1
Introduction and Overview*

An objective look at current statistics characterizing the state of drug development paints a gloomy picture. The traditional process for developing a new drug or biologic product and bringing it to market has become exceedingly expensive and lengthy—estimated to cost between $800 million and $1.3 billion, and to take approximately 10–15 years. Only 8 percent of investigational new drugs entering Phase I clinical trials run the full course of development and receive U.S. Food and Drug Administration (FDA) approval, and of those, about 4 percent are eventually removed from the market. In addition, the number of new drug approvals has been slowly declining over the last 11 years—from 53 new molecular entities approved in 1996, to an average of 28 per year between 1999 and 2005, and to a mere 17 in 2007. A recent editorial outlines many of these issues and concludes that “the conventional business model appears fallible” and that “both industry and academia are poorly positioned to respond in the [current] financial landscape” (FitzGerald, 2008). Even considering the potential for blockbuster drugs, this lengthy, high-cost, low-success-rate model is likely to prove unsustainable; for those far less commercially attractive drugs used to treat rare and neglected diseases,1 it is simply infeasible.

*

The planning committee’s role was limited to planning the workshop, and this summary was prepared by the workshop rapporteur and the Drug Forum staff as a factual summary of what occurred at the workshop.

1

For the purposes of this report, rare diseases are defined as diseases that affect small patient populations, and neglected diseases are defined as diseases that are concentrated in poor or developing countries.



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1 Introduction and Overview* An objective look at current statistics characterizing the state of drug development paints a gloomy picture. The traditional process for develop- ing a new drug or biologic product and bringing it to market has become exceedingly expensive and lengthy—estimated to cost between $800 million and $1.3 billion, and to take approximately 10–15 years. Only 8 percent of investigational new drugs entering Phase I clinical trials run the full course of development and receive U.S. Food and Drug Administration (FDA) approval, and of those, about 4 percent are eventually removed from the market. In addition, the number of new drug approvals has been slowly declining over the last 11 years—from 53 new molecular entities approved in 1996, to an average of 28 per year between 1999 and 2005, and to a mere 17 in 2007. A recent editorial outlines many of these issues and concludes that “the conventional business model appears fallible” and that “both industry and academia are poorly positioned to respond in the [cur- rent] financial landscape” (FitzGerald, 2008). Even considering the poten- tial for blockbuster drugs, this lengthy, high-cost, low-success-rate model is likely to prove unsustainable; for those far less commercially attractive drugs used to treat rare and neglected diseases,1 it is simply infeasible. *The planning committee’s role was limited to planning the workshop, and this summary was prepared by the workshop rapporteur and the Drug Forum staff as a factual summary of what occurred at the workshop. 1For the purposes of this report, rare diseases are defined as diseases that affect small patient populations, and neglected diseases are defined as diseases that are concentrated in poor or developing countries. 

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 BREAKTHROUGH BUSINESS MODELS Twenty-five years ago, Congress formally recognized the lack of avail- able treatments for rare and neglected diseases and the difficulty of finding companies to develop them. Congress reasoned that if adequate financial incentives were created, companies might be more willing to assume the large risks associated with developing drugs for these conditions. Accord- ingly, in 1983 Congress passed the Orphan Drug Act,2 which allows FDA to provide incentives for companies to bring such drugs to market. Recently, Congress introduced additional incentives in the 2007 Food and Drug Administration Amendments Act. Current incentives include grants, tax credits, a waiver of the $1 million Prescription Drug User Fee Act filing fee, FDA assistance with protocol development, priority review of new drug applications (a 6-month review rather than the standard 10-month review), and a 7-year U.S. market exclusivity following approval of a designated orphan product.3 Patient groups, disease foundations, and philanthropic organizations have long recognized that the conventional drug development model is less effective in yielding treatments for rare and neglected diseases, and have therefore devised a range of financial and operational strategies for filling this gap. As a result, the outlook for the development of drugs for rare and neglected diseases is arguably far better today than was the case a decade ago. The riskiest period of drug development, and the one most difficult to fund, is that between basic discovery, generally funded by government, and late-stage development, generally funded by large pharmaceutical com- panies. This period, often referred to as the “valley of death,” includes expensive preclinical animal safety testing, pilot manufacturing, and early- stage safety and proof-of-concept efficacy clinical trials. Many not-for-profit organizations are advancing the development of drugs for rare and neglected diseases through a broad array of financial and operational strategies aimed at decreasing the risk of investment during this period. Some organizations, such as the Cystic Fibrosis Foundation, have launched entire virtual compa- nies to manage all aspects of the development of new therapies for a single 2TheFDA Orphan Drug Program is discussed further in Chapter 3. 3 Therapies for rare and neglected diseases may be designated as orphan products if one of the following conditions is met: (1) the disease or condition for which the drug is intended affects fewer than 200,000 people in the United States or, if the drug is a vaccine, diagnostic drug, or preventive drug, the persons to whom the drug will be administered in the United States are fewer than 200,000 per year as specified in 21 CFR § 316.21(b); or (2) for a drug intended for diseases or conditions affecting 200,000 or more people, or for a vaccine, diag- nostic drug, or preventive drug to be administered to 200,000 or more persons per year in the United States, there is no reasonable expectation that costs of research and development of the drug for the indication can be recovered by sales of the drug in the United States as specified in 21 CFR § 316.21(c).

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 INTRODUCTION AND OVERVIEW disease, such as funding, intellectual property, patient registries, and clinical trials. Other organizations take a more focused approach; the Muscular Dystrophy Association, for example, aims to advance drug development for 40 neuromuscular diseases primarily through targeted funding and a process to facilitate access to patients with these diseases. Such innovative approaches are increasingly relevant to the devel- opment of mainstream drugs, which may lead to targeted therapies, for which fewer patients are eligible. For example, Genentech’s Herceptin (trastuzumab) is a monoclonal antibody therapy for breast cancer—but only for HER2-positive breast cancer. It is not an effective treatment for breast cancer patients whose tumors do not overexpress the HER2 protein. There are several other targeted therapies on the market today, mainly in the fields of oncology and HIV/AIDS, and it is expected that as this trend continues, an increasing number of products will have reduced markets and may qualify as orphan products. SCOPE OF THE WORKSHOP In this context, the Institute of Medicine’s Forum on Drug Discovery, Development, and Translation held a public workshop on June 23, 2008, titled “Breakthrough Business Models: Drug Development for Rare and Neglected Diseases and Individualized Therapies.” The purpose of the workshop was to explore innovative strategies for orphan drug develop- ment. As outlined by workshop chair Nancy Sung,4 the workshop was designed to: provide an overview of how drug development is financed; • review the state of orphan product development at FDA; • explore new models for funding translational research and tech- • nologies; and examine and discuss the adequacy of the regulatory, legislative, and • policy tools currently in place to help advance the development of drugs for rare and neglected diseases. The workshop presentations and discussions considered a range of strat- egies for reducing the risk to industry and venture capitalists of investing in the development of such therapies by filling critical funding gaps along the drug development pathway and pursuing highly targeted approaches to early-phase development. Such strategies include sharing data and materials, managing intellectual property, launching clinical trials, and incorporating progress milestones. Speakers and participants examined the factors that 4 Nancy Sung, Ph.D., is a Senior Program Officer for the Burroughs Wellcome Fund.

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 BREAKTHROUGH BUSINESS MODELS contribute to successful approaches. They further discussed the use of these approaches by other organizations and in other disease areas in order to accelerate research on rare and neglected diseases. In addition, the work- shop provided an opportunity for organizations with an interest in such diseases to share ideas and identify potential collaborative activities. KEy THEMES Over the course of the workshop several key themes emerged: Collaboration—Developing a drug for a rare or neglected disease is • often prohibitive for any single organization. Establishing alliances is advantageous and can result in expanded access to innovative technology and to additional resources, including funding, intel- lectual property, disease experts, and patient communities. Several speakers stated that relationship building is paramount, and a successful relationship requires that knowledge and intellectual property rights flow in both directions to enable acceleration, inno- vation, translation, and deployment. Sustainability—The workshop discussions encompassed a broad • spectrum of funding models, including philanthropy, pharma- ceutical partnerships, venture capital, angel investors, and social investors, as well as product revenues and traditional sources such as loans, grants, and Cooperative Research and Development Agreements. Regardless of which models are pursued, the key to an organization’s long-term success and the success of its product pipeline is sustainability. Of the approaches discussed, those that had been in operation the longest used a diverse array of funding mechanisms to achieve sustainability. Sharing of data and materials—Making data and materials avail- • able and accessible is critical to progress. Establishing publically accessible repositories of tissue, nucleotide sequences, or clinical data for particular diseases is vitally important. These repositories facilitate sharing by requiring standardization of entries, validation of data, and the capability for direct input of data and samples by patients. Also important is the implementation of user agreements mandating that those accessing data or materials must share as well. Negotiations for sharing can be made more efficient through the use of standardized agreements. Global reach—When dealing with rare diseases affecting extremely • small numbers of people, it is important to try to identify every patient afflicted worldwide. Doing so can make it possible to gather a large enough population for clinical trials and can also help deter-

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 INTRODUCTION AND OVERVIEW mine the market for a product, aiding in the assessment of pricing and access. Communication with FDA—Drug sponsors have a legal right to • meet with FDA regarding drugs in development. Early and frequent communication with FDA throughout the development process can increase the chances of a smooth, efficient process and a success- ful application. FDA can advise on trial planning and execution, such as the selection of appropriate end points for the indications desired. ORGANIzATION OF THE REPORT The chapters that follow summarize the presentations and discussions that took place during the workshop: Chapter 2 provides an overview of the current financial landscape • at the various stages of drug development, including the investors at each stage, the drivers of investment for those funders, and the current state of investments. Chapter 3 reviews the regulations and opportunities that currently • exist through FDA’s Orphan Drug Program, and describes strate- gies for accelerating the development of therapies for rare and neglected diseases. Chapter 4 is the first of four chapters offering specific examples • of business models for the development of drugs for rare and neglected diseases. The funding models of four organizations are described: the Institute for OneWorld Health, a nonprofit phar- maceutical company; Cystic Fibrosis Foundation Therapeutics, a disease foundation that functions as a virtual drug company; Genzyme, a for-profit biotechnology company; and Celtic Thera- peutics, a global private equity firm that functions as a virtual pharmaceutical company. Chapter 5 addresses strategies to facilitate the sharing of data • and research materials. Two successful models are highlighted: the Alzheimer’s Disease Neuroimaging Initiative, a public–private part- nership that is conducting a large observational longitudinal study of Alzheimer’s, and the Genetic Alliance BioBank, a centralized repository for disease-specific clinical data and biological samples, as well as medical records, DNA/RNA, self-reported patient infor- mation, cell lines, tissue, and organs. Chapter 6 provides examples of innovative ways in which intellec- • tual property has been used to advance drug development for rare diseases. Examples discussed include pooling intellectual property,

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 BREAKTHROUGH BUSINESS MODELS depositing it into a trust, allowing open access to data, implement- ing socially responsible licensing, standardizing material transfer agreements, and creating new benefit-sharing arrangements. Chapter 7 describes strategies for facilitating clinical trials. It • reviews the regulatory tools available to assist with orphan drug development and approval processes, including fast track designa- tion; accelerated approval; priority review; and early and frequent communication with FDA through such vehicles as Type A, B, or C formal meetings, special protocol assessments, or informal meetings. Chapter 8 outlines areas identified as needing further discussion: • (1) business models for the development of drugs for rare and neglected diseases, as it is still too soon to be able to distill broadly applicable lessons and best practices, and new models will con- tinue to be created; (2) the current state of data and resource sharing and public access, with a focus on distilling best practices; (3) intellectual property issues as they relate to orphan drugs and rare and neglected diseases; and (4) policies applied to the review of orphan drug applications, with consideration of what new or revised policies might better facilitate the approval of such drugs. Finally, a number of resources mentioned throughout the workshop • are available on the Internet. Appendix C provides a list of web- sites for those interested in the development of drugs for rare and neglected diseases.