In my last blog I discussed the flagship universal health coverage policy of the Indian government. In this blog I take on the case of orphan drugs and the policy sphere surrounding it in India.
Inequities also exist in terms of availability and Research & Development (R&D) on drugs for certain diseases. Generally, pharmaceutical companies tend not to focus their R&D on rare diseases, thus creating an inherent inequity for patients with these diseases. Here I will discuss how public policies can influence the development and availability of drugs, through a comparison between India and USA.
Diseases with very low prevalence have been designated as rare or orphan diseases by some countries. The United States of America (USA) defines any disease affecting less than 200,000 individuals in the USA as a rare disease, while the European Union (EU) uses a prevalence of less than 5 per 10,000 in the European population to categorize the same. The World Health Organisation estimates that approximately 400 million people worldwide suffer from one of 5000-8000 rare diseases.
The pharmaceutical sector often neglects rare diseases; the low prevalence of disease creates difficulties in drug development trials and limits the market size. Hence, rare diseases are also referred to as orphan diseases, and the drugs used to treat such diseases as orphan drugs.
Several countries have introduced supply-side incentives to overcome these market failures in pharmaceutical innovation for rare diseases (Gammie, Lu, & Babar, 2015). These regulations primarily act as a pull mechanism to induce pharmaceutical innovation in rare diseases by offering varying periods of market exclusivity and/or subsidies for drug development costs. The Orphan Drug Act (ODA) of 1983 in the USA provides seven years of market exclusivity and a 50% tax credit on clinical trials cost, while the EU offers ten years of market exclusivity but does not offer financial incentives (Gammie, Lu, & Babar, 2015). India, however, does not provide any significant incentives for orphan drugs aside from an expedited drug review process and relaxation of guidelines necessitating in-country clinical trials (Nishith Desai & Associates, 2020)
The influence of the Orphan Drug Act on drug discovery is not easily quantifiable. However, the legislation’s usefulness can be gauged by the 10-fold increase in the number of drugs marketed for rare diseases in the decade following the law’s passage (Rados, 2003). Since 1983, enthusiasm regarding the development of orphan drugs has remained steadily high among pharmaceutical organizations, with a steady upward trend in new approvals. As of March 2021, 957 drugs have received orphan drug designation in the USA (USFDA, 2021).
Financial metrics have also been used to study the impact of the Orphan Drug Act. Miller (Miller, 2017) examined the effect of a drug receiving orphan status on the drug manufacturer’s stock price. She identified a significant positive correlation between stock price increases and the announcement of orphan drug designations. Kim et al. (Kim, Chatterjee, & Higgins, 2018) examined the impact of the EU orphan drug regulations on venture capital firms’ investment activity. They found an increase in investment at an earlier stage in startups belonging to sectors that fell under the ambit of the orphan drug regulations, compared to other life sciences firms whose work lay outside the purview of these regulations.
Several scientists in recent years have criticized the ODA as having given rise to new market failures. A rising proportion of orphan designation approvals are for secondary indications for previously approved drugs (Miller & Lanthier, 2018). Moreover, many orphan designation approvals seem to be based on defining diseases in the narrowest sense possible. This is seen commonly in oncology, where pharmaceutical firms have resorted to specifying specific stages and subtypes of cancers as distinct diseases to obtain orphan designations, a phenomenon referred to as “salami slicing” (Rinaldi, 2005). In a similar practice, pharmaceutical firms also stack 7-year monopolies for the same drug on top of each other, for only marginally different indications, thus obtaining prolonged periods of market exclusivity (Arno, Bonuck, & Davis, 1995).
The lack of availability of more than half of the orphan drugs approved in the USA in India is a matter of concern. The policy framework surrounding orphan drugs in India is likely a significant determinant of this discrepancy.
The Indian market is doubly unattractive due to price controls and the absence of any market exclusivity. A robust orphan drug policy for India can go a long way in improving this situation. However, due care must be taken to avoid replicating the same market failures generated by the USA’s Orphan Drug Act.
The core of the solution lies in finding ways to delink R&D and financing, possibly through government interventions. In place of the fixed periods present in the ODA and EU orphan regulations, a flexible period of market exclusivity, dependent upon the quantum financial benefits reaped by the pharmaceutical firms in the form of monopoly rents, maybe another potential solution to avoiding such market failures.
In my next blogs, I pivot my focus onto the inequities within healthcare service providers in India. My next series of blogs, “Think before you waste” and “Straighten the Spine” will centre on the biomedical waste workers and ASHA workers, respectively, who are among the most ignored subsections of the Indian healthcare system.
This article has been modified from a submission to the course of Health Economics undertaken by Prof Tarun Jain at the Indian Institute of Management, Ahmedabad. Co-contributors were Dr. Manoj Joseph, Mr. Vaishak P, Mr. Arpit Singh and Mr. Shubham Agarwal, along with Dr. Dhairya Shrivastava.
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Gammie, T., Lu, C. Y., & Babar, Z. U.-D. (2015). Access to Orphan Drugs: A Comprehensive Review of Legislations, Regulations and Policies in 35 Countries. Plos One. doi:https://doi.org/10.1371/journal.pone.0140002
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