Orphan Drugs -- Big Pharma's Big Opportunity?
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The pharmaceutical industry, as I have noted before, is an industry in transition, reflecting significant change in the regulatory environment, technology, market expectations, and competitive set. Any one of these dynamics forces, even leading companies, to rethink fundamental assumptions about their business models, their go-to-market strategies and the products and services they bring to market. But for pharmaceutical manufacturers, the fact that all of these forces are happening simultaneously accelerates the pressure and reinforces the need to challenge business model assumptions. As a result, orphan drugs appear to be an interesting opportunity to consider for insuring continued success.

Blockbuster drugs have created massive profits for Big Pharma for quite some time. But as patents have expired over the past few years (and continue to do so), this model appears unsustainable. With the enormous success of these blockbuster drugs, and significant regulatory hurdles for new drugs, most manufacturers have spent R&D money investing in follow-on or me-too products, rather than developing innovative drugs. The result is a shockingly low number of truly new molecules and an equally disappointing ability to identify which drugs will work for which patients under a given set of circumstances. Nowhere is this more evident than in the treatment of cancer. Without change to the business model, there is grave potential for the bubble bursting in an industry that U.S. companies have dominated for years.

Further complicating the issue for the industry is that regulators, payers, and patients now question the benefit of some of these follow-on products compared to their predecessors. Many of the new drugs have not demonstrated significant improvement to justify additional cost, and blockbuster drugs have historically generated significant side effects across various populations. Globally the bar is being raised for what constitutes economic and clinical evidence.

The current model relies almost exclusively on randomized placebo-controlled trials (RCTs) required for bringing them to market. These clinical trials utilize inclusion and exclusion criteria that wind up not properly accounting for the people who actually take the drugs in the real world post approval. And this is how we wind up with uncertain efficacy and a whole variety of negative effects that were not anticipated. This is where orphan drugs have an opportunity to play a potential role in Big Pharma's resurgence.

Orphan drugs target a small subset of the population (fewer than 200,000 people). To the extent one can find narrow indications and unmet medical need, there is an opportunity to capitalize on the advantages conferred by the orphan drug law that enable pharmaceutical and biotechnology companies to zero in narrowly, thus, avoiding some (if not all) of the issues with efficacy and safety mentioned above. Economic and clinical value is easier to demonstrate with a small population, and the pendulum is swinging in favor of narrower focus (niche markets).

Another benefit to orphan drugs is that these markets do have the potential to become "rolling blockbusters" (I provide a great example of one such success in an earlier post entitled "Today's Orphan Drug Could Be Tomorrow's Blockbuster"). Companies can first focus on patients with a certain combination of comorbidities for which an indication might be appropriate, and then roll out additional research, without investing the enormous amount of time and money in trying to make a "one-size-fits-all" product, which, at the end of the day, doesn't usually 'fit'. Rather than limiting themselves to one specific therapeutic area, companies could look at a variety of areas where they can make a difference, and focus a certain percentage of their efforts on demonstrating greater economic and clinical value for specific target populations.

Not only will this create public good, but it will also help get back to the roots of the pharmaceutical industry -- innovation and novel products that have kept the U.S. at the forefront of the global pharmaceutical industry. While this specialized focus might not eclipse blockbuster success, it will certainly improve the chance of the industry maintaining its status, as the blockbuster model has seen better days.

Orphan drugs come with some additional advantages to the traditional blockbuster approach. For one thing, the cost of development is significantly lower, particularly given that clinical trials can be smaller (i.e., Phase III trials can be conducted with less than 1000 enrollees). This is a more hospitable environment than the current normal drug path. There are also other attractive benefits like fast track approval, tax credits, and PDUFA fees waived for orphan drugs. And while evidence clearly must still exist -- FDA won't cut corners -- when truly life-threatening conditions are at stake, it may mean that there will be more "wiggle room" in getting a product to market, especially when there are no alternative treatments.

There are, of course, some potential challenges that pharmaceutical companies will need to overcome. Most notably, increased competition draws increased scrutiny from the FDA and Congress, who question whether drugs are really orphan drugs with so much money being invested. There is potential for legislative restraints in the future, though these are likely to just be a part of doing business and an inevitable market force that will play itself out.

Additionally, payers have pushed back on orphan drugs. They still look at FDA approval, safety and efficacy, and the population for which the drugs are intended. No payer will say it won't cover the approved drug (particularly if it's the only drug out there), as this would result in tremendous public backlash. However, because of the price tag, there is great (and reasonable) concern over whether the drugs work. More scrutiny on efficacy is likely to come with orphan drugs, but, ironically, the flipside can be seen with "ultra-orphan" drugs (which target an extremely small population). For these drugs, the total spend may not be the same as a typical branded pharmaceutical, so they are unlikely to get the same attention.

Ultimately, payers are still concerned about cost. Through focus on real world evidence, there will be a lot of opportunity to prove viability of particular drugs. As a result, pharmaceutical companies that are able to monitor and track patients to make sure they see positive effects will see great success with endeavors in orphan drugs. The opportunity to engage in post-marketing studies will prove to be beneficial for both patients and for R&D. But some companies are better prepared for this than others. It will be crucial to establish these capabilities to make this work.

There is a significant opportunity for pharmaceutical companies to revitalize their bottom lines and benefit society at the same time. But attention must be placed on changing the way they do business. Patient engagement must change to make them a more integral part of the process. Real world evidence is at the heart of the success of orphan drugs, particularly as companies have the potential to utilize a "rolling blockbuster" model through more focused research. Today's orphan drug could be tomorrow's blockbuster!

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