For the last few years, Evaluate Ltd., a life science market intelligence firm, has been assembling their annual EvaluatePharma® Orphan Drug Report, based on coverage of over 5,000 of the world’s leading pharmaceutical and biotech companies. The latest results show that the sector continues to grow, and at a much faster rate—almost 12%—than the industry as a whole, which is at 5.9%.
The number of U.S. orphan drug designations also increased by 12% in 2014 (and rose a staggering 62% in Europe). While this makes the sector a vibrant and interesting one, it also invites more attention from regulators and payers, increasing the pressure to produce truly innovative therapies that can help reduce overall healthcare costs.
It’s important to understand what defines an orphan drug, a pharmaceutical product aimed at rare diseases or disorders. In the U.S., rare disease populations are defined by the FDA as having less than 200,000 patients (<6.37 in 10,000). Evaluate defines a clean “orphan” subset of products within their data as following certain criteria. For instance, the first indication approved has to be for an orphan condition. Also, the product has to generate more than 25% of sales from orphan indications—which excludes drugs like Avastin, Enbrel, Humira and Remicade, because the orphan designations for those products don’t reach the 25% threshold.
[See Orphan Drugs Report, pg. 42]
Orphan Market Drivers
Why is this upsurge occurring? Mainly because “orphan” is not such a diminutive term anymore. The National Organization for Rare Disorders (NORD) currently estimates 30 million Americans suffer from 7,000 rare diseases. This enormous population of potential patients presents great opportunity for the pharmaceutical industry to develop appropriate treatments for unmet medical needs. Treatments that generate high levels of reimbursement.
Also, the Orphan Drug Act of 1983 financially incentivized the development of orphan drugs. Companies developing these medications receive a 50% tax credit on R&D costs. Before the act was passed, only 38 orphan drugs were approved. Since then, 425 indication designations covering 347 drugs have been approved.
And there are significant financial incentives. In the U.S., a company receives seven years of marketing exclusivity from approval. The market exclusivity blocks “same drug” recombinant products.
Indeed, large pharma groups finding orphan indications for some of their biggest sellers mean that seven of the 10 top companies by orphan indications are global majors, and the likes of AbbVie are trying to ensure their seat at the big table through acquisition. The Chicago-based group is now in the top 20 companies by orphan sales, thanks to its acquisition of Pharmacyclics.
The enduring appeal of orphan drugs remains grounded in a variety of factors, including the lack of alternatives for patients, lower R&D costs, easily defined patient populations, and the prices that the drugs are able to command. So far orphan drug developers have managed to defend the cost of these life-changing drugs, due to the relatively small patient populations they serve and the continued paucity of options for sufferers.
The one big change this year is that Celgene replaces Novartis as the world’s biggest orphan drug company by sales in 2020. Celgene is set to achieve this solely on the back of the performance of its biggest drug Revlimid, which is used in 14 orphan drug indications in the U.S. and Europe.
The Orphan Drug Report also reveals that worldwide orphan drug sales will reach $178B by 2020. The proportion of orphan drugs in relation to the rest of the industry is also growing, with orphans set to account for over 20% of all prescription drug sales by 2020, up slightly from the 19% Evaluate reported last year.
Other highlights from the report include:
• Median cost per patient differential is13.8 times higher for orphan drugs compared to non-orphan
• Vertex and Alexion are set to march up the orphan drug sales ranking table
• Revlimid (lenalidomide)is likely to be the No.1 orphan drug in 2020
• Phase III orphan drug development costs are half that of non-orphan, and potentially a quarter of the cost of non-orphan with U.S. tax breaks
• Phase III drug development time for orphan drugs is no faster than non-orphan
• Orphan drug FDA approval time is 10 months vs. 13 months for non-orphan
• Expected return on investment of Phase III/ Filed orphan drugs is 1.14 times greater than non-orphan drugs
• Obeticholic acid (Intercept Pharmaceuticals) is the most valuable R&D orphan drug
• It was a record year for FDA orphan designations in 2014 with 291; Also a record number of European designations too with 201 and Japan designations were up 7%
• Opdivo is the most promising new orphan drug approved by FDA in 2014
[See more figures, next pages]
Top 100 USA Drug Cost per Patient per Year 2010-2014
Average orphan drug cost to patients $111,820 in 2014; Median orphan drug cost $66,057. EvaluatePharma® estimates that the average cost per patient per year in 2014 for an orphan drug was $111,820 versus $23,331 for a non-orphan drug. The average and median drug price has increased year on year for both orphan and non-orphan drugs since 2010. The median price of orphan and non-orphan drugs has increased by a factor of 1.8 and 1.7 since 2010 respectively.
2014: USA Revenue per Patient per Year for Top 20 Selling Orphan Drugs
Advate highest revenue orphan drug in 2014; Revenue per patient and number of patients treated correlated; Orphan drugs that treated fewer than 10,000 patients: Closer correlation of drug price and patient numbers. EvaluatePharma® finds that revenue per patient for the Top 20 USA selling orphan drugs is correlated (R2 = 0.76) to the number of patients treated in 2014. A similar analysis of the Top 10 selling orphan drugs that treated fewer than 10,000 patients confirms a closer correlation (R2 = 0.88). This analysis confirms industry perceptions that smaller patient groups allow a pricing premium to be achieved versus non-orphans. Products such as Gleevec support the notion of an innovation premium for drugs that create a step change in treatment options and therapy outcomes. Advate and Soliris confirm the pricing power resulting from indications with the fewest number of patients.
FDA Approvals of Designations & New Drugs (NMEs/ BLAs): 2000 to 2014
FDA approves 19 new orphan drugs in 2014 vs. 16 in 2013; Orphans 38% of total FDA new drug approvals in 2014. FDA approves 40 designations in 2014 vs. 31 in 2013. EvaluatePharma® finds that 19 new orphan drugs (NMEs/ BLAs and biologicals) were approved in 2014 out of 50 new drugs. Orphan drugs represented 38% of the industry’s new drug output in 2014.
Overall the FDA approved 40 designations in 2014 vs. 2013. This includes new indication approvals of already marketed products.
FDA New Drug Approval Analysis (NMEs/ BLAs) 2014: Orphan vs. Non-Orphan
Opdivo most promising new orphan drug approved by FDA in 2014: Top 10 orphan drugs have 155% the sales potential of non-orphan and delivered at 64% of the Phase III trial cost. EvaluatePharma® finds that Opdivo, from Bristol-Myers Squibb , for melanoma is the most promising new orphan drug approved in 2014, with expected US sales in 2019 of $4,601m. The top 10 orphan drugs approved in 2014 are expected to sell on average $1,330m in the USA market, five years post launch. This compares with $1,158m for non-orphans approved in 2014.
The average Phase III trial size for the top 10 orphans was 2,132 patients vs 6,318 for top 10 non-orphans approved in 2014.