Orphan Drug Development Amid Regulatory Uncertainty

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Policies within the IRA and at the FDA in response to recent litigation could influence commercialization decisions for orphan drugs and may need to be clarified by policymakers.

As the portion of medical products approved and in the pipeline for approval increasingly shifts to focus on orphan indications, understanding the marketplace shaping this landscape is critical. The recently signed Inflation Reduction Act of 2022 (IRA) includes a provision exempting orphan drugs from Medicare price negotiation. The exemption applies only to those orphan drugs with an approved indication (or indications) for a single rare disease or condition. Some stakeholders have suggested that this exemption is narrow and could limit opportunities for additional research and development for indications to other rare diseases.  Additionally, the criteria that the Centers for Medicare & Medicaid Services (CMS) may use to parse out “conditions” from separate “indications” may need further clarification.

At the same time, a recent decision by the US Court of Appeals for the Eleventh Circuit specifying which products will retain the 7-year exclusivity provided by the Orphan Drug Act (ODA) introduces the potential for additional uncertainty for orphan drug manufacturers. On September 30, 2021, the court of appeals ruled that orphan drug exclusivity should be applied at the entire disease level, rather than for just an approved indication. The court’s decision to limit orphan drug exclusivity to just one drug per rare disease is misaligned with how the Food & Drug Administration (FDA) has approached orphan drug approvals historically. If adopted, this decision could result in a significant backlog of treatments seeking approval for orphan exclusivity that are no longer eligible. As depicted below, orphan indications are a substantial portion of all FDA approvals. The decision was appealed and awaits Supreme Court action.

Figure 1. Orphan Drug Approvals as a Percentage of all FDA Approvals
Figure 1. Orphan Drug Approvals as a Percentage of all FDA Approvals

Source: New Drug Approvals in 2021

Subsequent to the court of appeals’ decision, the FDA published a notice in the Federal Register stating that it would limit application of the decision to the orphan drug at issue in that case. However, it would continue to apply its preexisting regulations linking orphan drug exclusivity to uses or indications rather than to an entire disease. According to the FDA, the court’s ruling could result in such an expansive scope of orphan exclusivity that it “could adversely affect children—particularly the youngest pediatric populations—and other populations that are typically studied later in drug development.”  At this time, it is unclear whether the FDA’s interpretation of the court decision will stand up to legal scrutiny and whether the FDA’s current interpretation of the orphan drug exclusivity statute will remain in the long-term.

Key Considerations for Stakeholders

At a time when stakeholders are still assessing the implications of the IRA’s orphan drug exemption from Medicare negotiation, the court of appeals’ decision and subsequent action by the FDA may create an even more complicated environment for investment and commercial decisions related to orphan drugs and treatments for rare diseases. The current regulatory and legal landscape raises the following considerations for orphan drug manufacturers:

  • Given the interplay between the IRA’s orphan drug exemption and the emerging regulatory uncertainty related to orphan drug exclusivity, manufacturers should weigh the costs and benefits of investment into additional indications for preexisting orphan drugs.
  • Manufacturers should consider whether investment in orphan treatments should continue if another treatment has already been granted orphan exclusivity for a similar condition.
  • Manufacturers should analyze how the current regulatory and policy environment affect future innovation into treatments for rare diseases.
  • Manufacturers should determine the trade-offs of a potentially broadened interpretation of a rare disease or condition.
  • Manufacturers should analyze the conclusions in the court of appeals’ decision as they relate to the FDA’s authority to interpret statutory language with deference from the courts.

Looking Ahead

Given the shifting legal and regulatory orphan drug landscape, stakeholders may initially engage with the FDA and CMS, asking for clarification of “disease or condition” and how it will be defined as per the IRA exemption.  Additionally, stakeholders might consider the need for a legislative solution to harmonize the potential jurisdictional conflicts in application of orphan drug exclusivity through legislation.  Furthermore, as the decision has been appealed to the Supreme Court, stakeholders may choose to file amicus briefs encouraging the Supreme Court to swiftly resolve the legal conflict between the court of appeal and the FDA.  Going forward, it will be important for stakeholders to actively engage with regulators at the FDA and CMS, with Congress, and with the courts to ensure that policymakers understand how emerging decisions in these areas could affect the future development of treatments for orphan and rare diseases.

To learn more about regulations affecting orphan drugs, connect with us.

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