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Executive Summary

The Bush Administration is uniformly opposed to pending Senate legislation (S 2060) to end market exclusivity for orphan drugs for which sales exceed $200 mil., FDA Commissioner Kessler testified at a March 3 hearing before the Senate Labor & Human Resources Committee. "The Administration strongly opposes S 2060," and if it were referred to President Bush, HHS Secretary Sullivan "would recommend that it be vetoed," Kessler said. Noting that Bush in the last Congress vetoed legislation that would limit market exclusivity under the orphan drug act, the commissioner said S 2060 "does not differ substantially from the legislation previously vetoed by the President." Kessler contended that "any weakening of the exclusivity provisions almost certainly will discourage development of orphan drugs in the future." Kessler has been a lukewarm advocate of administration positions on some pending FDA bills (particularly the enforcement powers bill). On the orphan amendments, however, he was able to take a solid position in line with the White House. FDA's traditional distancing from drug cost issues makes Kessler's support for the Administration's opposition easier. Sen. Simon (D-Ill.) urged the Bush Administration to produce "a constructive alternative" to S 2060 if it opposes the bill. Acknowledging that he is "torn" on the issue, desiring to preserve incentives for R&D but eager to ease the burdens of payments experienced by patients and health care insurance programs, Simon asserted: "It is not enough for the Administration to come in and say this is not good legislation" and threaten to veto it. "I think the Administration has to come in and say, 'Here is the alternative; here's how we solve this problem.'" The Illinois Democrat said he would be "willing to vote against" S 2060 if he were to "see a constructive alternative." However, he continued, "If I don't see a constructive alternative, it makes it very, very difficult." Sen. Hatch (R-Utah), the ranking Republican on the Labor & Human Resources Committee, suggested that the alternative should be to address drug expense issues as part of larger health care reform measures and not through the orphan drug act. Hatch said he is "very concerned about the approach that's being taken" by S 2060. "It is unfair and unwise," Hatch declared, "to expect that the Orphan Drug Act can or should be a primary vehicle to guarantee financial access to health care." He said "many of the complaints ...launched against the Orphan Drug Act belong in the health care reform debate." Maintaining that the bill would reduce orphan drug research, Hatch pointed out that there are 74 approved orphan drug indications but 5,000 known rare diseases. "Reducing incentives for rare disease research will limit development of treatment of the 98.5% for which no drugs are available," he said. Kessler agreed that the orphan drug act's current incentives should be preserved and that the distinct issue of access to health care should be addressed separately. "We have to address both, but I think we keep the incentives in the Orphan Drug Act, and we address the issue of access to health care and ability of people to afford medicines," the commissioner said. Sen. Kassebaum (R-Kan.), a cosponsor, maintained that the bill is necessary to save the credibility of the orphan drug law. "There comes a point where enough is enough. The intent of the Orphan Drug Act is clear, its purpose is worthy and it is well past time that the clouds on its credibility be lifted," Kassebaum said. Pharmaceutical Manufacturers Association President Gerald Mossinghoff testified that more than half of PMA member companies have indicated that establishing a sales volume threshold to end market exclusivity under the orphan drug law "would be a sufficient reason not to pursue orphan drug research." Furthermore, Mossinghoff maintained, congressional consideration of orphan drug amendments already has discouraged orphan drug development. "More than one third" of member companies indicated in a 1990 PMA survey that "uncertainty" about the future of the orphan drug law constituted a disincentive to R&D for drugs for rare diseases. Sen. Metzenbaum (D-Ohio) -- who chaired the hearing and is a co-sponsor of the bill -- maintained that the legislative debate in the last Congress actually caused the number orphan drug applications to increase. "FDA has documented that in 1990 there was a flood of orphan drug applications from companies trying to take advantage of the prospective application of pending legislation," the senator said. Metzenbaum added that "Lilly is the only company that has ever suggested to me that they intend to get out of the orphan drug business, and that threat is meaningless because Eli Lilly doesn't have a single orphan drug in the pipeline to stop developing." He asserted that "the only orphan drug that Lilly has ever had -- human growth hormone -- was in development long before there was an orphan drug act." Industrial Biotechnology Association Chairman and Immunex Chairman Stephen Duzan suggested that changing the orphan drug law by ending market exclusivity periods after sales exceed a designated threshold would particularly discourage development of drugs for marginally rare diseases. For example, Duzan said, "multiple sclerosis currently afflicts 185,000 patients." If a treatment costing $1,000 annually were approved under S 2060, it would "lose its market exclusivity in about a year," he noted, arguing: "We strongly doubt that any company will pursue a nonpatentable MS drug under such circumstances." Duzan said Immunex' Leukine sales totaled about $31 mil. in the nine months it was marketed during 1991 and yielded the company's first profit in its 10-year history: "about $800,000." He contended that "if S 2060 were enacted, Immunex would not be able to recoup its investment in Leukine before losing its market exclusivity." Repeating the central argument of last year's debate, Duzan contended that curtailing the exclusivity periods of a currently marketed orphan because either its sales exceed $200 mil. or its patient population grows beyond the 200,000-patient threshold "would constitute a 'taking' under the Constitution for which the government would owe hundreds of millions of dollars in compensation to the affected companies." Association of Biotechnology Companies President Forrest Anthony, whose group supports S 2060, countered the IBA testimony by arguing that most orphan drugs "were in fact already under development before the orphan drug law was created" in 1983. "Most would have been brought to market without orphan drug incentives," he maintained. Furthermore, Anthony said, "the misclassification of" highly profitable products such as human growth hormone, erythropoietin and aerosolized pentamidine "as orphans frustrates the whole purpose" of the 1983 law. "Innovation in new drugs and biologics would actually be encouraged by closing the loopholes in the existing act," the ABC president said. S 2060 would encourage smaller biotechnology companies "to continue development of an orphan drug even if they are not first to market." Metzenbaum maintained that Genentech's biosynthetic human growth hormone Protropin was granted an orphan designation by FDA two months after it was approved for marketing. "Clearly, Genentech never relied on the orphan drug act's protection to bring its blockbuster to market." The Ohio Democrat also argued that protection of highly priced "blockbuster" orphans that are protected from price competition adversely affects health care indirectly, even if patients have insurance or are given the drug under company programs for indigent patients. Metzenbaum cited the testimony of Dixie Gasparini, whose daughter Ashley takes $24,000 worth of Protropin annually. Gasparini acknowledged that her daughter "literally owes her life to this drug -- and for this, my husband and I are very grateful." However, she continued, "the extremely high cost of this drug has made my husband and I feel that our whole family is owned by Genentech, because that's how great an impact the company has had on our lives." She said her husband quit his night job and she remains unemployed to limit family income and remain eligible for state assistance. The fallout effect from the Gasparinis' health bills has been felt by other people on their health insurance program. Gasparini maintained that the cost of Protropin coverage caused health insurance premiums at the automobile dealership where her husband works to skyrocket. Consequently, the small company has cut back health insurance benefits for its 120 employees to "substandard" levels. In addition, she said, "every citizen who pays higher insurance premiums and every taxpayer who supports Medicare and Medicaid are paying the price for Protropin, too." Genentech maintained in a March 2 letter to Metzenbaum that it provided Protropin for Ashley on a compassionate basis before the product was approved, provided it free for four years after approval under the company's Compassionate Use Program, and has paid for the Gasparinis' Protropin copayments. Metzenbaum criticized as "reprehensible" the lobbying tactics of Cystic Fibrosis Foundation President Robert Dresing, who argued against the legislation. The senator noted that at a Jan. 21 hearing before his Senate Judiciary/Antitrust Subcommittee, Dresing testified under oath that companies "have not" told him that they would cease R&D for cystic fibrosis treatments if the orphan drug law were changed. However, Metzenbaum has since obtained a copy of a memorandum from Dresing to foundation members that claims cystic fibrosis patients' "lives are being threatened by congressional attacks on the Orphan Drug Act." The memo advises members to urge their congressional representatives to oppose S 2060 because "the proposed amendments completely destroy hope of a cure." The senator said such "unspeakably cruel lobbying tactics being used to frighten the victims of rare diseases into opposing" S 2060 are "of most concern" to me. Claims that the bill will end hopes of finding a cure are "flatly untrue," Metzenbaum said. "In this senator's view, that kind of scare tactic is reprehensible." Dresing replied that although no company told him S 2060 would discourage orphan drug research, he believes it would because R&D thrives on the profit incentive that offers more than an opportunity to recoup costs. The cost of developing a cure for cystic fibrosis "is not going to be inexpensive; it's going to be very expensive," Dresing continued. "And that's in jeopardy because there are going to be decisions made" as to whether to invest in products whose returns are artificially limited or in more highly profitable products. Dresing added that he opposes the bill "because I'm fighting for the lives of children, including my own son." Rep. Studds (D-Mass.), sponsor of S 2060's House companion bill (HR 3930), argued that establishment of a sales threshold will not discourage orphan drug R&D. A $200 mil. trigger would allow an orphan sponsor "to receive roughly $28 mil. in sales per year without any competition whatsoever over the seven-year period" of exclusivity, Studds calculated. "Of the more than 10,000 drugs currently on the U.S. market, annual sales of $28 mil. would place the drug in the top 100 best-selling drugs in the country. Given this high sales threshold, it strains credulity to think that commercial incentives will somehow be insufficient to developing orphan drugs" (Studds' emphasis). National Organization for Rare Disorders Executive Director Abbey Meyers, testifying in support of S 2060, noted that the orphan drug law was enacted to encourage development of unprofitable drugs. "No one ever envisioned that companies would use the monopoly to charge so much for drugs, and certainly no one ever dreamed that there would be six orphan drugs on the list of the country's top-selling drugs," she said.

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