FDA moves to close loophole on orphan drugs to bring down costs

The FDA commissioner announced plans to close loopholes in the Orphan Drug Act passed in 1983.

The Food and Drug Administration is changing the way it approves medicines known as "orphan drugs" after revelations that drugmakers may be abusing a law intended to help patients with rare diseases.

In a blog post Tuesday, FDA Commissioner Scott Gottlieb said he wants to ensure financial incentives are granted "in a way that's consistent with the manner Congress intended" when the Orphan Drug Act was passed in 1983. That legislation gave drugmakers a package of incentives, including tax credits, user fee waivers and seven years of market exclusivity if they developed medicines for rare diseases.

A KHN investigation earlier this year, which was published and aired by NPR, found many drugs that now have orphan status aren't entirely new. Of about 450 drugs that have won orphan approval since 1983, more than 70 were drugs first approved by the FDA for mass-market use. Those include cholesterol blockbuster Crestor, Abilify for psychiatric disorders and rheumatoid arthritis drug Humira, the world's best-selling drug.

[Also: Novartis leukemia gene therapy treatment gets $475,000 price tag]

Gottlieb announced plans to close a loophole that allows manufacturers to skip pediatric testing requirements when developing a common-disease drug for orphan use in children. He also signaled that bigger changes are being considered, announcing a public meeting to explore issues raised by scientific advances, such as the increase in precision medicine and biologics.

"We need to make sure our policies take notice of all of these new challenges and opportunities," he wrote. Gottlieb, through his agency, declined multiple requests for interviews.

[Also: Medicaid's budget bursting over climbing prices of older drugs]

Over the years, drugmakers have fueled a boom in orphan drugs, which often carry six-figure price tags. Nearly half of the new drugs approved by the FDA are now for rare diseases -- even though many of them also treat and are marketed for common diseases.

Gottlieb became commissioner in May, a few months after three key Republican senators called for a federal investigation into potential abuses of the Orphan Drug Act, and the Government Accountability Office agreed to investigate.

The GAO has yet to begin its investigation, saying it doesn't expect to start work until late this year, when staff is available. Regardless, in late June, Gottlieb announced what would be the first in a series of updates that shift the way the FDA handles orphan drugs.

Those include:

• Eliminating a backlog in drug applications for orphan designation or status. Getting a "designation" is a critical first step if a company wants to win orphan incentives once the drug is approved for treatment use. And, much like the rise in approvals, the requests by companies to get drugs designated with orphan status has also skyrocketed. Gottlieb said in June that he wanted to get rid of the backlog; on Tuesday, he said the effort was complete. About half of the 200 applications from drugmakers won orphan status.
• Mandating that drugmakers prove their medicine is clinically superior before getting the market exclusivity that comes with being an orphan. The agency had lost a lawsuit in which a company said it was owed the exclusivity period regardless of whether its medicine was better. And two more lawsuits had been filed by Eagle Pharmaceuticals and, more recently, another by United Therapeutics. The FDA Reauthorization Act, which passed last month, made it law that a drug has to be clinically superior to get the incentives.
• Closing the loophole for pediatric orphan drugs by requiring all drugs approved for common adult diseases, like inflammatory bowel disease, undergo pediatric testing when getting approval as a pediatric orphan drug. Pediatric testing is not required for orphan drugs, and last month Congress mandated that orphan drugs for cancer be tested for children. Still, the American Academy of Pediatrics celebrated the proposed change but warned it was only a "first step." Dr. Bridgette Jones, chair of American Academy of Pediatrics Committee on Drugs, said late Tuesday that orphan drugs are "still mostly exempt from pediatric study requirements … children deserve access to safe, effective medications."

Dr. Martin Makary, who wrote a critical 2015 paper on orphan approvals, said the changes at the agency indicate that Gottlieb seems "concerned about all the right things."

"The government does a lot of lip service in general," Makary said. "This is not lip service."

The restructuring has been swift in some ways.

Sandra Heibel, a senior consultant at Haffner Associates, a firm that helps companies submit orphan drug applications, noted that the approval process for designations definitely sped up over the summer, and "we are absolutely getting responses from the FDA back in 90 days. That has come through."

Other changes to the agency, though, will evolve slowly. For example, the orphan drug office has begun reaching across the FDA's divisions for help in reviewing drugs. In May, the FDA's orphan reviews began to work with the office of pediatric therapeutics to review pediatric applications -- ideally increasing the expertise applied when considering a company's request for orphan drug use in children.

In an emailed note Tuesday, the agency confirmed that Gottlieb's orphan modernization plan is part of a larger effort to increase competition and decrease drug prices. One focus is on targeted drugs -- especially those that affect rare diseases or diseases for which there is no effective therapy, the agency said.

"Such drugs present some of the biggest opportunities in medicine to treat and cure debilitating and very costly diseases," the agency stated.

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