The European Union has finally implemented its legislation to promote the development of orphan drugs. Yet, except for prolonged market exclusivity, the incentives on offer seem less attractive than those in the US. Jon McKenna asks whether the new regulations will be sufficient to mirror the growth of rare disease research witnessed in the New World.
Size is the driving force of a corporate, global business strategy. Big business seeks big markets for big profits. And the pharmaceutical industry is no exception: you only have to read Bristol-Myers Squibb's stated pursuit of "mega blockbusters" to realize that every major pharmaceutical company's R&D investment revolves around the next billion dollar product.
Developing drugs for rare diseases, therefore, is hardly going to appeal to major market players. Small patient populations mean unacceptably low peak sales. But should market forces prolong the suffering of those unfortunate to have these conditions?
Experience has taught governments one important lesson: dangle a large enough carrot and the pharmaceutical industry will follow. The US and Japan have long since introduced legislation to rectify the situation. An array of complex incentives has paved the way to the commercial development of a sizable number of so-called orphan drugs across a vast therapeutic spectrum.
Recent European legislation has finally brought the EU up to speed. So is Europe about to witness an explosion of medical and biotechnology research to focus on these long-neglected diseases?
The players
"The initial response from companies to the legislation has been very encouraging," says Camilla Barter, drug regulation officer at the Department of Health in the UK. Following the legislation's approval in April, by mid September 42 applications for designation had already been submitted and a further 30 notifications of intent to submit had been received. However, Mrs Barter remains cautious. "It's far too early to judge whether the European Commission or nation states need to consider adopting further measures. The next year will prove critical."
Biotechs are the key beneficiaries from orphan drug legislation. Neurochem, for example, recently filed for Orphan Medical Product designation with the European Medicines Evaluation Agency (EMEA) for the development of Fibrillex, a drug for the treatment of amyloidosis. The company had already acquired orphan drug designation from the FDA.
"These US and EU programs provide great incentives and both are very important in progressing development of this product," acknowledges Libe Herbert, director of communications at Neurochem. "Essentially, the design of the incentives package will have the same effect [as the US legislation] - to cause a stimulus for orphan drug development and growth of the biotech industry."
The pharmaceutical companies, however, are not quite so excited. "From an investment point of view the legislation may be considered more significant for biotechs, who are often constrained by a limited resource base," suggests Philip Thompson, spokesperson for GlaxoWellcome, now GlaxoSmithkline. "The policy for Glaxo has always been to develop drugs at all levels. We seek to facilitate drugs to meet an array of therapeutic needs." Mr Thompson confirms that, as yet, the company is not considering applying for any orphan drug designation under the new guidelines. "The option, however, is always available," he notes.
Exclusivity - the jewel in the crown
Perhaps some of big pharma's lack of interest stems from the weaknesses of the EU legislation. While registration fee waivers and R&D grants have been central to the success of orphan drugs in the US, they are all but lacking in the European equivalents. Furthermore, tax credits amounting to up to 50 percent of the R&D costs may be sought in the US. Again, this is fragile in the EU. Implementing tax breaks across member states with varying tax policies would be inherently difficult.
Nevertheless, the EU regulation has one jewel in its crown: it offers companies market exclusivity for their products of up to 10 years, overshadowing the FDA's seven. Will this jewel shine brightly enough to ensure a successful future for a European orphan drugs market?
Neurochem certainly believes it will. "We will obviously be seeking the full 10 years market exclusivity available. We consider this the major incentive and wish to utilize the opportunities it brings to the full," states Dr Herbert.
Indeed, while the legislation, and particularly the lack of tax incentives, may not tempt large pharmaceutical companies to participate in orphan drug research, the long exclusivity period makes sales and marketing of orphan products highly attractive. Most biotechs will require sales and marketing forces to support their products. Mr Thompson suggests that at this stage major pharmaceutical manufacturers will get involved. "We may look to form sales and marketing alliances with biotechs," he says.
Given this potential impetus from pharma, market exclusivity remains the major tool in the EU's drive for a strong European orphan drugs industry. The diminutive nature of other incentives appears offset by this singular benefit. Three years extra protection compared to the US is three more years of protected revenue - which far outweighs any tax allowances.
Building for the future
The EU legislation could yet be further strengthened if its weaknesses do reduce its impact. Despite the lack of a centralized tax system, the Commission is currently working with individual member states to provide tax credits. The extent to which these are offered, however, will ultimately be the prerogative of individual countries.
The ultimate success of the EU's new laws rests in the hand of the regulators. "It is imperative that the guidelines enable companies to address the needs of those suffering from orphan diseases and use the widest possible market to avoid the dispersion of limited resources," stresses Melanie Carr, scientific administrator at the EMEA. "Rigorous implementation of the policy is essential if the orphan drugs legislation is to appeal to the greatest number of companies." The emphasis will always lie with the EU and the EMEA to remain proactive and flexible in their approach.
The current package has proved incentive enough to spark great demand for orphan status for pipeline drugs. If individual nations responsibly implement additional, attractive tax credit systems the draw of the orphan drugs market will be strengthened even further. The true test now lies in long-term sustainability. "Provided the EMEA and EU remain responsive to public health issues and the industry potential," asserts Mrs Barter of the UK's Department of Health, "the European orphan drugs market should flourish."