solely as orphan drugs. Most had been approved for the relatively more prevalent rare conditions such as multiple myeloma, but one, imiglucerase (Cerezyme), was approved for Gaucher’s disease, which has a U.S. patient population estimated at 3,000 to 6,000.1 In 2008, about 1,500 patients in the United States were taking the drug, which was priced at more than $300,000 per year (Pollock, 2008).

Biotechnology companies have been prominent in the orphan drug market from the outset, and the Orphan Drug Act has been cited as a key factor in their growth (OIG, 2001b; Ariyanchira, 2008; Grant, 2008). Small- to medium-sized companies have also played a significant role in orphan drug development (Seoane-Vazquez et al., 2008; Villa et al., 2008). Perhaps influenced by challenges in developing traditional blockbuster drugs as well as by the market protection and other incentives provided by the Orphan Drug Act, some major pharmaceutical companies have recently announced that they are considering or pursuing orphan drug development; many already have at least one orphan drug on the market (Anand, 2005; Dimond, 2009; Pollack, 2009; Whalen, 2009).

In addition to incentives for developing orphan drugs provided by the Orphan Drug Act, the potential profitability of orphan versus nonorphan drugs may be affected by several other factors. One is that private health plans generally have little leverage in negotiating prices for expensive biotechnology drugs, many of which are orphan drugs. Even the Kaiser Permanente system in California, which is large and accustomed to negotiating prices, has noted that “opportunities are limited” in this arena (Monroe et al., 2006). In a Government Accountability Office (GAO, 2010b) survey, sponsors of Medicare prescription drug plans cited the lack of competitors in the market for a drug (which gives manufacturers little reason to offer discounts) and the limited volume of a drug used by the plan (which limits a plan’s negotiating power) as two primary reasons for a health plan’s lack of leverage on drug prices. Orphan drugs often have both of these characteristics.

Colchicine provides an example of the implications for health plans and patients of limited competition. The drug, which had never been approved by the Food and Drug Administration (FDA) because it predated the 1938 Food, Drug, and Cosmetic Act, has long been used to treat gout and has for some time been used to treat familial Mediterranean fever, a rare disease. A company recently received FDA approval for the product as a treatment for gout and, in addition, as an orphan drug to treat familial Mediterranean fever (NDA 022352). It then increased the price of the drug (which is taken two to three times daily) approximately fiftyfold, from about $0.10 a pill to

1

Estimated prevalence range is from 1/50,000 to 1/100,000 population (see, e.g., NHGRI, 2009).



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