Introduction
In December 1999, the European Commission adopted the Orphan Regulation to promote the research and development of orphan medicinal products (OMPs) for the diagnosis, prevention or treatment of a rare disease. The Orphan Regulation can be understood as an attempt to improve health equity, as it provides the pharmaceutical industry with financial incentives to invest in the area, attempting to make it similarly attractive as investment in other areas of health. However, despite an increase in the availability of OMPs since the introduction of the Orphan Regulation, OMPs remain very expensive and problems of inequality of access persist across Europe. In its ongoing revision of the Orphan Regulation, the European Commission has proposed increased competition in order to promote accessibility, to the dismay of many pharmaceutical companies.
A public health priority
Rare diseases collectively affect about 30 million Europeans and about 300 million people worldwide. Individually, however, the prevalence of rare diseases ranges widely from affecting 1 in 2,000 to fewer than 1 in 1,000,000 people. Very small and geographically dispersed patient populations with biologically complex conditions create difficulties for conducting robust research. This, combined with a perceived limited potential for returns on investments meant that in the past the area of rare diseases attracted few investors, and medicinal development was limited.
To mitigate some of these issues, the Orphan Regulation offers pharmaceutical developers financial incentives, most importantly in the form of reduced fees for regulatory activities and a 10-year market exclusivity. The latter protects an OMP against competition from similar products for the same rare condition. This is especially valuable for shareholders to estimate whether they will receive a desired return on their investment in a product or company. Since the implementation of the Orphan Regulation, around 2000 products have been granted status as orphan medicinal products, and the European Medicines Agency (EMA) has authorised over 200 OMPs for marketisation in the EU.
Obstacles to equity and affordability
Despite the Regulation, accessibility of OMPs remains a mixed picture and is particularly complicated by the high prices set by pharmaceutical companies for their products. Such prices are based on the rationale that orphan medicines development carries higher risk and uncertainty, so that investors should be rewarded with higher returns. As orphan medicines target very small populations, these higher returns need to be generated from the small number of sales achieved, leading to a very high price per product. Attracting investment for research and development depends on the expectation that healthcare payers are willing to pay these higher prices to make them accessible to individual patients. In other words, it relies on payers pursuing equitable healthcare provision for all patients across the healthcare system, and by extension their willingness therefore to pay extra for rare disease patients with higher (unmet) medical needs.
While initially it appeared that payers were indeed able and willing to pay higher prices for orphan medicines coming to market, more recently concerns have emerged as an increasing number of orphan medicines reach European markets that “orphan drug prices are too high, patient access is incomplete, and manufacturers make too much profit.” While the Orphan Regulation was put in place in an effort to improve health equity, the very high prices on OMPs now threaten health equity by driving out other healthcare. Critics furthermore target pharmaceutical companies’ tactics, labelled as “salami slicing” and “indication stacking“. Both are aimed at maximising profits emerging from the incentives offered by the Orphan Regulation, and keeping competitors from producing cheaper generic or biosimilar products from entering the market and driving down prices. Where budget sustainability is normally promised by the prospect of market competition after the end of market exclusivity periods, some pharmaceutical giants are effectively fending off such competition.
The role of regulation and regulatory revisions
The European Commission is currently conducting an expansive revision of its Pharmaceutical Regulation, including changes to the Orphan Regulation which has remained largely the same since 2000. In April 2023, it published its draft proposal for amendments. To start addressing the issue of access, it proposes a modulated approach to exclusivity periods. This would introduce considerable differences between market exclusivity periods for different types of products that the Commission sees as deserving of more or less reward. OMPs that address a high unmet medical need would receive a 10-year market exclusivity, while well-established use orphan products[1] would only receive 5 years. All other OMPs would receive a 9-year market exclusivity. Importantly, companies can earn an additional 12 months of market exclusivity if they provide a continuous and sufficient supply of their products to patients across all relevant Member States,[2] and another 12 months for extending the marketing authorisation of their OMPs to include additional orphan conditions.[3]
This modulated approach provides a way to differentiate between pharmaceutical strategies that the European Commission considers more or less valuable to EU citizens. The more ‘innovative’ and ‘widely accessible’ a product, the higher the exclusivity rewards companies receive. Moreover, shorter exclusivity periods encourage earlier competition from other companies developing biosimilar or generic products, that could drive down the price of the original product and improve the affordability of OMPs. To promote faster market authorisation procedures, the Commission is looking to simplify its regulatory processes with the aim of cutting the average approval time for medicines from 400 to 180 days.
While European Commission officials have praised the provision for ensuring that “availability, affordability, and access … go hand in hand with industrial competitiveness,” the European Federation of Pharmaceutical Industries and Associations (EFPIA) has responded by stating that the proposal “puts European competitiveness at risk [as] it weakens the attractiveness for investment in innovation and hampers European science, research and development.”
This disagreement over the expected impact of the proposed changes emerges from conflicting visions concerning the role of the Orphan Regulation and how it should intervene in the market for OMPs that it once helped to create. While industry hopes for a protected environment with limited competition that attracts investment streams and ensures returns on such investment, EU policymakers are looking to increase competition and lessen protection in order to improve the affordability and accessibility of OMPs and improve health equity across Member States. The question remains whether during the period in which the contents of the EU’s reform proposal are likely to be subject to significant change, a sufficient balance can be struck between competition and protection that satisfies both sides.
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[1] Well-established use orphan products contain an active ingredient that has been in use for over 10 years, so that their efficacy and safety has been well-established.
[2] Under current provisions, companies are not obliged to apply for access in all Member States, and make strategic financial considerations in choosing which Member States to apply to. The proposal thus presents a considerable change, as companies would need to negotiate pricing and reimbursement in all Member States where the Marketing Authorisation applies – a laborious, time-intensive and expensive process.
[3] Currently, it is a common strategy of pharmaceutical companies to extend their marketing authorisation to one or more orphan conditions where the OMP is effective, as under the current Orphan Regulation they gain an additional full 10-year market exclusivity for the product. In other words, the European Commission’s proposal precludes this opportunity for companies to make large profits from a single OMP in multiple rare conditions, effectively preventing what is referred to as ‘indication stacking’.
About the author:
Hadewych Honné is a PhD student at the department of Science, Technology, and Innovation Studies (University of Edinburgh) and the Life Sciences and Society Lab (KU Leuven). In her PhD research she focuses on the roles of patient organisations in reimbursement processes for Orphan Medicinal Products in different European countries. Her research interests broadly cover patient and public involvement in health and healthcare, the dynamics of the biomedical innovation landscape, and the politics of resource allocation in health and healthcare.
Photo by Hush Naidoo Jade Photography on Unsplash
