Extended Market Exclusivity Beneficial for Manufacturers, Rare Disease Patients

Granting extended market exclusivity may provide pharmaceutical manufacturers with financial incentive to conduct clinical trials for indications where needs are unmet. A new study published by Health Affairs estimates the financial gain of this type of policy would be $94.6 million.

In addition to the financial benefits for pharmaceutical companies, this policy would allow many patients with rare diseases to gain expanded access to treatment options.

Under market exclusivity, manufacturers earn significant revenue from their branded drug. However, once this period ends, other manufacturers can market generics of the drug for 80% or more off of the cost of the branded product. This causes the revenue from branded drugs to plummet, which is why implementing another period of market exclusivity would be of interest to manufacturers, according to the study.

A similar program currently exists, and provides 6-month market exclusivity to manufacturers whose drug indications have been expanded to include children.

Congress has been considering the Orphan Product Extensions Now (OPEN) Act since 2014, which would grant 6 additional months of exclusivity for drugs that have been approved by the FDA to treat rare diseases. Advocates for the legislation argue that it would address the shortcomings of the Orphan Drug Act, which guarantees 7 years of market exclusivity for new drugs approved for rare diseases, according to the study.

The OPEN Act was originally included in the 21^st Century Cures Act, but was removed from the final version that was passed in December 2016. Despite not passing in recent legislation, the bill has gained support from the pharmaceutical industry and patient advocacy groups, therefore, will likely be reintroduced.

In the study, the authors identified FDA-approved drugs that received expanded orphan indications between 2005 and 2010. They then examined the financial gain for manufacturers to the cost of conducting additional clinical trials.

Of the supplemental applications, 27% were approved for rare diseases, and were granted orphan designation by the FDA. There were 8 small-molecule drugs, 5 biologics, 10 oncolytics, and 9 drugs that were initially approved with an orphan designation, according to the study.

The investigators found that the per patient study costs varied from $30,523 in a phase 2 hematology study to $70,203 for a phase 3 cancer study. The median cost of all 27 clinical trials conducted for these drugs was $9.41 million, according to the study.

From these findings, the researchers calculated the median cost of being approved for a new orphan indication was approximately $29.8 million.

The investigators found that the median cash flow for these drugs was $94.6 million per year after discounting sales 10% per year, according to the study. For a majority of the drugs included in the study, the financial benefits of exclusivity far outweighed the cost of new clinical trials.

Blockbuster drugs were found to have higher income generated from market exclusivity compared with non-blockbuster drugs, the researchers said.

However, the OPEN Act may cause an increase of $869 million in government spending on prescription drugs over the next 10 years, and will cost payers $4 billion to $12 billion during this time. If the OPEN Act is reintroduced, lawmakers should consider whether the patient benefits outweigh the increase in government spending.

By extending market exclusivity for orphan drugs, manufacturers are presented with an opportunity to generate significant income, and provide patients with treatment options where there may be little to none currently available.

Although many manufacturers explore their drugs in rare diseases without incentive, the study concluded that providing an additional 6 months would likely cause more companies to conduct clinical trials, leading to new drug approvals.