Health Policy$ense

Orphan Drugs and Precision Cancer Medicine

Small markets, high prices

“Orphan drug” is a bit of misnomer, or at least verbal shorthand.  It’s not the drug that’s “orphan” or rare; rather, the disease is the orphan, meaning that it might not affect enough people, and provide enough of a market, to incentivize a drug company to look for therapies. That’s the premise behind the 1983 Orphan Drug Act (ODA), which offers incentives for companies to develop therapies for diseases that affect less than 200,000 people in the United States.

The drafters of the ODA did not likely foresee a world of precision medicine, in which many common diseases could be transformed into orphan ones by molecularly characterizing subsets that can be targeted with a specific drug. They did not foresee a time when seven of the top ten best-selling drugs had orphan designations. And they did not foresee a drug development product cycle in which more than 40% of all new approved drugs would have the orphan designation.

The Gant Precision Cancer Medicine Consortium at the University of Pennsylvania recently discussed the role of the ODA as a framework for developing increasingly targeted cancer therapies. These therapies, like drugs for rare diseases, may have small sales relative to their development costs, and therefore, drug companies may need incentives and high prices to justify their investment.

The ODA’s incentives include access to a small pool of research grants, tax credits for clinical trial costs, waiver of the FDA approval fee, and seven years of post-approval market exclusivity for an approved indication. And although it did not change standards for FDA approval, the ODA called on the FDA to display “maximal flexibility” in considering orphan drugs. As a result, empirical evidence indicates that, as a group, preapproval clinical trials for orphan cancer drugs had fewer enrollees and used less rigorous designs than trials for other cancer drugs.

The number of orphan designations has increased dramatically since 2000, although 95% of the more than 7,000 identified rare disease still have no therapy. The number of designations has increased in part because a single drug can have multiple orphan designations (for example, Gleevec, approved in 2001 for chronic myelogenous leukemia, now has nine) and because companies can repurpose existing mass market drugs for a new indication. The number of orphan drug approvals has increased as well, as shown below:

FDA Orphan Drug Designations and Approvals, 1983–2015, Orphanet Journal of Rare Diseases, 2017, 12:1 DOI: 10.1186/s13023-016-0551-7

The growth of orphan designations and orphan approvals indicates that companies now see drugs with small markets as lucrative. How much the ODA has incentivized this process, and how much would have occurred anyway with dramatic price growth, is a topic of great debate, as is the overall social benefit of the law.

Precision cancer medicine brings these debates into sharp focus.  It holds out the possibility that many common cancers (such as breast, prostate, and colon cancer) will turn into amalgams of “rare” biomarker-defined diseases, each qualifying for orphan status and commanding a price premium.  We are already seeing the process play out: one study identified 13 orphan drugs approved by FDA between 2009-15 for biomarker-defined subsets of more common diseases. Twelve of them were cancer drugs, with a median monthly cost of about $10,000. The authors note:

Orphan-designated drugs to treat biomarker-defined subsets of common conditions have a number of characteristics that make them ill-suited to the orphan drug designation, including short development times and rapid expansion of off-label indications after approval. Application of the Orphan Drug Act in these cases risks wasting resources that might be better focused on truly rare conditions.

The budget-busting potential of this process is concerning. A recent article laid out the economic factors that exert upward pressure on drug prices in precision medicine. These factors include the limited brand-brand competition in small markets, followed by delayed generic competition when market exclusivity is extended beyond the patent expiration. Precision medicines are often biologics, which are more costly to develop and produce than traditional small molecule drugs, and face limited competition from biosimilar drugs.

On the other hand, higher drug prices for precision medicines may be warranted if they are more effective than treatments in unselected populations. The fundamental challenge that remains is how to make precision cancer medicine economically sustainable as more and more of the population is treated with targeted, biomarker-defined therapies, each commanding a higher price than its non-targeted predecessor. The Gant Precision Cancer Medicine Consortium will take up this challenge in an all-day meeting next month.


The Penn Precision Cancer Medicine Consortium is a multidisciplinary group of more than 20 experts and stakeholders that has come together at Penn to develop a new framework for the economic sustainability of precision cancer medicine. Through multiple discussions culminating in a conference in May 2017, the group will tackle the hard questions that precision medicine raises for patients, providers, and payers.

The Consortium is made possible through a philanthropic gift to the University of Pennsylvania by Donald R. Gant, Wharton '52 and the Gant Family. It is led by LDI Senior Fellows Justin Bekelman and Steven Joffe. Other members of the Consortium and their backgrounds are here.