Orphan drugs can be a route to success, but pricing is a future problem

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The sharp rise in the share price of Amicus Therapeutics last week, prompted by phase II data on its Pompe’s disease candidate AT2220, has thrown the spotlight on the hitherto lucrative area of orphan indications. Companies developing drugs to treat rare diseases can charge a premium for their products – but there are indications that this strategy might not be sustainable.

The pricing of orphan therapeutics is becoming problematic, with regulators and health authorities beginning to kick at high prices. It is reasonable for developers to expect a reward for the risk they take in seeking to address small patient populations, but when a larger company licenses in an orphan drug and then charges a king’s ransom the situation could appear unfair.

Plucky underdogs

The poster child for orphan drugs is Soliris – the single most expensive compound on the planet. Alexion charges nearly half a million dollars per patient per year for the paroxysmal nocturnal haemoglobinuria (PNH) therapy, but did oversee its entire development, from discovery to marketing. There are also only an estimated 8,000 PNH sufferers in the US, a fact that Alexion surely used to justify charging so much for Soliris, which according to EvaluatePharma is set to attain blockbuster status this year.

But it is this ability to charge premium prices for orphan drugs that is increasingly making them more attractive to big pharma groups struggling with rising R&D costs and lower productivity. Merck & Co's €442.5m ($576.4m) deal this week for the orphan cytomegalovirus prophylactic letermovir is a sign of how important this area is for the biggest drugmakers (Antiviral joins humming Merck pipeline in fat deal, October 16, 2012). Other notables include Pfizer's pact to license Protalix's Gaucher's disease treatment taliglucerase alpha for an up-front fee of $60m and potential milestones of $55m.

Another attraction of orphan drugs is the relative ease of getting them to market, with many getting the nod from small trials using ill-defined or surrogate endpoints. Amicus’s AT2220, for example, is well placed: the only approved treatment for Pompe’s is enzyme-replacement therapy with Sanofi’s Myozyme, which is forecast to become a blockbuster by 2018. AT2220 is designed to potentiate Myozyme, and last week’s phase II results give an indication that it works, though final data are not expected until the end of the year.

However, the tiny trials conducted on orphan drugs mean that sometimes it is hard to tell whether a drug offers a genuine advance. Sarepta’s success with eteplirsen in a phase IIb Duchenne muscular dystrophy study this month caused its share price – like Amicus’s – to rocket, but with only 12 patients it is always possible that the company simply got lucky (Sarepta’s step forwards in muscular dystrophy raises the bar for competitors, October 4, 2012).

So, with health budgets tightening around the world and increasing emphasis on real world evidence of the effectiveness of drugs rather than clinical trial results, Amicus and companies like it could find it difficult to pull off Alexion’s trick. Amicus’s other drug, a phase III Fabry disease candidate called Amigal, is partnered with GlaxoSmithKline. If public opinion turns staunchly against big pharma profiting significantly having taken on little risk, Amicus might find it hard to charge the kind of sums necessary to compensate for the work put in.

Competition

Furthermore, the orphan strategy is unlikely to wash in the emerging markets in which pharma companies are so keen to get a foothold. Orphan drugs rely on insurers or governments stumping up the cash; poorer countries are liable to balk at huge prices, forcing developers to either lower the cost or abandon the market.

In a sense, the interest in orphan drugs could contain the seeds of its own destruction. For example, Sanofi, Shire and Dainippon Sumitomo have all sought, and obtained, a slice of the Fabry disease market. There is no reason why competition in orphan drugs would not do what competition usually does, and drive prices down.

Incentivising the development of therapies for rare diseases is a necessity. In future, however, companies might come to rely on market exclusivity and tax breaks rather than the ability to charge extremely high prices.

To contact the writer of this story email Elizabeth Cairns in London atelizabethc@epvantage.com

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