Economic Incentives for Orphan Drug Research and Development in the U.S. and Europe

Presenter: Rosa Rodriguez-Monguio, University of Massachusetts

Abstract

OBJECTIVES: Orphan drug (ODs) status applied to drugs for rare diseases when there is no reasonable expectation to recover the cost of developing and marketing the drug from sales in the United States (U.S.) or there is not satisfactory alternative and sufficient return on the investment in the European Union (EU). The U.S. Orphan Drug Act (1983) and the EU orphan drug regulation (2000) established several economic incentives to encourage OD R&D. Grants, agencies fee waivers, tax incentives, and periods of orphan market exclusivity (10 years in EU and 7 years in the U.S.) are main incentives for OD research and development (R&D). This study examined the characteristics of OD designations and approvals in the U.S. and in the EU centralized system between 2000 and 2007, and compared the characteristics of sponsors, products and indications.

METHODS: Data derived from the US FDA Office of Orphan Drugs Development, the U.S. Patent and Trademark Office and the European Medicines Agency (EMEA). Data included all orphan designations and approvals granted by the FDA and the EMEA during the study period. Chi-Square and Fishers’ exact tests, and group comparison t-tests were used in the analysis.

RESULTS: In the study period, the FDA listed 773 orphan designations and 65 (8.4%) approvals, and the EMEA listed 492 designations and 37 (7.5%) approvals. Orphan designations were granted to 472 sponsors by the FDA and to 293 sponsors by the EMEA. The sponsors included 30 universities, public organizations and individual sponsors in the U.S. and 20 in the EU. The average OD designations per sponsor were 1.64±1.63 in the U.S. and 1.68±1.51 in the EU. 68.9% of sponsors in the U.S. and 65.9% of sponsors in the EU had only 1 OD designation. Larger sponsors had more approvals per designation. The time from OD designation to approval was 1.74±1.45 years in the FDA and 2.73±1.43 years in the EMEA (p<0.001). 98 (14.7%) sponsors had OD designations in both agencies. 85 designations in both agencies had the same sponsor, product and indication; and 66 designations had the same product and indication and different sponsor.

CONCLUSIONS: Europe had more orphan exclusivity but significantly less orphan designations and approvals than the U.S. Other factors including economic incentives for drug development, market size and composition, research environment and involvement of academic institutions could also explain the development and marketing of ODs. OD incentives encourage R&D by small sponsors that, otherwise, could not assume the risk and opportunity cost associated with developing such products. The small number of OD developed by large companies could be explained by emphasis on research toward drugs with a larger potential for profit. This study also found duplicated activities in orphan drug development in US and Europe.

The analysis did not account for mergers and acquisitions, or licensing of products. The analysis excluded ODs approved by European national agencies.

Policy recommendations include the need for intercontinental collaboration of public and private orphan drug R&D activities, and for a better coordination of the regulatory processes of FDA and EMEA.