Orphan Drugs – How a National Health Crisis Spawned a Multi-Billion Dollar Industry

99% Invisible recently reported on the history of “Orphan Drugs.” These drugs are an enormous source of income for pharmaceutical companies – but the explosion in their production is a relatively recent phenomenon.

What are “Orphan Drugs”?

Orphan Drugs are defined by the Orphan Drug Act of 1983 as drugs that would be used in the treatment of fewer than 200,000 Americans. Though the conditions these drugs treat are rare, they are often quite serious – patients with Huntington’s disease, ALS, and muscular dystrophy all benefit from their availability.

The label “orphan” was applied pejoratively before the passing of the act, describing their undesirability as market products for pharmaceutical companies. The nickname stuck.

The Beginning of a Movement

Abbey Meyers joined the Tourette Syndrome Association (this writer’s preferred TSA) in the 1970s after her son David was diagnosed by a specialist.

The specialist informed her of a drug being developed for schizophrenia that had been successfully used for treating Tourette syndrome overseas. David even managed to get into a clinical trial for the drug, and noticed improvements. But the drug never tested as well in schizophrenia patients – its intended market. The company, seeing no potential for profit in the limited number of Tourettes patients, halted production.

Abbey and the TSA lobbied and campaigned tirelessly, eventually securing a hearing with California Congressman Harry Waxman about the orphan drug problem. The hearing was attended by almost nobody – save for a journalist with the Los Angeles Times who wrote an obscure article unlikely to gain any traction on its own.

Life Imitating Art

Quincy M.E. was a popular medical mystery show in the late 70s and early 80s. One of the producers for the show, Maurice Klugman, just so happened to read the obscure article in the LA Times.

Maurice, brother to the show’s star Jack Klugman, had terminal bone cancer. Abbey’s story, and especially her dedication to gaining support for orphan drugs, connected with him. So he called her.

Not long after, Quincy aired an episode where the eponymous doctor meets a young man with Tourette’s, and becomes heavily invested in the fight for orphan drugs. The young man later delivers a powerful speech at a congressional hearing. It’s an emotional episode, and the public responded in droves. Thousands of letters were sent to Klugman, though he always forwarded them to Abbey.

Congress reacted too. An orphan drug bill was passed in the House of Representatives, but got stuck in the Senate.

So the writers of Quincy made another episode.

In this episode, a lone Senator threatens to stop the passing of an orphan drug bill. At the end of the episode, the Senator is dramatically confronted by the scene of a passionate crowd of the bill’s supporters – cast entirely of people actually afflicted with rare diseases. He of course folds immediately and signs the bill.

The real-life Senate passed the House-approved Orphan Drug Act not long after the second episode aired. Ronald Regan the bill into law in 1983, and the floodgates for orphan drugs were opened.

The Orphan Drug Act of 1983

The Orphan Drug Act provides a number of incentives for pharmaceutical companies developing orphan drugs. Since these drugs would under normal circumstances be highly unprofitable, the terms of the bill are enticingly generous.

Notably, the bill gives the manufacturer a seven-year monopoly period during which no other company may sell a competing drug in the United States. This effectively allows the pharmaceutical company to charge whatever they want for the drug. Emboldened by their confidence that insurance companies would cover most of the cost for a patient’s treatment, pharmaceutical companies started charging more and more for these life-changing drugs. This spiral led to the six-digit medical bills members of the rare disease community are all-too-familiar with.

Patients as a Source of Profit

Lev Pharmaceuticals was formed only in 2003, and with one purpose in mind: to secure FDA approval for a drug used to treat hereditary angioedema. The drug had existed for some time, being used successfully in Europe for three decades at that point. Quite simply, nobody had yet taken the trouble to bring the drug through clinical trials in the United States.

It cost Lev $75 million to fund the drug’s clinical trials. In only five years, just before the FDA was about to rubber stamp the drug for marketing in the US, Lev Pharmaceuticals was sold for nearly $450 million. A sixfold profit.

Within just a few years, the new company was making $400 million of their money back each year from the sale of that drug alone. That didn’t last long though, because they were bought out by an even bigger company for over $4 billion soon after.

Without these orphan drugs, thousands of patients across the United States likely never would have received treatment for their rare diseases. But their hefty price make some feel as though pharmaceutical companies are holding patients with rare diseases “hostage.” Others argue the prices are justified, as orphan drugs are still a risky investment, despite the incentives provided by the Orphan Drug Act.

Regardless of morality, the reality of the matter is that for better or worse, drugs for rare diseases have the potential to be massively profitable. Before the 1983 Act, only 38 orphan drugs had ever been approved in the United States. As of 2014, only 31 years later, 373 orphan drugs had been approved by the FDA.

This writer predicts for the manufacture of new orphan drugs to continue at an impressive rate, and for prices not to lower any time soon.


Do you think pharmaceutical companies overcharge for orphan drugs? Should the government provide greater incentives for the manufacture of these drugs? Share your thoughts with the Patient Worthy Community!

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