Johns Hopkins calls on regulators to close Orphan Drug loophole
Health experts at Johns Hopkins Medicine are calling on lawmakers and regulators to close loopholes in the Orphan Drug Act they claim give drug companies millions of dollars in unintended and misplaced subsidies and tax breaks and fuel skyrocketing medication costs.
In a recent commentary published in the American Journal of Clinical Oncology, the authors argue that pharmaceutical companies are exploiting gaps in the law by claiming orphan status—a designation meant to encourage the development of drugs for rare diseases that affect fewer than 200,000 people in the U.S. Yet many of those drugs, according to the commentary authors, end up being marketed for other, more common conditions, generating billions in profits.
The 1983 act was designed to encourage drug companies to develop treatments for so-called orphan diseases that would be unprofitable because of the limited market. The authors point out that legislation has accomplished that mission and sparked the development of lifesaving therapies for a constellation of rare disorders, including cystic fibrosis, muscular dystrophies and certain pediatric cancers. They also note, however, the law has invited abuse.
Under the terms of the act, companies can receive federal taxpayer subsidies of up to half a million dollars a year for up to four years per drug, large tax credits and waivers of marketing application fees that can cost more than $2 million. In addition, the FDA can grant companies seven years of marketing exclusivity for an orphan drug to ensure they recoup the costs of R&D.
Author Martin Makary, M.D., M.P.H., professor of surgery at Johns Hopkins, said companies exploit the law by initially listing only a single indication for a drug’s use—one narrow enough to qualify for orphan disease benefits. After FDA approval, however, some such drugs are marketed and used off label far more broadly, thus turning large profits.
According to the Johns Hopkins authors, seven of the top 10 best-selling drugs in the U.S. for 2014 came on the market with an orphan designation.
Makary and the team recommend that once a drug exceeds the basic tenets of the act—to treat fewer than 200,000 people—it should no longer receive government support or marketing exclusivity. That goal can be achieved, the authors said, through pricing negotiations, clauses that reduced marketing exclusivity and leveling of taxes once a medication becomes a blockbuster treatment for conditions not listed in the original FDA approval. Such measures would ensure that the spirit of the original act is followed while continuing to provide critical economic incentives for truly rare diseases.