President Biden signed the Inflation Reduction Act (IRA) into
law on Aug. 16, 2022, with the goal of reducing health care costs
for the government and participants in Medicare and Medicaid
programs. The IRA includes a section relating to drug price
negotiation that subjects some of the most expensive
Medicare/Medicaid drugs to mandatory price reductions. The IRA
includes a provision that excludes orphan drugs from the drug price
negotiation requirement, provided that the orphan drug has a single
indication (the Orphan Drug Exclusion).
During the notice and comment period leading up to the
implementation of the IRA, the Centers for Medicare & Medicaid
Services (CMS) maintained that “a drug that has orphan
designations for more than one rare disease or condition will not
qualify for the Orphan Drug Exclusion, even if the drug has not
been approved for any indications for the additional rare
disease(s) or condition(s).” CMS also confirmed that “it
will consider only active designations and active approvals when
evaluating a drug for the Orphan Drug Exclusion; that is, CMS will
not consider withdrawn orphan designations or withdrawn approvals
as disqualifying a drug from the Orphan Drug Exclusion.”
Despite the well-meaning intentions of the IRA, there is a
significant possibility of unintended negative consequences,
particularly in the orphan drug market.
What is an orphan drug?
An orphan drug is a drug that is directed to an orphan disease,
which is defined as a disease or condition that affects fewer than
200,000 people in the United States. More than 10,000 rare diseases
impact more than 30 million people in the United States. On top of
that, approximately 95% of rare diseases do not have an
FDA-approved treatment.
Developing drugs for orphan diseases is difficult and costly, in
part because of the medical complexity associated with rare
diseases. It is not only less profitable to invest R&D money
into a drug that will be used by so few patients, but it is also
difficult to recruit patients to participate in clinical trials
because of the small patient populations associated with these
diseases.
Orphan Drug Act of 1983
In order to promote the development of orphan drugs, Congress
passed the Orphan Drug Act in 1983. This statute created incentives
for manufacturers to discover, sponsor and market drugs for rare
disease patient populations. These incentives included seven years
of marketing exclusivity for orphan indications (with no limit on
the number of orphan drug indications), tax credits for qualified
human clinical trials, grants to fund new research and development,
and waiver of FDA fees for review and approval (which can total in
the millions of dollars). The Orphan Drug Act also permits orphan
drugs to be used for non-orphan diseases.
Since the Orphan Drug Act was passed in 1983, FDA has approved
around 600 distinct drug products to treat orphan diseases.
IRA’s impact on orphan drugs
The IRA exempts orphan drugs from the price negotiation program,
but only if the orphan drug has a single approved indication to an
orphan disease. If an orphan drug receives an additional
indication, whether directed to an orphan disease or not, then that
drug is no longer eligible for the exemption and may be subject to
price negotiation in the future.
This exception is a significant change from the incentives
provided by the Orphan Drug Act. This change has the potential to
significantly impact pharmaceutical companies and orphan disease
patients.
It is common for orphan drugs to receive additional or
“follow on” indications for other diseases, both rare and
common. Many cancer medicines in the United States often launch
first in an orphan indication and broaden their use over time to
additional populations.
For example, between 1990 and 2022, 15% of orphan drugs had
multiple orphan disease indications and 20% had both orphan and
common disease indications. Looking more recently, of the 282 novel
orphan drugs that were approved by FDA between 2003 and 2022, 63
(23%) were approved for at least one follow-on indication,
including 29 (10%) for multiple follow-on indications. Indeed, 61%
of those follow-on indications were also for orphan drug
conditions. These follow-on indications normally require additional
clinical trials and years of research to obtain.
There is a significant possibility that the IRA will discourage
companies from pursuing additional indications for orphan drugs. In
fact, several companies have already canceled trials and abandoned
additional research into further indications.
For example, Alnylam Pharmaceuticals Inc. cited the new IRA
price controls as the reason for canceling a Phase III clinical
trial that tested its drug Amvuttra in treating patients with
Stargardt disease, a rare eye disease that can lead to loss of
vision. Amvuttra is already approved to treat polyneuropathy caused
by hereditary ATTR amyloidosis. Alnylam stated that obtaining a
second orphan drug indication would open Amvuttra up for price
negotiation.
Alnylam is not alone. In a 2022 PhRMA survey, 95% of responding
member companies said they planned to develop fewer uses for new
medicines.
Although the IRA price negotiation provision has good
intentions, there is a potential for unintended negative
consequences. Pharmaceutical companies that stand to face price
negotiation for orphan drugs if they obtain one or more additional
indications are likely to be left with little incentive to pursue
additional indications. This can lead to patients having fewer
potential treatments as pharmaceutical companies grapple with
significant losses in revenue. As well-intentioned as the IRA is,
it may end up hurting orphan disease patients the most unless the
Orphan Drug Exclusion is updated or revised to include drugs
indicated only for orphan diseases.
Kramer Levin is continuing to monitor the IRA and its potential
effects on the pharmaceutical industry. Please check back often for
further updates.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
#Potential #Effects #Inflation #Reduction #Act #Orphan #Drug #Development #Life #Sciences #Biotechnology #Nanotechnology
