Senate committee opens inquiry into orphan drug pricing after KHN report

Republican Sen. Chuck Grassley, chairman of the Senate Judiciary Committee, has opened an inquiry into potential abuses of the Orphan Drug Act that may have contributed to high prices on commonly used drugs.

In a statement, Grassley said the inquiry is "based on reporting from Kaiser Health News" and strong consumer concern about high drug prices.

"My staff is meeting with interested groups and other Senate staff to get their views on the extent of the problem and how we might fix it," Grassley wrote on Feb. 3, adding that he will continue to work on bringing prices down in other ways as well.

A six-month Kaiser Health News investigation published in January found that the orphan drug program intended to help desperate patients is being manipulated by drugmakers. While the companies are not breaking the law, they are using the 1983 Orphan Drug Act to secure lucrative incentives and gain monopoly control of rare disease markets where drugs often command astronomical price tags.

[Also: Gross manipulation of orphan drug rules creates monopolies, huge price tags]

KHN's investigation, which was published and aired by NPR, found that many drugs that now have orphan status aren't entirely new. More than 70 were drugs first approved by the Food and Drug Administration for mass market use. Those include cholesterol blockbuster Crestor, Abilify for psychiatric disorders, and rheumatoid arthritis drug Humira, the best-selling drug in the world.

Others are drugs that have received multiple exclusivity periods for two or more rare conditions. About 80 drugs fall into this latter category, including cancer drug Gleevec and wrinkle-fighting drug Botox.

Before the Orphan Drug Act passed, drugs for rare diseases were often abandoned during development -- hence the name orphan. The patient populations were simply too small to be financially viable.

Grassley, the senior senator from Iowa, is well positioned to call for changes in the law's incentives. His Judiciary Committee oversees anticompetitive and patent-related issues. Grassley made headlines late last year calling for hearings to demand that drugmaker Mylan justify its price hikes for the lifesaving EpiPen.

Grassley's office has reached out to staff members of the Senate Health, Education, Labor and Pensions Committee, which has jurisdiction over the FDA. When asked this week about a possible update to the law, the committee lauded the Orphan Drug Act for helping millions of families and said it "will continue oversight of the law to ensure it is working as intended."

But there are questions over whether the law is working as intended. Dr. Robert Califf, who left his post last month as commissioner of the FDA, said he believes it's time to review the orphan drug program and the incentives offered to corporations.

The decades-old law, Califf said, has been very successful in bringing effective treatments to rare disease patients. But like any program, he said, "once it reaches a mature phase, it's important to reassess it."

In talking about what could be changed, Califf said reexamining the FDA's orphan drug policy "does need to occur at this point in time."

[Also: Orphan drug spending not as high as originally thought, study says]

Califf noted that before he arrived at the FDA in 2015 he was involved in consultant meetings where there "clearly is an effort for gaming" the orphan drug approval process.

"It's understandable that whenever you put a financial incentive in place in the United States, people will try to figure out how to take advantage of it -- almost all of them within the law," Califf said. "So, I'm not talking about illegal activity but … there is a game of cat and mouse that goes on."

In an interview late last year, PhRMA's Anne Pritchett, vice president of policy and research at the drug industry's lobbying group, said government incentives for orphan drug development are needed because the research involved is costly, risky and uncertain, and it can take years to develop a successful drug. This week, a PhRMA spokeswoman said they had not heard of any movement on changing or updating the Orphan Drug Act.

Dr. Martin Makary, a professor at Johns Hopkins University School of Medicine and a vocal critic of the high prices of orphan drugs, has offered up possible solutions. He suggested that drugmakers should pay back some of the federal incentive money once a drug reaches a blockbuster sales level for treating a rare disease.

"That money, at a certain point, could go back to the FDA through a back tax that starts after $1 billion in annual sales," Makary said.

Former U.S. Rep. Henry Waxman (D-Calif.), who pioneered the Orphan Drug Act in the 1980s, thinks Congress should tackle prescription drug pricing on a variety of fronts, and that an update to the Orphan Drug Act is part of the solution.

Waxman noted that President Donald Trump has expressed concern about prescription drug prices and that could bring energy to the effort.

"Hopefully, he'll come in with some good proposals and do something about the problem," Waxman said. "I hope that when Congress does something, it will be something that has an impact."

But Peter Saltonstall, president of the National Organization for Rare Disorders, said his group has heard "no energy" for changing the law now. He said his organization, which is the largest group representing rare disease patients, is constantly evaluating how well the Orphan Drug Act works.

"I think the Orphan Drug Act at least from our perspective has been successful," Saltonstall said, adding that there are other prescription drug pricing concerns that could be addressed by Congress such as the high prices of a variety of drugs -- orphans, he said, are a small portion of the nation's total drug costs.

Today, more than 450 orphan drugs have been approved and gaining orphan designation is a popular business strategy for manufacturers. Drugs approved to treat rare diseases made up 40 percent of new drugs approved by the FDA in 2016 and nearly 50 percent of new drugs approved in 2015. The drugs are also very expensive with $111,820 as the average annual price of an orphan drug in 2014 versus $23,331 for a mass market drug.

As part of the 1983 law, Congress approved a basket of financial incentives to spur development. It includes seven years of market exclusivity to a drug for use on a specific rare disease. It also provided companies with tax credits on research and development and waived regulatory fees. And, notably, the drugs are often approved with smaller and fewer clinical trials because of the smaller patient populations.

In the 1990s, lawmakers introduced a number of amendments to the Orphan Drug Act in Congress, including proposals to impose taxes on profits and revoking exclusivity if the patient population exceeded the 200,000 bright line used to define a rare disease. The proposals all failed.

KHN's coverage of prescription drug development, costs and pricing is supported in part by the Laura and John Arnold Foundation.

Twitter: @HC_Finance