODA, only 10 orphan drugs existed, 450 products had been approved by the FDA by the end of 2017.
It's worth noting that although legislation has increased the number of orphan drugs, they aren't by any means cheap and they probably won't be in the short term. Regeneron, the company responsible for the Covid-19 antibody cocktail that treated US President Donald Trump, produces the drug Arcalyst to treat Muckle-Wells syndrome. A quite literal, 1 in a million disease, the annual cost of Arcalyst is $250,000, a far reach above the $61,937 median income for US families. In fact, the median cost per patient for orphan drugs is 10 times higher than for non-orphan drugs. The burden of recouping the cost of R&D is split over a smaller patient population and this inevitably leads to higher prices, though this affects insurers and state medical providers more than individuals.
One advantage of developing orphan drugs is that they tend to have easier paths to regulatory approval because smaller clinical trials can get approval. This counters the issue of having to attract enough patients to prove efficacy and safety out of what is, by the definition of orphan diseases, a very small population. According to a 2012 study by Thomson Reuters, clinical trials for orphan drugs had a 5% higher probability of success and in 2019, 44% of new FDA approvals went to orphan drugs.
Another compelling factor that induces orphan drug research is how the resulting scientific knowledge can be translated into therapeutics for non-orphan diseases. A commonly cited example is that of familial hypercholesterolemia, whereby a very rare mutation can lead to fatally high cholestrol levels. Research into this rare condition, helped reveal the mechanism of statins, the most widely-prescribed cholestrol lowering drugs in the world . In this way, companies may be encouraged to invest in orphan drug discovery, as they have the option of utilsing the research for other non-orphan drugs as well.
With decades having passed since legislation incentivizing orphan drug production was introduced, it's worth examining what has changed since to warrant further interest in orphan drugs.
Firstly, scientific developments are reducing the costs of innovation all the time. Genome sequencing is a prime example of this. From the hefty $50 billion price tag of the Human Genome Project, costs have plummeted to the level of hundreds of dollars.
Source: National Institutes of Health
With 80% of rare diseases, caused by 1 gene (monogenic), it's easy to see how cost reductions in both the diagnosis and R&D of monogenic diseases could be achieved this way. Monogenic diseases are also simpler to treat and in conjuction with newly developed scientific tools like CRISPR Cas-9, the aforementioned high costs of development for orphan drugs could decrease gradually going forward.
In addition, as most of the "low hanging fruits" have been "plucked" by the pharma industry, the small market size associated with orphan diseases has become increasingly tempting for companies, seeking new revenue streams. With orphan drug producers acheieving a 9.6% higher return on investment than non-orphan drug producers between 2000 and 2012, it's easy how the benefits associated with orphan drug development outweigh the initial barriers.
The growth in the market for orphan drugs is reflected in projections from EvaluatePharma who envisage a rise in the proportion of sales derived from orphan drugs compared to all prescription drugs from 13% in 2016 to over 18% in 2024. Orphan drugs' sale are predicted to reach $217bn by 2024, a 121% increase on 2016's figure of $98bn.
Source: EvaluatePharma Orphan Drug Report 2020
Looking forward, novel approaches for therapeutics, lower costs of development and a greater awareness and detection of orphan diseases will only accelerate the transition of orphan drugs from an overlooked subset of the pharmaceutical industry to a dominant player.