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Executive Summary

Amgen's Epogen (erythropoietin) and Genentech's Protropin (human growth hormone) would be exempted from shared market exclusivity under an amended version of Rep. Waxman's (D-Calif.) orphan drug bill adopted by the House Energy & Commerce/Health subcommittee at a June 21 markup. Introduced by Rep. Richardson (D-N.M.), the amendment inserts a "grandfather clause" exempting currently marketed drugs from the bill's shared exclusivity provision. Products in the development pipeline would also qualify for exclusion from shared exclusivity if they have an NDA pending or have been designated as orphan drugs and are in clinicals. The change significantly alters the original intent of the bill, which had been retroactive ("The Pink Sheet" April 30, p. 10) and reflects intensive lobbying by the Industrial Biotechnology Association and individual companies. The grandfather clause would apply to: drugs with licenses approved before Aug. 15; drugs that had NDA's pending on Aug. 15; and drugs that on Aug. 15 were both designated as orphans and in clinical trials. Serono and Novo-Nordisk, which have NDAs pending for their versions of human growth hormone, do not stand to gain by the bill in its current form, because Genentech and Lilly retain their market exclusivity for hGH products. Remaining in the bill (HR 4638) is the provision authorizing FDA to nullify the exclusivity benefit for any orphan product once the indicated patient population exceeds a 200,000-patient threshold. The patient population provision may affect Lyphomed's aerosolized pentamidine, Nebupent, with its growing AIDS patient population. In addition, Ortho has a PLA pending for use of its erythropoietin, Eprex, in AIDS patients. The Waxman bill as it emerges from the subcommittee continues to require sponsors of orphan products to make projections of how large the target population will be three years from the date of request for orphan designation. * The Richardson amendment is part of a compromise package worked out by subcommittee members at a closed session on June 20, and the following day, prior to markup late on the afternoon of June 21. By voice vote, the subcommittee passed the bill with the Richardson amendment and two other amendments sponsored by Waxman. The full committee is expected to consider the bill in the next week or two. In the Senate, no action has been scheduled yet on Sen. Metzenbaum's (D-Ohio) bill, which is identical to the original Waxman legislation. Waxman ultimately supported the compromise legislation but noted that the deliberations among members had been a "contentious matter." The final bill does not address two of the major issues Waxman originally had set out to correct. When his bill was introduced April 26, Waxman specifically said his measure was intended to open three closed markets: erythropoietin, hGH and aerosolized pentamidine ("The Pink Sheet" April 30, p. 11). However, Waxman has allies on the Senate side, and the compromise worked out on June 20 may have been a necessary expedient to get the bill through his own subcommittee, where the opposition may be the most difficult. Amendments floated by Rep. Bliley (R-Va.) were a major obstacle to the subcommittee consideration. Bliley had expressed interest in introducing amendments that would have stricken the shared exclusivity provision from the bill completely. Bliley noted at the markup that he was "particularly pleased" that members reached an agreement on the grandfather clause. He supported the compromise package. * Waxman had floated a requirement for the removal of market exclusivity in cases where all orphan indications combined for an individual product exceeds the 200,000 patient population limit. Such a provision would have been significant for EPO. The first of the two amendments that Waxman ultimately introduced dealt with the bill's definition of "simultaneous development." The amendment establishes three requirements for simultaneous development: 1) the second drug must request designation as an orphan within six months of the first drug; 2) the second drug must have been in clinical trials no later than 12 months after the first drug was in clinical trials; and 3) the NDA for the second drug must have been filed no later than 12 months after the NDA for the first drug. The initial requirement is the same as in Waxman's original bill. The second requirement is tighter than it had been the original bill, which stated that subsequent sponsor must be "actively pursuing" clinicals when the first product's application is approved. The third requirement is made more stringent under the amendment in that language is included to assure the second NDA is substantially complete upon submission to the agency. The original bill mandated only that the subsequent sponsor would be required to submit an application to FDA less than one year after the original product's application is filed. Under the amendment, the second NDA must include reports of the clinical and animal studies necessary for approval. Waxman intends to further flesh out the requirements for qualifying for shared exclusivity with language in the committee report. The report will specify that there must be enough data for approval in the second NDA when it is filed. Waxman's second amendment requires that a study be conducted on the impact of the simultaneous development provision on R&D of orphan drugs. The study would be initiated two years after the bill is enacted, and a report would be completed as soon as data was sufficient to measure the provision's impact. During the subcommittee's behind-the-scenes deliberations on the bill, the Administration weighed in with a June 20 letter to Waxman in opposition to HR 4638. The letter referred to the original version of the bill. HHS Secretary Sullivan told Waxman that the Administration opposes major changes to current law. "Despite concerns about the anomalies in the operation of the act," he said, "we have concluded that the act should not be altered in any fundamental manner." Sullivan said the Administration "welcomes any suggestions for improving the act to meet fiscal and economic concerns without jeopardizing the integrity and effectiveness of the act. We do not believe that current legislative proposals will prove successful at improving the act's administration or effectiveness." The remarks confirm an earlier letter sent by White House Special Assistant to the President for Policy Development Lawrence Lindsey to PMA ("The Pink Sheet" June 18, p. 11). The Justice Department drafted a letter to Waxman opposing the bill's retroactive provisions but the letter was never cleared by OMB and never officially reached the subcommittee. However, it was widely circulated among interested parties. Written by Acting Assistant Attorney General Bruce Navarre, the letter states: "There is a significant risk that the courts would hold a retroactive change to be a taking of property within the meaning of the Fifth Amendment's Takings Clause. If that were to happen, the government would be liable for damages and this change in the program ultimately would be financed from the federal budget." Justice further contended that "there are strong arguments that the exclusive marketing rights granted by the Orphan Drug Act are property within the meaning of the Takings Clause." Legal memoranda recently prepared on behalf on Genentech and Lyphomed have taken the position that the Waxman bill would result in an unconstitutional taking of property rights ("The Pink Sheet" June 11, T&G-9). IBA expressed mixed reactions to the amended bill in a June 22 statement. "It is a victory for biotechnology in one respect because orphan drugs already on the market and the 133 in the pipeline at [FDA] will be unaffected," IBA President Richard Godown said. However, he added, "the Subcommittee's severe weakening of the market exclusivity provision of the act...will impede research and development into potentially lifesaving orphan drugs." PMA continues to oppose sections two and three of the bill, the sections on shared exclusivity and the 200,000 patient limitation, and supports reauthorizing the program without attempts at modifications. The National Organization of Rare Disorders is supportive of the compromise and is anxious to move the bill because it contains a provision reauthorizing the orphan drug grant program.

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