By Jakob Wested and John Liddicoat
In a working paper from November 2020, the EU Commission finds a significant inefficiency in the EU orphan drug regulation (a pan-EU piece of legislation): that it does not contain a provision to safeguard the affordability and accessibility of orphan medicines.
The working paper then entertains the idea of inserting such a provision into the regulation. But, is the orphan drug regulation the right place for this type of law?
Diagnosing the problem behind orphan drug pricing is the key issue to address before jumping to consider ways to address excessive pricing.
The orphan drug system is designed to respond to unmet need, rather than the novelty and inventiveness of the product (as in the patent system). That design, however, raises the concern that drug price and R&D investment could become disconnected.
While technological and scientific progress (e.g., genome-editing technology, mRNA and gene therapy technology) hold great promise for developing treatments for rare diseases, another approach to increase treatment options involves repurposing existing medicinal products. Consequently, a drug developer could charge the same price for new drug developed with cutting-edge technology as it does for a repurposed drug, which typically involves less risk and expenditure.
It is this issue of disconnect between price and R&D investment that has prompted the EU Commission to consider introducing safeguard provisions. One of the Commission’s ideas is to shorten orphan exclusivity if the drug is repurposed.
Yet, addressing pricing issues in the orphan drug domain via amendments to the orphan drug regulation seem an ill-suited approach. A study of the European orphan drug regulations from 2019 found that 69% of the orphan drugs in the EU had patent protection on compounds that extended beyond the orphan drug exclusivity. Thus, any change to orphan exclusivity will have no effect unless these patents are found invalid, too.
Moreover, limiting exclusivity will only become a solution if generics enter (or threaten to enter) the market. However, both the EU Commission working paper and the study of European orphan drug regulation note that there is limited generic competition for orphan drugs.
If the exclusivity is reduced, one must also consider if this reduction will diminish incentives to repurpose drugs for orphan diseases. In a forthcoming study in Nordic Intellectual Property Law Review, we show that only 11% of orphan drugs were repurposed from treatments for other diseases and another 11% were repurposed for new populations suffering the same disease (for example, new patient cohorts with different genetic variants). Many experts speculated this percentage would be much higher.
Reducing the exclusivity for repositioning raises the possibility that these percentages could drop further. This would be detrimental to the many rare disease patients without an approved and tested treatment. It would also risk inhibiting the synergies between repurposing, precision medicine, and the evolving landscape of stratified patient populations, which are now often generated by AI.
The point is not that the price issues should be ignored, but that other regulatory instruments are available and probably better suited to address a disconnect between R&D investments and prices.
For instance, in June this year, the Dutch competition authority fined Leadiant Biosciences €20 million for misuse of their dominant position when they excessively priced an orphan drug. After designation, Leadiant raised the price of their drug from €884 to €14,000 without any evidence of R&D costs that could explain the price hike.
Another option to address high prices emerges from Canada. Amendments to the Patented Medicines Act has introduced a bouquet of regulatory instruments to give a specialist medicines board power to analyze whether prices are excessive. These powers will come into effect next year and include analyzing whether patients have an “ability to pay” for the drug.
In a European context, this prompts several questions: should high orphan drug prices be addressed via general competition law (Dutch approach) or via specialized boards targeted at high drug prices (Canadian approach)? Should the pricing issues be raised at an EU level or national level? And could the issue be addressed ex-ante, e.g., via government-operated health technology assessments that make recommendations on usage, price, and reimbursement, or ex-post, e.g., by competition authorities? If the issue is a disconnect between R&D expenditure and price, the latter option seems the best fit: it does not remove the incentive for repurposing, and competition authorities have the experience and knowledge to make such assessments.
The world — including the pharma world — is full of sinners. Until we get our head around the above questions prompted by the EU Commission’s ongoing evaluation of the orphan drug regulation, we must try to save the lost souls best we can. Bear in mind: it is not a mortal sin to make money on orphan drugs. Now that you are aware of that fact, you can make a living if you remember to stay clear of hoarding designations and to share the low-hanging fruits as best you can. Then everything (or most, at least) should be forgiven.
Acknowledgement: This work was supported by the Collaborative Research Program for Biomedical Innovation Law, which is a scientifically independent collaborative research program supported by the Novo Nordisk Foundation (grant NNF17SA0027784).
John Liddicoat is a Senior Research Associate at the University of Cambridge.
Jakob Wested is a post-doctoral fellow at the JUR Centre for Advanced Studies in Biomedical Innovation Law (CeBIL).