How a loophole in the Orphan Drug Act was blown open by COVID-19

A 1983 law known as the Orphan Drug Act was intended to be used to incentivize the development of drugs for rare diseases. So how did a drug for COVID-19 get a package of special incentives? AgencyIQ unpacks the history, regulations and context behind the drug remdesivir, an antiviral currently in clinical trials for treating COVID-19.

 

To contact the author of this piece, write Aaron Badida, JD at abadida@agencyiq.com

 


Executive IQ Brief

  • How Things Work Now: The Orphan Drug Act of 1983 helps make the research and development of drugs to treat rare diseases financially viable for manufacturers. Under the law, drugs treating diseases affecting fewer than 200,000 patients (among other criteria) are eligible to receive a tax credit worth 25% of all related development costs, as well as 7 years of marketing exclusivity during which time a generic version of the same drug may not be approved. Manufacturers can seek withdrawal of this designation, however, which the FDA will grant upon request.
  • What’s New: In early March, Gilead Sciences sought Orphan Drug Designation for its potential COVID-19 treatment called remdesivir. Because COVID-19 affected fewer than 200,000 persons in the US at the time Gilead sought designation, it technically complied with the FDA’s rules and was issued the designation. However, after public scrutiny, Gilead voluntarily withdrew its request two days later.
  • What’s Next: The designation saga of remdesivir highlights the way that traditional regulatory structures can be a poor fit for emergent public health situations. COVID-19 is expected to affect millions of Americans, and could even kill between 100,000 and 240,000 Americans, according to recent estimates touted by Trump administration officials. While the ODA regulations do include a provision aimed at accommodating vaccines, it does not take into account the potential for a company to be developing the drug as the disease continues to spread. As the FDA’s recent actions indicate, companies are able to obtain Orphan Drug Designation if they seek the designation early on in the outbreak of a disease, regardless of how many people it will ultimately affect.


Regulatory Background

Pharmaceutical and biopharmaceutical products are eligible to receive special incentives from the FDA and IRS under the terms of the Orphan Drug Act of 1983 (ODA), which established a regulatory framework for the development and review of drugs intended to treat rare diseases.


The original intent of the ODA was to incentivize the development of drugs for rare diseases. Because few patients may have a disease, it is generally more difficult to conduct clinical research on the rare disease, and it may be more difficult to make back a company’s initial investment into research and development. As a result, many of these diseases were traditionally “orphaned”—that is, did not have companies working on developing products for them.


Under the law, drugs treating diseases affecting fewer than 200,000 patients (among other criteria) are eligible to receive a tax credit worth 25% of all related development costs, as well as 7 years of marketing exclusivity during which time a generic version of the same drug may not be approved. It may also be eligible to avoid conducting certain pediatric studies ordinarily required for drugs intended to treat non-rare diseases.

Eligibility for these incentives depends on a company receiving Orphan Drug Designation from the FDA. 


FDA regulations outline the process and criteria for obtaining Orphan Drug Designation, which include providing extensive documentation justifying the expected prevalence of the disease, the costs involved in bringing the drug to market and the anticipated price of the drug.


Importantly, documentation about the prevalence of the disease must only show that the disease affects fewer than 200,000 persons in the US at present time.

According to the regulation:

“For the purpose of documenting that the number of people affected by the disease or condition for which the drug is to be developed is less than 200,000 persons, “prevalence” is defined as the number of persons in the United States who have been diagnosed as having the disease or condition at the time of the submission of the request for orphan-drug designation.

As a result, if a condition later affects more than 200,000 persons, the drug would not lose its designation unless it included an untrue statement or omitted material information.


There are also provisions to amend or withdraw an orphan drug designation at the sponsor’s request. For example, the FDA’s regulation states that a sponsor:

“may voluntarily withdraw an orphan-drug designation request or an orphan-drug designation at any time after the request is submitted or granted, respectively, by submitting a written request for withdrawal to FDA. FDA will acknowledge such withdrawal in a letter to the sponsor. Any benefits attendant to designation (such as orphan-exclusive approval) will cease once designation is voluntarily withdrawn, from the date of FDA’s acknowledgement letter. If a sponsor voluntarily withdraws designation, FDA will publicize such withdrawal in accordance with §316.28.”

Generally, once a company has an Orphan Drug Designation, they’re likely to keep it. Withdrawal of the designation by the sponsor occurs in about 14% of drugs that receive the designation. More than 5,300 drugs have received an orphan drug designation since the ODA passed, though only about 16% have ultimately received marketing approval.



Orphan designation and COVID-19

One recent experience with Orphan Drug Designation indicates unintended consequences associated with the law. In particular, that the law was never designed to take into account emerging viral diseases—only established one. 


In March 2020, Gilead Sciences applied for Orphan Drug Designation for its drug remdesivir, an experimental antiviral drug originally developed to treat Ebola and derived from earlier attempts to treat SARS and MERS-CoV.


At the time that Gilead applied for the designation, the number of confirmed COVID-19 cases in the US was still below 100,000, and the FDA subsequently granted the company’s request for Orphan Drug Designation.


However, while Gilead was technically eligible for the designation, it received immediately and critical reaction from those who noted that the disease was almost certainly going to affect more than 200,000 people in the US in just a few weeks. As of April 1, 2020, the US has reported 213,144 cases of COVID-19, making drug no longer eligible to receive orphan drug status for COVID-19 (unless they meet a cost-related criteria).


Within two days of receiving the designation, Gilead requested that the FDA rescind the orphan drug designation, which the FDA did.


In a statement, Gilead wrote that it felt the benefits of Orphan Drug Designation were no longer necessary.


“Gilead is confident that it can maintain an expedited timeline in seeking regulatory review of remdesivir, without the orphan drug designation,” it wrote in a statement. “Recent engagement with regulatory agencies has demonstrated that submissions and review relating to remdesivir for the treatment of COVID-19 are being expedited.”


The company explained that it had sought out the designation, in part, because it waives a requirement for the company to provide a Pediatric Study Plan. Those plans normally require additional studies and pre-market planning by a company.



Impacts

The designation saga of remdesivir highlights the way that traditional regulatory structures can be a poor fit for emergent public health situations.


COVID-19 is expected to affect millions of Americans, and could even kill between 100,000 and 240,000 Americans, according to recent estimates touted by Trump administration officials.


While the ODA regulations do include a provision aimed at accommodating vaccines, it does not take into account the potential for a company to be developing the drug as the disease continues to spread. For example, the regulations state that a vaccine is eligible for designation if it is intended to be administered to fewer than 200,000 patients per year.


However, as the FDA’s recent actions indicate, companies are able to obtain Orphan Drug Designation if they seek the designation early on in the outbreak of a disease, regardless of how many people it will ultimately affect.


It seems likely that legislators may work to amend this specific provision of the law in the coming months or years to ensure other companies don’t command a 7-year exclusive license on the drug.


The episode also shows just how much scrutiny life sciences companies will be under for their (ordinarily) routine regulatory actions. Life sciences companies regularly tout their regulatory and development milestones. In the current climate, those pronouncements could prove to be a liability, especially if they do not include an explanatory statement indicating why an action was taken.


Companies should also be mindful of public sentiment around COVID-19. Public outcry on drug development actions could significantly inform future drug pricing legislation. Companies should think twice about taking actions that could be misconstrued as being greedy, such as seeking lengthy periods of exclusivity during a pandemic.



Key Dates and Documents

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