When or­phan drugs are block­busters: Re­searchers call on Con­gress to make com­pa­nies pay back tax cred­its

A new re­search let­ter pub­lished to­day in JA­MA ques­tions whether there needs to be con­tin­ued or­phan drug in­cen­tives con­sid­er­ing the spike in the num­ber of ap­provals in rare dis­ease ar­eas, and as many lat­er be­come block­busters.

Among 315 drugs re­viewed from 2008 to 2016, 83 (26%) were ini­tial­ly in­di­cat­ed for or­phan-des­ig­nat­ed con­di­tions. Me­di­an, five-year net sales were $719 mil­lion for or­phan-des­ig­nat­ed drugs and $812 mil­lion for non-or­phan drugs. The West Vir­ginia and Har­vard re­searchers said their da­ta showed how “drugs ini­tial­ly ap­proved for an or­phan des­ig­nat­ed con­di­tion were just as lu­cra­tive for their man­u­fac­tur­ers as drugs de­vel­oped for more com­mon con­di­tions.”

So how could the rare dis­ease drugs be just as lu­cra­tive? The aca­d­e­mics point to high­er launch prices, and from 2008 to 2018, launch prices for or­phan-des­ig­nat­ed drugs were sev­en times high­er than for non-or­phan drugs, they wrote.

“Con­gress could re­form the statu­to­ry in­cen­tives in the Or­phan Drug Act, such as by re­quir­ing man­u­fac­tur­ers to re­pay tax cred­its when or­phan-des­ig­nat­ed prod­ucts are com­mer­cial suc­cess­es,” the re­searchers wrote.

De­moc­rats back in 2021 sought to cur­tail the tax cred­its too. A bill from for­mer House Speak­er Nan­cy Pelosi would have tweaked the word­ing around the sec­tion of the or­phan drug law, mov­ing from, “Test­ing must be re­lat­ed to use for rare dis­ease or con­di­tion,” to, “Test­ing must be re­lat­ed to first use or in­di­ca­tion for rare dis­ease con­di­tion.”

The cred­its, which in 2015 were sav­ing bio­phar­ma com­pa­nies more than $100 mil­lion in de­vel­op­ment ex­pens­es, have been used as a pawn for years now by both sides of the aisle — Re­pub­li­cans once sought to elim­i­nate the cred­its en­tire­ly — even if it has gen­er­al­ly been help­ful in the ap­proval of 351 or­phan drugs from 2008 to 2017 in 27 dif­fer­ent ther­a­peu­tic ar­eas, ac­cord­ing to the GAO.

Con­gress al­so re­cent­ly reau­tho­rized $30 mil­lion in or­phan drug grants from 2023 through 2027 to help de­fray the costs of de­vel­op­ing drugs for rare dis­eases or con­di­tions, in­clud­ing qual­i­fied tri­al ex­pens­es. The grants pro­gram, run by FDA, has fund­ed clin­i­cal re­search since 1983, in­clud­ing tri­als that led to the ap­proval of more than 80 drugs.