Orphan Drug Act on congressional agenda.

In 1983, Congress passed the Orphan Drug Act to encourage development of pharmaceuticals used in the treatment or diagnosis of diseases that occur so rarely that there is no financial incentive for development of these so-called "orphan drugs." The Act established, among other things, exclusive marketing rights on unpatentable orphan drugs for a period of seven years and a tax credit equal to 50 percent of the cost of conducting human clinical trials. It also authorized the Secretary of Health and Human Services (HHS) to make grants and enter into contracts to reduce the costs of clinical testing in orphan drug development.

In 1985, inspired by the fact that, within two years of passage of the Orphan Drug Act, 54 orphan drugs were under development or already approved, Congress decided to extend the Act's authorization of research grants and expand its protection of marketing rights to all orphan drugs rather than just unpatentable ones. The 1985 amendments to the Act also established a National Commission on Orphan Diseases (NCOD) to evaluate government research activities on rare diseases.

The Food and Drug Administration (FDA), which is charged with administration of the Orphan Drug Act, provides orphan drug designation when the targeted disease afflicts 200,00 or fewer Americans and no satisfactory therapy exists to combat the disease. The development of new drugs qualifying for orphan drug status continues. According to a recent survey by the Pharmaceutical Manufacturer's Association (PMA), 17 pharmaceutical companies spent an estimated $51.6 million in 1987 alone on research and development of orphan drugs. As a result of these and other investments, physicians and patients may now or in the future gain access to drugs for such rare diseases and disorders as pituitary dwarfism, pneumocystis carinii pneumonia, Hodgkins disease, osteosarcoma, leukemia, schistosomiasis, manic-depression, neonatal shunt cynanosis, Tourette's syndrome, Cushing's syndrome, angioedema, Wilson's disease, sickle cell anemia, candida and cryptococcus infections, colon cancer, lymphoma, Sjogren's syndrome, septic shock, toxoplasmosis, Lyme disease, carcinoid syndrome, third line testicular cancer, primary brain malignancies, CMV retinitis, hyaline membrane disease, phanylephrine, regimentary glaucoma, vernal kerato-conjunctivitis, and AIDS.

Persons afflicted with rare disease are not the only beneficiaries of the Orphan Drug Act. The biotechnology industry, which has been struggling since its inception to offset huge R & D costs, has also prospered. Many biotechnology products that qualify for orphan drug status are deprived of patent protection because they are based on substances produced in the human body. The recombinant techniques applied by biotechnology companies enable the production of naturally occurring substances, such as human growth hormone (HGH) and erythropoietin (EPO), in large quantities without sufficiently altering the structure of the substances to bring them within the purview of the federal patent laws. The biotechnology industry, therefore, hopes to live up to its potential as a billion dollar industry using the Orphan Drug Act as a springboard.

To further accelerate the development of orphan drugs by the pharmaceutical and biotechnology industries, the NCOD recently asked Congress to approve greater incentives for orphan drug companies. Estimating that 20 muillion Americans suffer from orphan diseases, the NCOD recommended extension of the seven-year market exclusivity period and additional tax credits for R & D expenditures. The NCOD also asked for more federal funds for orphan disease research, speedier FDA approval of medications for victims of rare diseases, and relocation of the orphan drug program from FDA to a central office in HHS. In the wake of the NCOD report, the Senate Labor and Human Resources Committee announced that it will ask the Appropriations Committee to immediately increase funding for the grants program by $8 million.

Despite the visible successes of the Orphan Drug Act, its market exclusivity provisions have evoked concern among several members of Congress. Senators Edward Kennedy (D-Mass.) and Orrin Hatch (R-Utah) claim that manufacturers are abusing the provisions by charging high prices for their orphan products. They have asked that the FDA impose a moratorium on orphan approvals until June 30, 1989, so that Congress can review the Act and consider amendments. At the same time, Representative Henry Waxman (D-calif.), the prime author of the Orphan Drug Act, wants to change the law so that sponsors of drugs with large sales potential cannot take advantage of the market exclusivity provisions by initially pursuing approval for narrow indications.

Commercialization of HGH is often cited as an example of how the Orphan Drug Act is subject to abuse. Approximately 10,000 American children require HGH weekly to treat their dwarfism disorder. Because the manufacturers of this drug are currently insulated from competition by the Act, HGH now costs these children's families an estimated $12,000 each yearly. At this price, HGH sales will exceed $1 billion over the seven-year period of exclusivity. Meanwhile, at least three other companies with HGH on the market elsewhere in the world are denied access to the U. S. market. By keeping these potential competitors out of the market, the Act inadvertently facilitates elevated prices.

Advocates of the Orphan Drug Act, including PMA and the Industrial Biotechnology-association (IBA), reply that high prices are necessary to recoup R & D costs. They oppose the initiatives by Senators Kennedy and Hatch to amend the law, because companies might be deprived of the fruits of their large investments in orphan product R & D. In correspondence to Senators Kennedy and Hatch, PMA recommended administrative fine- tuning rather than legislation. Also hesitant to endorse the recommendations of Senators Kemnedy and Hatch is the NCOD, which cautioned that orphan drug development requires additional incentives and that corrective legislation be limited to "clearly documented" abuses, and the FDA, which refused to impose the moratorium requested by the senators, explaining that it is precluded by law from deliberately withholding a virtually approved drug pending a change in the Orphan Drug Act.

Currently, there is interest in Congress to expand the patent laws to give market protection to developers of biotechnology products who would otheriwise be forced to seek exclusivity under the Orphan Drug Act. At an April 13 press conference held by the NCOD, Senator Hatch remarked that some biotech companies "are not protected by a current patent ... and ... we've got to provide those protections, and once the protections are provided, they won't be seeking to uise the Orphan Drug Act to solve their problems." Legislative analysts predict that the future of this proposal, and its relation to the Orphan Drug Act, will be hotly debated by the 101st Congress.

T H E A U T H O R

William H.E. von Oehsen is a health associate in the Washington, D.C., offices of Epstein Becker & Green, P.C. He specializes in food, drug, and medical device law.