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Closing the Orphan Drug Act Loophole

On Tuesday, February 11, 2020, Senators Bill Cassidy (R-LA), Jeanne Shaheen (D-NH), and Tammy Baldwin (D-WI) introduced legislation to eliminate the “orphan drug loophole.” Current law allows the Food and Drug Administration (FDA) to grant seven years of market exclusivity to a drug manufacturer if the drug is intended to treat a disease or condition affecting fewer than 200,000 patients in the U.S., or less commonly, if the manufacturer cannot expect to recover the costs of developing and marketing a drug. In either scenario, such drugs are referred to as "orphan drugs," and the policy goal is to incentivize companies to develop drugs that are needed by many Americans but do not have enough demand to make a profit. 

In some cases, however, even if the drug developer meets the criterion of having no hope of recovering the costs, the drug does actually become profitable—some significantly so—but competitors are still barred from entering the market with a lower-cost alternative during the 7-year exclusivity period that exists by operation of law. To combat this issue, the recently introduced Senate bill (as well as a nearly-identical House bill introduced in October 2019) targets a loophole that allows market exclusivity under the Orphan Drug Act to be extended for future versions of the same drug without the drug's manufacturer having to show that the drug remains unprofitable.

The Senators sponsoring the Fairness in Orphan Drug Exclusivity Act and others have pointed to buprenorphine, a treatment for opioid addiction, as an emblematic example of why reform to this law is needed. Invidior markets buprenorphine under the trade name Subutex and received seven years of market exclusivity as an orphan drug upon its approval by FDA in 1994—long before the current opioid epidemic began. In 2016, FDA approved Invidior’s new formulation of the drug, called Sublocade, which is administered as an injection rather than as a sublingual tablet. Invidior received another seven years of market exclusivity for the new formulation under the law's loophole. Critics say actions like this keep prices high by subverting competition and making it impossible for generic and follow-on competitors to get to market.

Following public outcry and a citizen petition requesting the action, in November 2019, FDA reversed its decision to grant orphan drug market exclusivity for Sublocade, but the potential remains for this scenario to repeat itself. The proposed legislation would require FDA to revoke a company’s orphan drug exclusivity under the “no cost recovery” criterion if the company fails to prove the drug would still be economically unviable after the original orphan determination was made, which in some cases may be many years prior to commercial approval of the drug product.

These bills are likely to be included in a legislative package that's being developed for drug pricing reform, whether that’s ultimately Cures 2.0 or a separate bill. If this reform legislation does not move in 2020, we expect that it could be a user fee rider in the upcoming FDA user fee reauthorization package.

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Author

Aaron L. Josephson

Senior Director

Aaron L. Josephson is a Senior Director of ML Strategies who advises clients on health care policy issues related to medical devices and pharmaceuticals. Earlier, he was with the US Food and Drug Administration, including as a senior policy advisor in the Center for Devices and Radiological Health.