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Orphan Drugs at 30: Will Success Become Too Expensive?

Monday, January 14th, 2013

 

The Orphan Drug Act (ODA) turned 30 this month, demonstrating that good laws really can have an enduring impact. Amidst the celebrations, a reporter asked me a provocative question: can we afford more orphan drugs costing hundreds of thousands of dollars per year? FDA Matters answered “yes.”

However, I added a caveat that should worry everyone eager for orphan drugs to succeed. When genomics and personalized medicine become successful, this will multiply the number of rare diseases and the overall cost of orphan drugs, perhaps beyond what the system can bear.

Orphan Drugs/1983. At the time of the 15th anniversary of the ODA, I wrote an article entitled: A Good Law is Always at Risk. I tried to convey that the original Act had been no “slam-dunk.”

We were focused on diseases with almost no constituencies—ones that were unknown or neglected and had little chance of attracting human and capital investment. I still think of these as “traditional rare diseases,” such as Parkinson’s, Tourette’s, ALS and inborn errors of metabolism. This was the problem the ODA was designed to address.

Cancer was the counter-case—well-organized, lots of public awareness and concern, a well-funded NIH institute and the attention of researchers and drug companies. Only later did we realize that all but four types of cancers are “rare diseases.” One positive and unexpected outcome is that oncology patients have been among those who have received the most clinical benefit from the ODA.

From the beginning, there were worries that the law would richly incentivize drug development that would have occurred anyway. A rewrite of the ODA in the current environment would undoubtedly add restrictions to prevent “windfall profits,” “excessive pricing,” and “market exclusivity for blockbusters.” I have argued—and will continue to do so– that the overwhelming benefits of the Act (including its remarkable stimulative effect on the growth of biotechnology) have been worth whatever it has cost society by not restricting these outlier situations.

Orphan Drugs/2013. The pace  of designations, approvals, and orphan drug investment has accelerated over the last few years. Along with continued strong Congressional support for orphan drugs, some very large drug companies have suddenly discovered the orphan market.

At the same time, orphans have seen more than their share of controversy and public questioning. At least one company took an inexpensive compounded drug and set a market price for their approved orphan version at $1500, more than 50 times its prior cost. Recently, there have been projections that orphan drugs in development may cost more than $400,000 per patient per year and that “million dollar orphans” are on the horizon.

It is this latter situation that prompted the reporter to ask me if we can afford orphan drugs and “doesn’t something need to be done?” I think not.

FDA approves orphans, but it is up to insurers, health plans and government programs to decide if they will pay for them. A prior column, Drug Pricing 101: A Fundamental Issue Revisited, explains how most companies come up with prices and how they justify them to payers. Apart from the occasional price made up in the boardroom (e.g. the $1500 drug mentioned above), orphans will continue to be reimbursed because some significant portion of their price is justified by the value they add to patient outcomes, the existing treatment costs they replace and/or the amount and length of the discovery and approval process.

I expect lots of future controversy because the per patient prices ARE shocking, but I also expect that the aggregate costs of traditional orphan drugs—including the more expensive ones that are coming—will still not be a major factor in health care cost containment. Downward payer pressure on orphan drug prices will definitely occur. Wholesale failure to pay for orphan drugs by insurers will definitely not occur.

Orphan Drugs/2023. The future of orphan drugs is not, however, as bright as this suggests because we are moving beyond traditional rare diseases and orphan drugs.

 I’ve argued it will take many years before genomics and personalized medicine finally emerge as cornerstones of FDA-approved medications. Slowly, however, over the next decade or so, large, seemingly homogenous diseases (e.g. breast cancer) will start to become subdivided into many diseases based on patient characteristics that are responsive to selective treatment (e.g. the BRAC mutation in breast cancer).

Any such treatment that works for only one group of patients may represent a “medically plausible subset” of less than 200,000 patients (FDA’s criteria for an orphan drug). Once we have reached the point where orphan drugs based on genomics and personalized medicine start to become numerous, then the societal and economic dynamics are different than today’s focus on orphan drugs for traditional rare diseases.  

Conclusion. I have confidence we can find the money for traditional orphan drugs in 2013 and the coming years. I do not know if the societal resources will be there when the scope of rare diseases is expanded by genomics and personalized medicine and the number of orphan drugs skyrockets.

Steven

Posted in FDA and Congress, FDA and Industry, Orphan Drugs | No Comments »

Drug Product Pricing 101: A Fundamental Issue Revisited

Friday, September 7th, 2012

 

Eighteen months ago, FDA Matters wrote about the firestorm created by KV Pharmaceuticals’ decision to “charge $1500 per dose for Makena, a drug that reduces the risk of pre-term delivery in pregnant women. The same therapy has been compounded in pharmacies for years at a cost of $10 to $30 per dose.”

 

Three months ago, K-V Pharmaceuticals filed for bankruptcy protection. This week, a federal judge rejected the company’s last-ditch effort to save itself by ruling that FDA had discretion to permit continued compounding of the drug.  

 

No one knows the “right price” for this or any other drug, but there are ways to rationally evaluate and guide product pricing decisions. Apparently, not everyone in industry knows this.

 

Value/pricing analysis helps companies determine an appropriate and defensible price. Some large pharmaceutical and biotech companies have the in-house capacity. Generally, small and medium-sized companies will use external consultants or consulting firms to assure a professional, unbiased process. However, it seems clear that some companies don’t bother to undertake a sophisticated analysis prior to setting prices.

 

In recommending a particular price or a range of prices, the consultant or consulting firm will look at three or more approaches…and then work with the company to make judgments about “best fit” or achieving consensus among a range of possible prices. Here are three examples of the approaches a consulting firm might use:

 

·         “Value-added” pricing. This values the company’s product (and supports a price) based on replacement or enhancement of current treatments in the same clinical category. In the case of an asthma drug, a value-added pricing approach would look at “savings” achieved by the reduction in hospital days, emergency room visits, and disability. Other system savings might be considered, such as the benefit of added compliance, the reduction in concomitant drugs, fewer side effects, etc. Any system “costs” (e.g. loss of productivity, treatment of adverse events) are also included in the model.

 

·         “Cost plus” pricing. This values the company’s product based on the development costs and achieving a reasonable return on investment (ROI).  This may include real, imputed and opportunity costs. Thus, the “cost” component is likely to be greater than the company’s actual expenditures. Pricing in this approach is highly dependent on the ROI variable and the likely timeframe before newer products or generics cut deeply into sales.   

 

·         “Comparable value” pricing. This looks at the pricing of products that have comparable characteristics or benefits, but may be in different clinical categories than the company’s product. For example, a new recombinant vaccine might be compared to the pricing increment when another vaccine was “upgraded” to a recombinant version. In the case of a unique therapy or breakthrough (e.g. a new drug for Huntington’s disease), an analogy is drawn to the most relevant situations in other treatment areas.

 

The analytic models are adjusted for a host of variables, such as the size of the potential market, the degree and rate of market penetration, and the likely product lifecycle. As noted, there is usually a consensus-building process where the consultant works with the company to determine a price that factors in the results of the different analyses.

 

Each consulting firm has its own approach, a proprietary model to distinguish their services from competing firms. These models add value and reach far beyond the basics I have described above.

 

Now you have an idea of how it’s done….or should be done. This analytic process should reduce objections to the pricing of a product and also prepare a company to defend its pricing decision. Controversy cannot always be avoided, but shareholders, patients, and payers are always going to respond better to companies who have backed their pricing with sound reasoning.

 

Steven

 

Disclosure: I am not affiliated with any consulting firm that does pricing analysis, nor is this a service I provide. However, if you are interested in the names of a few firms that are in this business, please contact me by e-mail at sgrossman@fdamatters.com.

Posted in Drug Approval and Access, Insight on FDA-regulated Industries, Orphan Drugs | 2 Comments »

Why Orphan Drugs are a Key Part of Pharma’s Future

Thursday, August 23rd, 2012

 

I was recently interviewed about orphan drugs for the British website, “pharmaphorum” and thought my readers might be interested. Here is a sample:

 

HB: How has the orphan drug space changed since the introduction of the Orphan Drug Act 1983?

SG: There is really no way to compare the situation. When we passed the Act, we hoped to stimulate the development of a few drugs that would make a difference in people’s lives. No one foresaw that we were creating what would become a multi-billion dollar market segment in which companies might compete fiercely to be first. The timing was also fortuitous — in that the Act was adopted just as our capabilities in biotechnology began to grow and the two movements are closely intertwined.

 

The full interview is as at: http://www.pharmaphorum.com/2012/08/22/fda-matters-orphan-drugs-key-part-pharmas-future/.

 

Steven

Posted in Drug Approval and Access, FDA and Congress, FDA and Industry, Orphan Drugs | No Comments »

User Fee Reauthorization—Critics Come Out Before the Ink Is Dry

Tuesday, June 26th, 2012

 

The House passed the final user fee reauthorization legislation last week and (as of this evening) the Senate has also passed the bill. It will now go to the President for signature. FDA Matters says: well done, Congress! Despite my fear of delays and bickering, you completed this process on time and with broad bipartisan support.

 

However, critics are already emerging, "before the ink is dry.” The advocacy group, Public Citizen, is complaining that drugs and devices will be less safe as a result of the legislation. At the same time, Dr. Scott Gottlieb, a former FDA official, has published an essay arguing the legislation doesn’t go far enough to expedite review of drugs for serious medical conditions.

 

The Public Citizen Health Research Group’s critique is to be expected. They were founded 40 years ago and have consistently been critical of the agency’s handling of drug and medical device approvals. Their continued opposition rests on three primary points:

 

  1. User fees created by PDFUA have created a conflict of interest because the agency is funded in part by the industry it is supposed to be regulating.
  2. This has led to poor quality reviews of drugs and thus the release of dangerous products. Since PDUFA, more drugs have been approved and then banned, causing needless deaths/injuries.
  3. Working conditions at the FDA have plummeted since PDUFA, resulting in high staff turnover and sweatshop-like conditions.

I, too, wish that FDA were 100% taxpayer funded, but user fees are reality, a compromise that makes it possible for FDA to have the funds to operate. There is no evidence of bias generated by the fees, plus Americans would be far worse off if a quarter of FDA’s budget (user fees) were to suddenly disappear.

 

With regard to the quality of drug reviews, I see no evidence they’ve declined and the methodology of the PDUFA/drug approval study is suspect. Working conditions and staff turnover are definitely a matter of “compared to what?” I don’t think FDA does badly when you look at it that way.

 

Far more of a surprise is the essay by Dr. Scott Gottlieb, former deputy commissioner for medical and scientific affairs at FDA.  Using primarily examples of orphan drugs, he argues that FDA is over-focused on long-term safety and on reining in physician prescribing practices. As a result, the agency is stifling medical innovation and disregarding the needs of patients with serious medical conditions. I don’t agree with him on a number of points, but you can hit the link and judge for yourself.

 

His argument might be more compelling if he referenced large-market products, such as pain killers and obesity drugs. However, by using orphan drug examples, Dr. Gottlieb winds up attacking the new user fee reauthorization legislation as insufficient to expedite review of drugs that target serious medical conditions.

 

FDA Matters has already praised changes affecting orphan drugs and accelerated approval. My view is shared by much of FDA and the FDA stakeholder communities; for example: FDA and other leaders, BIO, the National Health Council and the National Organization for Rare Disorders.

 

So, why attack PDUFA’s bold new efforts on behalf of orphan drugs and patients with serious medical conditions? 

 

To Dr. Gottlieb, these “legislative fixes” are inadequate because “the agency’s staff will still have wide discretion in determining when to employ these [new] tools.” If overcautious, reluctant reviewers are still in charge, then even Congressional changes in the FDA law will not improve the review process to benefit patients with serious medical conditions.

 

His proposed solution is to remove the approval of drugs from the review divisions and give that authority to a panel of senior scientists with the “experience and stature to exercise the policy judgment required to make careful decisions about how to weigh risk and benefits…” An even better solution, in his mind, would be to follow the European Medicine Agency’s model in which staff does analysis and evaluation, but the final approval decisions are made by politically-appointed individuals.

 

I think both of these approaches would severely weaken—if not outright undermine—the existing FDA approval process. This would be particularly unfortunate now, when the new legislation empowers agency leadership to lower the barriers, so that review staff can be more flexible and apply new approaches to evaluating therapies for serious medical conditions.

 

Conclusions. Before more drastic actions are considered, let’s give the new user fee reauthorization legislation time to work. The ink isn’t even dry!

 

Steven

 

 

Many readers were out of town this past Friday and may have missed:

 

Biosimilars Update: Keys for the Next Year and Beyond   June 22nd, 2012

The biosimilars market in the U.S. will not grow large overnight. By a decade from now, sales of biosimilars will be creating new winners and losers in the overall biopharmaceutical marketplace. In light of this, I was recently asked: what should a developer or investor be looking to achieve over the next year in the area of biosimilars? What should they be looking to achieve in the years after that?  Read the rest of this entry

 

Posted in Drug Approval and Access, FDA and Congress, FDA and Industry, FDA Leadership, Orphan Drugs | 1 Comment »

Spinal Cord Injury—Innovation Measured in Decades, Not Headlines

Monday, June 18th, 2012

 

We are undergoing a supposed “national crisis” in medical innovation.  Congress, FDA, NIH, and industry are involved in multiple initiatives to “cure” this problem. This is particularly visible now because the user fee reauthorization process is underway, but the state of medical innovation is always relevant because of our headline-driven, crisis-oriented culture. 

To FDA Matters, this approach profoundly distorts medical accomplishment. You can’t use “where are we today” to judge the success or failure of a medical research process that is inherently broad, iterative, uneven, filled with false starts and driven by cumulative success more often than miraculous breakthroughs. As a case in point, I offer efforts to achieve spinal cord regeneration.  

In the mid-to-late 1970’s, I worked for an advocacy group that, among other things, represented the interests of medical research institutions. There was one Congressman on the right committee who was friendly to our cause and with whom we should have had a great relationship.

However, he had two key positions with which we could not agree. He was, simultaneously, the leading Congressional advocate for animal rights and perhaps the only Congressional advocate for spinal cord regeneration. We opposed his position on animal rights because we thought it would hinder medical research.

Surprisingly, we were also against his legislation that would stimulate medical research on spinal cord regeneration. We supported groups promoting the fight against cancer or cardiovascular disease because their proposals allowed NIH significant discretion to determine priorities. In contrast, we were against legislation that would require research on narrow and specific topics, such as spinal cord regeneration.

But our objection (and the vehemence of our objection) went well beyond that. The promise of biomedical research was so great, it was wrong to waste research monies on areas that held no promise.

After all, we thought, spinal cord regeneration was the stuff of science fiction. Despite the death and disability from spinal cord injury—an area of genuine unmet need—there was nothing that could be done. People could dream of a future world where medical science could achieve such miracles, but for the foreseeable future it was wasted money and unfairly gave hope to patients to suggest that spinal cord regeneration was possible.

Flash forward 30 plus years and the Congressman looks like a visionary….and the organization I worked for looks like unwitting advocates for the status quo. A rich base of scientific discoveries has improved supportive care, provided mechanisms for limiting the damage from spinal cord injuries and given reasonable hope that spinal cord regeneration is a possibility for humans in the next 10 to 15 years, maybe sooner. 

To gain perspective on this, along with a sense of NIH’s current commitment to this area of research, go to http://www.ninds.nih.gov/disorders/sci/detail_sci.htm and also follow some of the links from that site.

I don’t think we were fools in 1998 because we couldn’t see spinal cord regeneration as a promising research area. Despite the organization’s considerable expertise, we underestimated how far medical research could take us—given enough time, interest, commitment and funding. Also, in retrospect, it is remarkable how willing researchers are to contribute to a process of innovation and discovery for which someone else might eventually gain most of the credit.

Forgive me if I don’t see the crisis of “medical innovation” about which it is so fashionable to complain.

As a result of the user fee reauthorization legislation and other FDA and NIH initiatives, I foresee a more conducive regulatory environment for development and approval of medically-innovative products, particularly orphan drugs. The goal is to allow more flexibility, while maintaining rigor. However, these process enhancements are only valuable if there is a wealth of medical innovation, not a dearth of it.

There is more innovative medical research being done today than at any time in history. But the truly great achievements are usually built on many people’s work undertaken over many decades—and until near the end, they hardly ever rate a headline unless someone is intentionally hyping them. Look beneath the surface and you will find that medical innovation is alive and well and just needs our continued encouragement—via regulatory and funding support.  

Steven

Posted in Drug Approval and Access, FDA and Congress, FDA and Industry, Insight on FDA-regulated Industries, Orphan Drugs, Uncategorized | 1 Comment »

PDUFA Reauthorization: Major Upgrades for Orphan Drugs

Wednesday, June 13th, 2012

 

Congress is to be congratulated on its progress toward passage of user fee reauthorization legislation. House and Senate-passed versions are being reconciled by staff, with a few fairly tough issues yet to be resolved. There is no apparent barrier to a final piece of legislation later this month or during July.  

One of the big winners in this process has been the rare disease/orphan drug (RD/OD) community. Notwithstanding a few remaining (minor) disputes in the RD/OD space (more on this later), the final legislation will contain the strongest set of improvements for the community since the original 1983 Orphan Drug Act.

The RD/OD community had three overriding objectives during the multi-year process of hearings and negotiations that culminated in the House and Senate-passed legislation:

  • FDA flexibility in reviewing orphan drugs
  • Resources  and process improvements for development  of biomarkers/pharmacogenomics
  • Overhaul of the humanitarian device program

The community achieved all three plus a number of additional items that will also be part of the final package.  

The Commissioner’s Commitment Letter. The user fee agreement is only partially contained in the law—much of the detail is in a commitment letter signed by the Commissioner. As part of this, FDA agreed to the Rare Disease Initiative, which includes:

  • increased staffing of the CDER/CBER Rare Disease Programs (RDP) (which provides expertise in orphan drug development to the product review divisions)
  • increased FDA efforts to assure that product reviewers, industry, and patients are working together
  • broadening  research and programming in the areas of non-traditional clinical trial design, endpoints, and statistical analysis associated with orphan drug development
  • enhanced staff training for reviewers with specific regard to approval of drugs for rare diseases
  • better integration of RDP staff into review teams

When the PDUFA legislation becomes law, these will be firm commitments that FDA must carry out for Fiscal Years (FY) 2013 (starts October 1, 2012) through FY 17.

Other RD/OD Priorities.  A number of other proposals, critical to the RD/OD community are in both the House and Senate bills:

  • establishing procedures for faster review and more flexibility for promising therapies for unmet (orphan) medical needs. This will be accomplished by:
    •  updating and codifying FDA’s existing accelerated approval process, and
    •  adding a new process to speed development of drugs demonstrating strong efficacy in the early stages of clinical development (the Breakthrough Act).
  • encouraging greater use of the existing, successful Humanitarian Use Device (HUD) program. The reauthorization legislation expands the scope of HUD (adult and not just children’s devices) and allows companies to make a profit.
  • permitting FDA to use a wider range of experts and to use the government-wide standards for assessing conflicts of interest
  • re-authorizing and improving the Orphan Drug grant program.

The Remaining Issues. There are three RD/OD issues that differ between the bills.

The first is in the Senate bill and tries to expand and strengthen the patient voice in FDA discussions. FDA is already doing this. However, the agency has a weak understanding of how much risk some rare disease patients might be willing to bear in order to have even a small possibility of benefit. Patients need to be heard in this debate. I hope the House agrees to this provision.

The second provision is in the House bill. It would revise the accelerated approval process to allow its use when there is little or no data on a rare disease with a particularly small population. I think these represent situations where FDA can best judge each situation themselves rather than being prodded into what might well be an unscientific review process. I hope the Senate does not adopt this provision.

Finally, the House has included a pilot program to encourage development of drugs and biologics for rare pediatric diseases. There are some questions about how this will work, so making it a pilot program makes sense. I hope the Senate agrees to this provision.  

Steven

About once a year, I check on progress in bettering the lives of people with rare diseases:

Posted in Drug Approval and Access, FDA and Congress, Orphan Drugs | No Comments »

Lies, Damned Lies and Statistics

Thursday, May 12th, 2011

   

FDA’s regulations, policies and actions are multi-faceted and complicated. Oftentimes, it is hard to interpret what the agency is doing and why. We all depend on good analysis to understand where the agency has been and where it is headed. Unfortunately, some of what we read about FDA is poorly reasoned or distorted by the media and others.  

 

Three recent analyses have particularly troubled FDA Matters. They claimed to draw broad and important conclusions about FDA behavior and were uncritically circulated through mainstream and trade press. Yet, the analyses they offer are unremarkable or misleading.

 

 

My first example is a recent analysis from a healthcare research firm analyzing the number of FDA refuse-to-file (RTF) letters over the last dozen years. These involve situations where companies file drug and biological applications for approval and the FDA returns them to the company rather than accepting them for evaluation.

 

There is a methodological problem: FDA does not disclose RTF’s and traditionally companies have not disclosed them. Thus, any analysis of trend data (“more now, fewer a decade ago) is speculative.

 

 

Likewise, not knowing which companies received RTF’s means there is no basis to conclude that RTF’s were previously associated with small, inexperienced firms, but now are being received by larger companies. The shift, we are told, might reflect the agency’s enforcement mentality under the new commissioner. And maybe standards have been raised. A commentator (not the author) even suggests that the alleged uptick may be FDA maneuvering to improve its success rate under the user fee program (while, presumably, returning meritorious applications?).

 

 

To its credit, the analysis does mention that “the wave of RTF’s” may be related to FDA’s 21st Century Review Initiative. One aspect of that initiative is for FDA to weed out applications that are likely to be rejected later in the process. This is more efficient for companies, as well as FDA.

 

 

Front-loaded reviews are going to create more RTF’s. This seems obvious, if not unassailable. But trying to embellish this with time/trend data and allusions to changing standards raises issues that have no bearing on the question of whether RTF’s are becoming more important in the review process…and whether this is a good trend.

 

  

However, the implication picked up by the media was that increased industry interest in orphan drugs was not being met by increased commitment by FDA to get these drugs approved. But is that really the case? I don’t know and, despite appearances, the numbers don’t answer the question.

 

 

Showing same-year data for applications, designations and approvals implies that they relate to each. However, any given year’s orphan drug approvals reflect designations that were made 2 to 6 years previously. The meaning of the surge in the number of designations in 2010 cannot be assessed until we see if there are more orphan drugs approved in a few years.

 

 

Lastly, there is this week’s headline that: Biopharmaceutical Product Approvals in the U.S. Rose Dramatically in the 2000’s.” As a result of a Tufts University study, we are told that “during the 2000-09 period, 65 biopharmaceutical products received U.S. marketing, approval, up from 39 in the 1990s and 13 in the 1980.” Media seemed to treat this as a revelation. 

 

However, there was no biotechnology industry to speak of in 1980 and no products. As chronicled in previous columns (link below), the growth of this new industry has occurred over several decades. Is anyone surprised there were more approvals in the 2000’s?  

 

These three examples are a reminder that those of who write about and critique the FDA have an obligation to be accurate and not misleading. All of us, including myself, will fail sometimes. The media that report on our analyses rarely check to see if our conclusions are valid or make sense. 

 

 

 

Steven

 

The first analysis is at: http://portal.leerink.com/IRPDocumentViewer/Web/DocumentViewerCache.aspx?docId=4E2F752B612F6B5646706F3D&pad=52384B6E6E74573478656F45317951416D4B6A506E673D3D&userId=52636261346B39577A34343D

 

The second analysis is at: http://www.fdalawblog.net/fda_law_blog_hyman_phelps/2011/01/orphan-drug-designations-and-applications-took-off-in-2010-while-orphan-drug-approvals-tapered-off.html

 

The third analysis is at: http://csdd.tufts.edu/files/uploads/may-june_2011_ir_report_summary.pdf

 

 

Forget the Hype: Change Takes Time     March 21st, 2011

FDA Matters is always impressed by how much FDA does. The everyday tasks are overwhelming: reviewing, approving, monitoring and inspecting the products and facilities responsible for 80% of our food supply and 100% of drugs, biologics, medical devices, vaccines, and animal drugs. Then there are the policy issues, big and small, that must be tended to.

These are largely functional tasks—someone has a job (or several) and does them. Yet, FDA has another life, as the bridge to the future of foods, drugs and devices. This responsibility is vitally important to our nation. It also takes time to bear fruit. Read the rest of this entry

Posted in Drug Approval and Access, FDA and Industry, Orphan Drugs | No Comments »

Public Incentives and Drug Development: More is Usually Better

Tuesday, April 5th, 2011

 

A former colleague often declared: life sciences companies have no alternative to re-investing in developing more drugs, biologics and medical devices. I always thought this naïve because of its implication that life sciences research is self-perpetuating and does not need encouragement.  

 

Currently, Congress seems primed (through oversight and possibly legislation) to consider the role of companies and government in medical product development. This week, FDA Matters explores the nature and need for incentives to conduct life sciences’ research; last week’s column looked at issues surrounding the pricing of medical products.

 

The government’s goal in incentivizing certain life sciences research is to stimulate activity that meets or resolves societal needs (e.g. drugs and devices for cancers, therapies for rare diseases, treatments for tropical diseases). Idealistically, the incentives encourage vital, new activity without providing subsidies for research that would have occurred without incentives.  

 

The reality is different. If the rules (statutory or administrative) for receiving incentives are drawn too tightly, then many research projects will not be undertaken, losing the benefits that society would otherwise receive.

 

To explain this better, I have identified three broad categories of public incentives for research:

 

Ordinary research incentives. These are the incentives available for all corporate-supported research. These include the research and development (R&D) tax credit, access to government technology transfer programs and patent protection. For most industries, and even most life sciences research, these seem sufficient to stimulate a high-level of research investment.

 

Upgraded incentives.  Ordinary research incentives are sometimes not enough to stimulate life science research that will benefit society. As a result, Congress has created a number of upgraded incentives for medical product development.

 

For example, Congress has provided partial patent term restoration for drug companies experiencing particularly long delays in receiving marketing approval. This has led to increased research investment (as well as boosting the generic drug market as part of the same legislation).  

 

Also, Congress created the Orphan Drug Act to provide incentives for research on drugs for rare diseases/small populations. This law incorporated a number of incentives, notably up to seven years market exclusivity for any new orphan indication on a drug.  

 

FDA also provides a number of upgraded incentives for particular types of research through its expanded access and accelerated approvals programs. User fee waivers granted to first products from new companies also stimulates research investment.  

 

Extraordinary incentives.  Sometimes even upgraded incentives aren’t enough to stimulate vitally important research. In those cases, Congress may consider incentives designed to dramatically alter the normal risk/reward/certainty calculation that usually precedes research investments.

 

Thus far, I can think of only one instance of extraordinary incentives. In 2007, Congress enacted a program that awards a “priority review voucher” for successful development of a new treatment for a neglected tropical disease. Owning a voucher entitles a company to ask for a priority review (6 months) by FDA of an unrelated product that would otherwise be granted a normal review (10 months). Currently, Congress is looking at legislation (S. 606) that would extend this voucher program to developers of products to treat pediatric rare diseases.

 

It is up to Congress to decide whether to encourage particular life sciences research beyond the ordinary incentives. When upgraded or extraordinary incentives are under consideration, the goal is stimulating substantial additional research….and the development of many new drugs that are particularly beneficial to society.   

 

In all such situations, there is a risk that incentives will be provided to research that would have occurred anyway. My own experiences suggest that overly tight restrictions on program eligibility result in understimulatoin of needed research. When creating incentives and, also, assessing their impact later, Congress needs to take the broad view of the societal good that can be achieved by upgraded and extraordinary incentives for research.

 

Steven

 

Drug Product Pricing 101                 March 26th, 2011

A thousand good deeds of the pharmaceutical and biotechnology industries have been washed away by the decision of K-V Pharmaceuticals to charge $1500 per dose for Makena, a drug that reduces the risk of pre-term delivery in pregnant women. There is an easy comparator: the same therapy has been compounded in pharmacies for years at a cost of $10 to $30 per dose. Congressional and public reaction has, quite understandably, been one of outrage.

No one knows the right price for this drug, but there are ways to find out. In conversations this week, FDA Matters discovered that many knowledgeable people don’t know that there are tools to rationally evaluate and guide product pricing decisions. Read the rest of this entry

Posted in Drug Approval and Access, Insight on FDA-regulated Industries, Orphan Drugs | No Comments »

For Twenty-Five Million Zebras: New Hope for Therapies

Sunday, August 1st, 2010

Several generations of North American trained doctors were taught: if you hear hoofbeats, think horses not zebras. This graphic image reinforced an important aspect of medicine for young physicians seeing mostly severely ill patients in tertiary care hospitals: if an otherwise healthy patient is coughing, it is most likely a bad cold. It is almost certainly not pneumonic plague.

What Congress, FDA, and NIH have learned over the last 30 years is that there are many more medical zebras in the United States than anyone imagined. NIH has catalogued nearly 7,000 rare diseases. More are being discovered all the time. Altogether, it is estimated that 25 to 30 million Americans are affected by rare diseases. (more…)

Posted in Drug Approval and Access, FDA Leadership, Orphan Drugs | No Comments »

Hot Town, Summer in the City—2010

Sunday, July 11th, 2010

For the news media, the only FDA story this coming week will be the two-day advisory committee meeting reviewing the diabetes drug, Avandia. Based on an earlier article (link below), FDA Matters will be looking at how Dr. Hamburg’s FDA handles the discordant voices coming from within the agency.

Missing from public dialogue is the extraordinary (perhaps unprecedented) number of large, consequential projects that FDA will be working on this summer. Every part of FDA is involved in some initiative that could become a “game-changer” for the agency. (more…)

Posted in Drug Approval and Access, FDA Accountability and Transparency, FDA and Congress, FDA and Industry, FDA Leadership, FDA-NIH Relations, Follow-on Biologics, Food Issues, Orphan Drugs | No Comments »

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