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Big Pharma and the Profit Problem of Rare Diseases

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The FDA wants to help small drugs reach big returns.

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Big Pharma's mandate is to develop potentially life-saving treatments, but it also has to turn a profit. That's why rare diseases and big business aren't necessarily a good mix. But the FDA is trying to show the industry how profit and rare diseases don't have to be mutually exclusive.

The FDA is sponsoring two programs next year to educate industry insiders on the benefits of creating orphan drugs, which are treatments for rare diseases. "The FDA has never run this kind of program before, wherein FDA staff provides individual guidance to applicants in creating submissions for orphan drug designation," said FDA spokesperson Sandy Walsh in an email to Minyanville. "These workshops represent part of a new era of transparency and they are being held now because orphan drugs continue to have an expanding role in drug development."

The workshops will take place in February at the Keck Graduate Institute in Claremont, California. and in August at University of Minnesota in Minneapolis, Minnesota.

The orphan drug designation is given by the FDA to drugs that treat diseases that affect fewer than 200,000 people in the US and would otherwise be fiscally irresponsible for the company to market. While the individual markets for rare diseases are small, the conditions overall represent a significant portion of the population: There are about 6,000 rare diseases affecting 25 million Americans, according to the National Institute of Health.

The FDA provides companies with certain incentives for the drugs, including a tax break on 50% of expenses related to the clinical testing of the drug, marketing exclusivity of the drug for seven years, and access to research grants from the agency's Office of Orphan Products Development.

As Big Pharma switches from blockbuster medications that treat more generalized diseases (and rack up sales of a few billion dollars annually) to drugs with more individualized applications, orphan drugs could become more prevalent. (See also, Pharma's Next Big Thing: Personalized Medicine)

According to a report in 2007 by BCC Research, the global orphan drugs market reached $58.7 billion in 2006, and grew by 8% from $54.5 billion in 2005. It was the most recent time period for which the data is publicly available. The market is expected to grow at a compounded annual growth rate of 7% to reach $81.8 billion by 2011.

The US accounted for 55% of the market in 2006 at $32.5 billion. It is expected to grow at a compounded annual growth rate of 8% to $47.8 billion by 2011.

Biologic drugs, or drugs made from living cells, made up 60% of the market. This area is one of the hottest areas in drug development and represents the future of most medicines.

While not all new drugs will fit into the orphan drug designation, far more drugs than are currently available will be made to treat Americans with genetic disorders, or roughly 5% of the population. Orphan drugs are also a major boon for the cancer market, with nearly half of all those designated going to cancer treatments.

According to the National Organization of Rare Disorders, the Orphan Drug Act -- which was signed into law in 1983 by President Ronald Reagan -- became reality through the efforts of a grassroots coalition of people who were fighting for better treatments for the people in their lives with rare diseases.

Prior to the Orphan Drug Act, fewer than 10 products for the treatment of rare diseases came to market; since that time more than 200 drugs have reached the public (with another 1,200 receiving the designation), according to the OOPD.

In the last four months, 60 drugs currently being researched have received the designation. These drugs include a melanoma treatment by Eil Lilly (LLY), a drug for the treatment of Hodgkin's Lymphoma by Novartis (NVS), GlaxoSmithKline's (GSK) research into soft tissue sarcomas, and treatments for ovarian cancer by Merck (MRK) and Abbott Laboratories (ABT).
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