To Cure Rare Diseases, Unleash Orphan Drug Innovations

Drug companies should be rewarded for developing orphan drugs. It's the only way to guarantee that, no matter how uncommon an illness, there will be somebody, somewhere working to find a cure for it.

In September of 2012, the City of Pittsburgh hosted the 35th annual Great Race, a charity run that raises money for the Richard S. Caliguiri Amyloidosis Research Fund. Caliguiri, a former Pittsburgh mayor, died of this rare protein disorder, and a portion of the race proceeds are used to help find a cure.

It should have been an uplifting event. Yet the Pittsburgh Post-Gazette reported that "despite the rally of support ... the research fund created in Caliguiri's name has had little impact on the effort to find a cure."

Those familiar with the challenges of treating rare conditions like amyloidosis won't be surprised by this news. The sad truth is that the economic incentives for developing life-saving treatments for rare disorders are less than optimal.

But that doesn't mean that we're powerless to fight rare diseases. Policymakers can dramatically improve incentives for researchers and biopharmaceutical firms to create drugs that treat rare conditions — treatments known as "orphan drugs." And they should. Rare diseases collectively represent a major public-health threat.

Rare diseases — conditions like Huntington disease and Burkitt lymphoma which afflict fewer than 200,000 people — cost Americans more than $474 billion a year.

Over 7 percent of Americans — or more than 25 million people — suffer from the roughly 7,000 illnesses that fall into this category.

So the overall market for treatments for rare diseases is large. Indeed, total global spending on orphan drugs runs between $50 billion and $85 billion — or between 5.7 percent and 9.7 percent of what the world spends on pharmaceuticals, according to "A Primer on the Orphan Drug Market: Addressing the Needs of Patients with Rare Diseases," a new paper by economist Dr. Wayne Winegarden, senior fellow at the Pacific Research Institute.

But the potential number of beneficiaries for each individual orphan treatment is relatively small. A narrow market of potential buyers can make investing in orphan drugs perilous.

Part of the problem is that developing a treatment for any illness is a long and expensive process. It takes anywhere from 10 to 15 years to usher a treatment from the research phase, through the Food and Drug Administration (FDA) approval process, and into patients' hands.

At every step of the process, drug firms must spend more money — and face the distinct possibility that their research will fail. According to the best estimates, a single successful drug costs well over $1 billion to develop.

And once a drug goes generic, the firm that created the medicine must deal with fierce competition from other manufacturers.

It's hardly surprising, then, that pharmaceutical firms tend to bet on treatments that will be useful to the largest number of patients. This state of affairs often leaves those suffering from rare diseases with few treatment options.

Fortunately, policymakers have found ways to improve the incentives for pharmaceutical firms to invest in orphan drug research.

Consider the Orphan Drug Act, passed in 1983. It provided drug developers seven years of market exclusivity for their inventions, ensuring that they would have a reasonable amount of time in which to make back their hefty investment, free of competition from other pharmaceutical firms.

The law also lessened the economic burden of drug development by offering a 50-percent tax credit for the costs incurred during the clinical trial phase. On top of that, the Act waived the fees associated with applying for FDA approval.

The results? In the past decade, the number of new drugs — or New Molecular Entities (NME), as they are called in the trade — released in the United States for the treatment of rare diseases has increased dramatically. In fact, more new NMEs were launched in 2011 than in any of the last ten years.

This is encouraging evidence that those who suffer from rare illnesses shouldn't give up hope.

It's now up to our leaders to find new ways to lower the barriers to developing these valuable treatments. They should start by taking the Orphan Drug Act — already over a quarter-century old — and using it as a model.

Drug companies should be rewarded for developing orphan drugs. It's the only way to guarantee that, no matter how uncommon an illness, there will be somebody, somewhere working to find a cure for it.

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