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Executive Summary

PMA member firms engaged in orphan drug research have invested an average of $ 13 mil. apiece in orphan product R&D since passage of the Orphan Drug Act in 1983, the association said in a submission to House Health Subcommittee Chairman Waxman (D-Calif.). Outlining reasons for its opposition to Waxman's proposed changes in the act, PMA said that according to a recent survey of members, "fourteen of these companies have invested $ 1 mil. or more in orphan drug research and development since enactment of the Orphan Drug Act in 1983. The total investments for the 14 companies since 1983 exceeds $ 183 mil. with an average investment per company of $ 13 mil." PMA reiterated its position that the incentives provided by the current law have successfully spurred orphan product R&D, and that the changes being proposed by Waxman would remove the incentives. The association said that the seven-year exclusivity provision in the act "is the most important of these incentives." PMA maintained that the member companies "that have made large orphan drug research and development investments have stated in their responses to PMA's survey that the investments would not have been made but for the seven-year exclusivity provided by the Orphan Drug Act." Of the 24 drugs approved under the act, PMA noted that 15 have been developed by member firms. Last October, Waxman introduced HR 3459 to amend the act to allow for shared marketing exclusivity for orphan indications between companies who obtain approved full NDAs for the same product. That measure passed the full Energy & Commerce Committee. Waxman subsequently indicated that he will offer a substitute amendment on the floor of the House which would terminate exclusivity when an orphan product exceeds $ 25 mil. in annual sales. In a Jan. 29 letter to Waxman, Lilly Executive Vice President Mel Perelman, PhD, asserted that the proposal to terminate an orphan drug's exclusivity once the product has attained $ 25 mil. in annual sales "is extraordinary" and would "impede development of orphan drugs." Perelman maintained that "there is no reason to suppose that any drug with annual sales of $ 25 mil. is per se profitable or is producing a reasonable return on investment." For orphan drugs that are approved for nonorphan indications, the proposal's sales limit applies only to revenues relating to the orphan indication. Perelman added that the provision is "administratively unworkable because it is not possible for sponsors to differentiate between orphan and nonorphan sales for drugs that have more than one use." Because prescribers determine how a drug is used, he said, "there is no way to determine what percentage of a drug's sales can be attributed to a particular use. Any attempts to make such determinations are bound to result in lengthy disputes." Small orphan drug research firms have argued to Waxman that HR 3459 threatens their incentives because other small companies would be willing to pursue approval of a full NDA in order to share a market of only a few million dollars. Lilly, which markets the orphan biosynthetic human growth hormone product Humatrope, contended that the current Orphan Drug Law "is working." Noting that "at the end of 1987, 183 drugs had been designated as orphans, and 24 of these are already approved and being marketed," Perelman said the act "has been extraordinarily successful in stimulating the research, development, and marketing of drugs for rare diseases and conditions." In fact, he added, "not only is the act working, it is working better all the time"; more products "received orphan designation and subsequent approval in 1987 than in any previous year." Waxman's new proposal also permits different companies that simultaneously develop the same orphan drug to share exclusivity, if they meet certain eligibility criteria. Lilly argued that the proposal's limit on "the number of 'eligible' additional sponsors does not change the fact that any reduction in the scope of the protection currently provided by the act will destroy the fundamental incentive to which the Orphan Drug Act owes its success." Perelman wrote: "whenever orphan drug exclusivity is limited, research organizations, large and small, will be unable to predict the range of potential outcomes from their initial investment, and thus will be less willing to develop orphan drugs." PMA also argued against another change proposed by Waxman which would require companies to submit an annual sales report for any orphan product which does over $ 15 annually. The required report, to be certified by an independent accountant, represents "a legislative intrusion into corporate economic decision-making processes," the association said. Such a requirement "is entirely foreign to the purposes of the federal FD&C Act and the FDA, which are to assure the safety and effectiveness of health care products," PMA said. "Company managers knowing that one of the 'rewards' for successful development of an orphan drug could be governmental scrutiny of the company's sales and finances would be very reluctant to make the decision to invest in orphan drug research."

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