How the Orphan Drug Act Offsets Treatment Development Costs

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Determining whether the sales of a pharmaceutical product can offset the cost of developing it is an important factor to consider when deciding whether to develop a pharmaceutical product. This is particularly true for products used to treat rare conditions in which the costs of developing the product are too great to offset any revenue gained through sales.

In order to encourage pharmaceutical companies to develop treatments for rare conditions, the Food and Drug Administration passed the Orphan Drug Act of 1983. This legislation provides incentives for pharmaceutical companies to develop products to treat rare conditions.

Since the legislation has been enacted, the number of orphan drug approvals has increased. In 2014, approximately thirty-six orphan drugs were approved. Therefore, pharmaceutical executives should understand how to take advantage of this growing market.

What is the Orphan Drug Act?

Orphan drug designation is governed by Title 21 Code of Federal Regulations Part 316. FDA published Title 21 Code of Federal Regulations Part 316 to encourage development of treatments for rare conditions.

The regulation defines which pharmaceuticals and biologics can be granted orphan status, how companies can apply for orphan status, what information the Food and Drug Administration provides, and what patent exclusivity can be granted to orphan drugs.

 
 
 

Provisions Under the Orphan Drug Act for Designation and Approval of Drugs

According to the legislation, a product can be designated as orphan drug if the condition for which it is to be used as treatment affects less than 200,000 people in the United States or if the pharmaceutical company would not expect to recoup the cost of developing the treatment.

Under the regulation, a pharmaceutical company that wishes to seek orphan designation for an unapproved compound should ask the FDA to provide written recommendations for designating a compound as an orphan drug before it is submitted either for approval under section 505 or licensure as a biologic under section 351 of the Public Health Service Act. The FDA will provide recommendations for conducting the appropriate clinical trials if he or she finds that the drug meets the requirements for orphan designation.

If a pharmaceutical or biologic that meets the criteria for orphan status is approved, the pharmaceutical company must notify the FDA at least one year beforehand if it intends to stop manufacturing the product. For unapproved drugs, the pharmaceutical company must notify the FDA if it intends to stop developing the product. A notice regarding the designation of the product shall be made public.

Provisions under the Orphan Drug Act for Patent Protection and Funding

For approved orphan drugs, the FDA may not approve an equivalent treatment manufactured by another pharmaceutical company for another seven years. As such, the pharmaceutical company manufacturing the orphan drug will receive patent exclusivity during that period.

This exclusivity remains in effect as long as the pharmaceutical company manufacturing the product can produce sufficient quantities and does not provide permission in writing for another company to manufacture the treatment.

The legislation contains provisions related to the costs of developing drugs or biologics with orphan status. The Department of Health and Human Services may provide grants and enter into contracts with individuals and private businesses to help pharmaceutical corporations defray the costs of developing pharmaceuticals, devices, biologics, and foods to treat rare diseases.

These costs include those associated with preclinical studies and clinical studies that are conducted after a product has been granted orphan status and before it is submitted for approval.

Other Provisions under the Orphan Drug Act

The legislation also establishes the Orphan Products Board. The Assistant Secretary for Health of the Department of Health and Human Services chairs the board, which comprises representatives from the Food and Drug Administration, the National Institutes of Health, the Centers for Disease Control, and other relevant organizations.

The function of the board is to promote the development of orphan drugs and coordinate the functions of federal, public, and private agencies that develop these products. For pharmaceuticals, the board evaluates the effect of subchapter B of the Federal Food, Drug, and Cosmetic Act on orphan drugs, and the activities of the National Institutes of Health and the Alcohol, Drug Abuse, and Mental Health Administration as they relate to orphan drug development.

They also help to assure coordination among government, public, and private agencies developing orphan drugs. They also inform physicians and the public regarding the availability of orphan products and look for corporations to develop treatments for orphan conditions.

Conclusion

By understanding the mechanisms and incentives provided by the orphan drug act, pharmaceutical companies can use it to offset the costs associated with developing treatments for rare conditions and enjoy patent exclusivity for products that they develop.

This can result in increased revenue for companies and increased treatment options for patients with these conditions.

Have more questions concerning the Orphan Drug Act and how it affects you? Click here to contact us today and grab our free whitepaper: The Benefits for Pharma Companies of Working with an FDA Compliance Consulting Firm

 

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