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Rather than seeking a single indication for one large group, the orphan-drug approach segments the market for a drug more minutely.
Historically, orphan drug development has existed on the margins of R&D spend, but increasingly, this product class is attracting attention and value. With the blockbuster model wearing thin, the pressure for lower cost drugs with better outcomes is growing. It's time for the industry therefore to diversify its strategic approach.
The benefits of shifting focus to orphan drugs are many, including a streamlined approval process, patent extension and exclusivity, tax credits, and smaller clinical trials based on narrow indications. But as competition moves into these niche spaces, everyone will be looking for an opportunity to get an orphan-drug designation (ODD). This strategy may lead to additional scrutiny and intensify the need to demonstrate the economic and clinical value of a product as it applies to a particular population before approval.
The pursuit of orphan drugs has implications for change across the entire business. It will require a new R&D approach that addresses economic and clinical value data, and goes beyond randomized clinical trials for regulatory approval to alternative types of data (e.g., observational or "real-world" studies that demonstrate product value over time in real-life scenarios). Companion diagnostics used to identify the patient population most likely to benefit from orphan drugs represent another key area that biotech and pharmaceutical developers will need to explore. This area may present licensing and acquisition opportunities on both sides.
The growing emphasis on orphan drugs and more targeted diagnostics represent an increasingly personalized approach to medicine in general. An inevitable impact will be shrinking target patient populations, where the majority of blockbuster drugs will be suitable for a significantly smaller group of patients, the number of whom may well fall within the definition of rare diseases (6–8% of world population) (1). As genomics define specific subpopulations within larger disease conditions (e.g., hypertension), bio/pharmaceutical manufacturers of all sizes will increasingly need to shift to thinking about drug development within the context of the orphan model.
In this context, companies will have to seek indications for their products within narrower patient populations and build a large population of patients incrementally, rather than as one single, huge population used in the rolling blockbuster model. To develop a successful model based on orphan drugs, manufacturers will need to adopt a new approach to both product development and commercialization.
Rising product development costs, stingier public and private reimbursement, and increasing regulatory hurdles mean that companies are struggling more than ever to bring new products to market at prices that sustain ongoing investments in innovation. Ongoing waves of blockbuster-drug patent expirations are offering insurers cheap and effective generic drugs. Concurrently, rare but significant side effects (as in the case of Vioxx) have eroded regulators' willingness to approve drugs for primary care indications without prohibitively large and expensive clinical trials (2). Additionally, the situation is complicated by a shift in the balance of power among industry stakeholders, each of which may require different evidence to be convinced of a product's value.
Instead of thinking big, innovators need to think small. If a company shrinks the denominator to just the segment of the market that genuinely benefits, then the value element starts to look a lot better. This shift can mitigate business risk, as well. Rather than seeking a single indication for one, large group of patients, the rolling blockbuster approach for orphan drugs segments the market for a drug more minutely, creating a large number of target populations in which the drug's value can be assessed. Such an approach reduces the risk inherent in clinical trials because the binary outcome (reimbursed/not-reimbursed) applies only to the small segment under consideration. The population becomes the sum of those small segments, eventually comprising a much bigger population.
Compared with the bleak landscape of aging blockbusters, the orphan-drug market is appealing, especially when considering drugs that successfully made the leap from orphan to rolling blockbuster. Take, for example, Botox—a drug approved with orphan status in 1984 to treat uncontrolled blinking, neck pain, and muscle spasms. Since then, FDA has approved numerous additional indications, including the treatment of frown lines (2002) and migraines (2008). Today, there are 5 million doses of Botox administered annually in North America, which translates into approximately $1.5 billion in sales.
Orphan drugs have historically focused on a small, defined market need. Because the population of individuals likely to optimally benefit from any individual drug may be small, drugs produced will be higher cost because drugmakers will have to recoup their investment from a smaller population of patients. Proving the economic and clinical value of treatment is therefore more crucial for orphan drug. This value case can include elements such as high quality outcomes, better patient experience, sufficiently improved health to allow the patient to more effectively manage other conditions, or product characteristics that improve overall patient adherence. Each of these elements should be explored and planned for early in product development.
Because the target population will be smaller, clinical-trial participants may include some people suffering from comorbidities that would otherwise be excluded from the sample. In this regard, the trial participants begin to look more like people in the real world. As a result, careful tracking of all patient outcomes will be crucial. Preparing to track these outcomes will need to start early in product development and continue postmarket to develop the kind of longitudinal data required to make the case for premium reimbursement rates to payers.
Finally, developing more targeted drugs alongside similarly targeted diagnostics will be key. As medicine becomes increasingly personalized and diagnostics become more targeted, it will become easier for orphan-drug makers to identify the population most likely to benefit from their drug. Developing drugs and diagnostics together will not only improve the likelihood that the drug will be successfully used, but can also improve the likelihood that the drug will be approved. In 2011, two personalized drugs were approved for use in conjunction with a specific diagnostic test— Xalkori (crizotinib) for lung cancer and Zelboraf (vemurafenib) for melanoma (3, 4).
The advantages and benefits of adopting an orphan-drug centric approach reach beyond product development because the smaller population doesn't require large marketing or promotional campaigns. As a result, companies pursuing orphan drugs have adopted different kinds of promotional campaigns, often partnering with patient advocacy groups to get in front of their target populations.
This kind of commercial model could become the model pharmaceutical manufacturers adopt increasingly across their portfolios. Orphan-drug manufacturers have historically had to develop a deeper understanding of that population's characteristics than drug companies seeking blockbusters. As diagnostics become more targeted and the use of personalized medicine grows, companies pursuing all types of drugs will need to understand their target populations better and partner with advocacy groups like orphan drug companies have done. Ultimately, the growth of orphan drugs is one element of a larger paradigm shift in the pharmaceutical industry—one that manufacturers will need to adjust to.
Rita E. Numerof, PhD, is president, and Michael N. Abrams, is managing partner, both with Numerof and Associates, firstname.lastname@example.org.
1. European Organization for Rare Diseases, "Rare Diseases: Understanding this Public Health Priority" (Nov. 2005).
2. FDA, "Risk of Acute Myocardial Infarction and Sudden Cardiac Death in Patients Treated with COX-2 Selective and Non-Selective NSAIDs" (Sept. 2004).
3. FDA, "FDA approves Xalkori with companion diagnostic for a type of late-stage lung cancer" (Aug. 2011).
4. FDA, "FDA approves Zelboraf and companion diagnostic test for late-stage skin cancer" (Aug. 2011).