What does the Orphan Drug Tax Credit tell us about the Costs of Clinical Trials?

By James Love

Summary:

  • The number of patients enrolled in the trials used to support the registration of novel orphan product are significantly smaller that non-orphan products.  One measure of this is the difference in the enrollment of trials cited in the FDA drug trials snapshots.
  • Since 2015, the average number of trials cited in the FDA trials snapshots for novel drugs were 439 for orphan products, and 2,736 for non-orphans.
  • Data from the Orphan Drug Tax Credit provides insights into the costs of drug development, or more specially, the costs of the clinical trials used to support an FDA approval.
  • From 2010 to 2016, the average qualifying trial costs claimed for the orphan drug credit was $86 million to $102 million, per FDA approved orphan indication (assuming 2 to 3 year average years of lag between the credit claimed and the approval date).  Companies were able to take a credit of $43 to $51 million, on average, for each FDA approval.
  • The $86 to $102 million in pre-credit outlays is far lower than the average of $965 million on trial costs for a new drug approval, estimated by DiMasi and others in 2016.  Some of the differences are explained by the smaller trials for orphan drugs and other differences in methodologies, although both figures include the costs of failed trials and exclude pre-clinical or cost of capital costs.
  • In 2013, the last year for which we have actual rather than projected data on the credit (from the IRS Statistics of Income), the total amount of the credit from all 132 corporate tax returns that claimed the credit was just over $1 billion, nearly the same amount as the DiMasi estimate of $965 million for a single drug. But in 2013, the FDA granted 265 orphan designations and approved 33 orphan indications, including 8 novel products which were approved for an orphan drug lead indication.
  • The data from the orphan drug tax credit illustrates the large gap between the known facts about the costs for R&D for orphan drug development, and the astronomically larger R&D costs claimed by DiMasi (and frequently quoted by other researchers, policy makers and journalists) as averages that should guide policy making.
  • These data underline the need for greater transparency of R&D costs, and more sophistication and realism by policy makers regarding the costs of research and development for drugs qualifying as orphan products.
  • The data from the orphan drug tax credit also provides additional perspective on the estimates of drug development costs provided by Vinay Prasad and Sham Mailankody in their 2017 JAMA paper.

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Save The Date! 2/22/18: The Jaharis Symposium on Health Law and Intellectual Property

On February 22, 2018, join DePaul University, located in downtown Chicago, for The Jaharis Symposium on Health Law and Intellectual Property: Technological and Emergency Responses to Pandemic Diseases.

Hosted by DePaul University’s Mary and Michael Jaharis Health Law Institute and the Center for Intellectual Property Law and Information Technology (CIPLIT®), this one day conference will focus on “best practices” in response to emerging pandemic diseases.

Connect with keynote speakers Lawrence Gostin–University Professor and Faculty Director, O’Neill Institute for National and Global Health Law, Georgetown University– and Richard Wilder–Associate General Counsel, Global Health Program, Bill and Melinda Gates Foundation.  They will be joined by other esteemed panelists during this timely and important discussion.

@DepaulHealthLaw

REGISTER NOW (12/12)! Sixth Annual Health Law Year in P/Review

The Sixth Annual Health Law Year in P/Review symposium will feature leading experts discussing major developments during 2017 and what to watch out for in 2018. The discussion at this day-long event will cover hot topics in such areas as health policy under the new administration, regulatory issues in clinical research, law at the end-of-life, patient rights and advocacy, pharmaceutical policy, reproductive health, and public health law.

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TOMORROW, 11/9! Book Launch: Specimen Science – Ethics and Policy Implications

Book Launch: Specimen Science: Ethics and Policy Implications
November 9, 2017 12:00 PM
Countway Library, Lahey Room
Harvard Medical School, Boston, MA

In September 2017, MIT Press will publish Specimen Science: Ethics and Policy Implications, co-edited by Holly Fernandez Lynch (outgoing Petrie-Flom Executive Director), Barbara Bierer, I. Glenn Cohen (Faculty Director), and Suzanne M. Rivera. This edited volume stems from a conference in 2015 that brought together leading experts to address key ethical and policy issues raised by genetics and other research involving human biological materials, covering the entire trajectory from specimen source to new discovery.  The conference was a collaboration between The Center for Child Health and Policy at Case Western Reserve University and University Hospitals Rainbow Babies & Children’s Hospital; the Petrie-Flom Center  for Health Law Policy, Biotechnology, and Bioethics at Harvard Law School; the Multi-Regional Clinical Trials Center of Harvard and Brigham and Women’s Hospital; and Harvard Catalyst | The Harvard Clinical and Translational Science Center. It was supported by funding from the National Human Genome Research Institute and the Oswald DeN. Cammann Fund at Harvard University.

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REGISTER NOW (12/12)! Sixth Annual Health Law Year in P/Review

The Sixth Annual Health Law Year in P/Review symposium will feature leading experts discussing major developments during 2017 and what to watch out for in 2018. The discussion at this day-long event will cover hot topics in such areas as health policy under the new administration, regulatory issues in clinical research, law at the end-of-life, patient rights and advocacy, pharmaceutical policy, reproductive health, and public health law.

Continue reading

Book Launch: Specimen Science: Ethics and Policy Implications

Book Launch: Specimen Science: Ethics and Policy Implications
November 9, 2017 12:00 PM
Countway Library, Lahey Room
Harvard Medical School, Boston, MA

In September 2017, MIT Press will publish Specimen Science: Ethics and Policy Implications, co-edited by Holly Fernandez Lynch (outgoing Petrie-Flom Executive Director), Barbara Bierer, I. Glenn Cohen (Faculty Director), and Suzanne M. Rivera. This edited volume stems from a conference in 2015 that brought together leading experts to address key ethical and policy issues raised by genetics and other research involving human biological materials, covering the entire trajectory from specimen source to new discovery.  The conference was a collaboration between The Center for Child Health and Policy at Case Western Reserve University and University Hospitals Rainbow Babies & Children’s Hospital; the Petrie-Flom Center  for Health Law Policy, Biotechnology, and Bioethics at Harvard Law School; the Multi-Regional Clinical Trials Center of Harvard and Brigham and Women’s Hospital; and Harvard Catalyst | The Harvard Clinical and Translational Science Center.  It was supported by funding from the National Human Genome Research Institute and the Oswald DeN. Cammann Fund at Harvard University.

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Errors in Patent Grants: More Common in Medical Patents

By James Love

Recently I have become interested in the frequency of a “certificate of correction” on a granted patent, after two efforts to establish federal rights in patents granted.

The first case involved the University of Pennsylvania.  We had identified five patents on CAR T technologies granted to five inventors from the University of Pennsylvania where there was no disclosure of federal funding on the patents when they were granted by the USPTO, as is required by law.  All five patents had been filed in 2014.    We had reason to believe the five patents should have disclosed NIH funding in the invention, and we were right. But the error had been corrected by Penn, and five “certificate of correction” documents were granted by the USPTO in May 2016, something we had overlooked, in part because the corrections to patents are published as image files, and were not text searchable.

The second case involved the Cold Spring Harbor Laboratory.  KEI had identified two patents listed in the FDA Orange Book for the drug Spinraza,  which were assigned to Cold Spring Harbor, and which had not disclosed federal funding.  KEI was interested in pursuing a march-in case for Spinraza, on the grounds of excessive pricing.  The cost of Spinraza in the first year was $750,000, and the maintenance doses were priced at $375,000 per year.  Researchers listed on the two patents had received funding from the NIH to work on the subject of the two patents. Continue reading

The Cost of Medications: Current Realities and the Future of Pharmaceutical Pricing Regulations in the United States

The Cost of Medications: Current Realities and the Future of Pharmaceutical Pricing Regulations in the United States
October 4, 2017 12:00 PM
Wasserstein Hall, Milstein East B (2036)
Harvard Law School, 1585 Massachusetts Ave., Cambridge, MA

From “Pharma Bro” Martin Shkreli to huge price jumps for the EpiPen to the Hepatitis C treatment that costs $1000 per pill, pharmaceutical pricing is a major issue in the news and in Washington. The regular introduction of new, often expensive therapeutics as well as controversial price increases for familiar drugs attract bipartisan attention and ensure that drug costs will remain an important topic of public policy debate.

This panel of experts will discuss current laws and regulations governing pharmaceutical pricing in the United States, the impact of breakthrough therapeutics on drug pricing, and the future of drug pricing policy in the United States.

Continue reading

Orphan Drugs Designations and Approvals have Something to Say about Risks

This brief essay examines data from the U.S. Orphan Drug Act, including specifically the FDA designations of an indication for a drug to treat an orphan disease, and the likelihood that once the designation is made, the FDA will approve the drug for that indication. This is one empirical measure of the risks associated with the development of new drugs to treat U.S. defined orphan diseases.  Note that 75 percent of all novel cancer drugs approved in the United States from 2010 to 2016 qualified as orphan products.    The essay also reports the average time between the FDA designation and the FDA approval for orphan indications.

The main findings are that since 2010, the average time from orphan designation to approval is 5.3 years, and the likelihood of FDA approval for an orphan indication, which varies over time and across business cycles, was .22 from 1990 to 2017, and since 2010, was .25.

The essay concludes with a comparison to other studies of the risks of drug development.


On January 5, 1983, the U.S. Orphan Drug Act became law as Public Law 97-414. Over the past 34 years the Act has been amended numerous times, often extending or expanding the benefits, which currently include a 50 percent tax credit for qualifying clinical trials, exemptions or discounts on prescription drug user fees, an easier and faster path to FDA approval, and seven years of marketing exclusivity for an approved orphan indication. Continue reading

The U.S. Drug Price Catastrophe and the Central Planner

By Aobo Dong

If you are fortunate enough to have an insurance plan with extensive coverage and low co-pays for prescription drugs, chances are you may not be overly concerned with the U.S. drug price catastrophe. For millions of Americans without such a plan, getting the much-needed prescribed medicine often involves frustrating multi-player exchanges between the pharmacy, the insurance company, and the doctor, due to complications such as drug pricing and pre-authorization.

The NYT recently launched an investigation into a simple question: “Why Are Drug Prices So High?” One surprising revelation from the study is that deep drug pricing problems may have been contributing to the ongoing opioid crisis, as insurers restrict patient access to less addictive alternatives. For instance, UnitedHealthcare stopped covering Butrans – a drug that had successfully helped Alisa Erkes to ease her excruciating abdominal pain for two years – just to lower its own expenses. Instead, Alisa’s doctor had to put her on long-acting morphine – a drug in a higher category for risk of abuse and dependence than Butrans. However, since it costs the insurance company only $29 a month, UnitedHealthcare covered it with no questions asked. Continue reading

“The real possibility of an AIDS-free generation:” HIV Prevention and the Internet

By Clíodhna Ní Chéileachair

Last November, the National Health Executive (NHS) in the UK lost an appeal in the UK Court of Appeal regarding their failure to fund PrEP for individuals at risk of contracting HIV. PrEP, or Pre-Exposure Prophylaxis is a common term for regimes of anti-viral medication taken by individuals to lower their risk of being infected with HIV. Marketed as Truvada, clinical test results published by the National institute of Health in 2010 declared that the treatment could reduce the risk of contracting HIV by up to 90%, a rate that seemed farcical even in a world where information about HIV is more accessible than ever, and medical experimentation with cures has been steadily gaining steam. Based on those results, the U.S. Center for Disease Control issued interim guidelines for using the drug, despite the fact that it was over a year away from FDA approval, aware that doctors had been prescribing it off-label for HIV treatment. The titular quote is from former President Obama, speaking on World AIDS Day in 2011 about the breakthrough that PrEP represented. The story raises some fascinating questions about how doctors interact with experimental medicines when facing down diseases that will otherwise seriously compromise quality of life for patients, and even kill, but nonetheless remain unsanctioned by national healthcare providers and largely available through backchannels.

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The Cost of Medications: Current Realities and the Future of Pharmaceutical Pricing Regulations in the United States

The Cost of Medications: Current Realities and the Future of Pharmaceutical Pricing Regulations in the United States
October 4, 2017 12:00 PM
Wasserstein Hall, Milstein East B (2036)
Harvard Law School 

From “Pharma Bro” Martin Shkreli to huge price jumps for the EpiPen to the Hepatitis C treatment that costs $1000 per pill, pharmaceutical pricing is a major issue in the news and in Washington. The regular introduction of new, often expensive therapeutics as well as controversial price increases for familiar drugs attract bipartisan attention and ensure that drug costs will remain an important topic of public policy debate.

This panel of experts will discuss current laws and regulations governing pharmaceutical pricing in the United States, the impact of breakthrough therapeutics on drug pricing, and the future of drug pricing policy in the United States.

Continue reading

Perspectives on Cancer Drug Development Costs in JAMA

By James Love

Vinay Prasad and Sham Mailankody’s JAMA Internal Medicine study on the costs of research and development (R&D) when bringing a single cancer drug to market has sparked renewed discussion about how to measure R&D costs as well as the relationship between R&D costs and prices. What follows is my perspective on the Prasad/Mailankody (PM) paper, how it compares to DiMasi’s widely quoted 2016 study, and on the debate in general.  Continue reading

Introducing New Blogger James Love

James Love is joining Bill of Health as a regular contributor.
James Love is the Director of Knowledge Ecology International, where his research focuses on the production, management and access to knowledge resources, and aspects of competition policy. This includes work on the financing of R&D, intellectual property rights, prices for and access to new drugs, vaccines and other medical technologies, as well as related topics for other knowledge goods, including software, other copyrighted works, and data.  He previously worked for the Center for Study of Responsive Law, and before that, as Senior Economist for the Frank Russell Company. He has a MPA from Harvard University’s Kennedy School of Government and an MA from Princeton’s Woodrow Wilson School of Public and International Affairs. James will be blogging about  the policies to grant or revoke exclusive rights to make and sell medical products, as well as drug development costs.

Recent Publications:

Welcome, James!

Federal “Right to Try” Legislation – Perpetuating a Misguided Skepticism Towards the FDA

Cross-posted from the CRITical Thinking blog.

By Jeanie Kim

The “right to try” (RTT) movement presents a narrative that pits patients against the FDA. Supporters of RTT, powered by the libertarian Goldwater Institute, have pushed for laws that let terminally ill patients bypass regulators to access unapproved treatments.

As of September 2017, 37 states have enacted RTT laws. Earlier this year, the Senate and the House introduced federal RTT bills, and on August 3, 2017, the Senate unanimously passed an amended RTT bill without an opportunity for debate. There is pressure on the House to follow suit, but it is unclear whether the House will consider the originally introduced RTT bill (“RTT 1.0”) or the Senate’s amended version (“RTT 2.0”), or even take up the legislation at all.

Despite the recent legislative backing, RTT is not a new concept. It is a variation on an age-old skepticism towards the FDA that has been around as long as the agency’s inception. At the core of RTT is the previously rejected, yet persistent argument that the FDA’s approval standards for safety and efficacy should not matter for terminally ill patients who have nothing to lose [1]. Continue reading

Be Very, Very Concerned About What Allergan Just Did

Yesterday, it was announced that Allergan had transferred the ownership of the patents on its billion-dollar drug Restasis, used for the treatment of chronic dry eye, to the Saint Regis Mohawk Tribe. The Tribe then exclusively licensed the drug back to Allergan, in exchange for tens of millions of dollars in both licensing and royalty fees. Although it may not sound like it, this transfer is potentially huge news in the drug pricing world. It is also extremely complex, and its full implications have yet to be determined.

Enormous caveat before we begin: I am by no means an expert on tribal sovereign immunity. I may well be wrong here. (In fact, I would very much like to be wrong here.) There is little (any?) case law on sovereign immunity’s impact in the Hatch-Waxman area, and much of what follows is extrapolated from case law on tribal sovereign immunity both in IP and in other contexts, state sovereign immunity in the IP area, and discussions with other law professors. Please let me know if this is your area of expertise and you believe I’ve gotten the analysis wrong!

In short, if repeated and taken to its logical conclusion, this transfer has the potential to prevent most invalidity challenges to drug patents. Would-be generic competitors could not seek to initiate inter partes review (IPR) actions before the Patent and Trademark Office (PTO). They could not bring declaratory judgment actions in federal court. And – both most importantly and most unclear – they could not bring Paragraph IV invalidity counterclaims under Hatch-Waxman, preventing generic companies from independently challenging patents’ invalidity and potentially requiring us all to wait until the very end of patent expiration to experience generic competition.

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First, Do No Harm: NGOs and Corporate Donations

By Clíodhna Ní Chéileachair

Last year Médecins Sans Frontières (MSF) refused free vaccinations for pneumonia from Pfizer, who had offered the medicines as a corporate donation to the humanitarian organisation. The explanation MSF provided (available here) makes for an interesting, if uncomfortable read. Looming large is the lengthy history of negotiations between MSF with the only manufacturers of the vaccine, GlaxoSmithKline and Pfizer. MSF claim that the only sustainable solution to a disease that claims the lives of almost a million children each year is an overall reduction in the cost of the vaccine, and not one-off donations that come with restrictions on where MSF may use the medicines, and a constant power disparity between the parties, where Pfizer may release the medication on their own timeline, and revoke access as they see fit.

Continue reading

Monthly Round-Up of What to Read on Pharma Law and Policy

By Ameet Sarpatwari, Michael S. Sinha, and Aaron S. Kesselheim

Each month, members of the Program On Regulation, Therapeutics, And Law (PORTAL) review the peer-reviewed medical literature to identify interesting empirical studies, policy analyses, and editorials on health law and policy issues relevant to current or potential future work in the Division.

Below are the abstracts/summaries for papers identified from the month of July. The selections feature topics ranging from the characteristics of expanded access programs, to the association of the priority review voucher with neglected tropical disease drug and vaccine development, to the use of surrogate outcomes in oncology. A full posting of abstracts/summaries of these articles may be found on our website.

  1. Bonnie RJ, Kesselheim AS, Clark DJ. Both Urgency and Balance Needed in Addressing Opioid Epidemic: A Report from the National Academies of Sciences, Engineering, and Medicine. 2017 Jul 13. [E-pub ahead of print]
  2. Fralick M, Avorn J, Kesselheim AS. The Price of Crossing the Border for Medications. N Engl J Med. 2017;377(4):311-313.
  3. Hwang TJ, Kesselheim AS, Sarpatwari A. Value-Based Pricing and State Reform of Prescription Drug Costs. 2017 Jul 10. [E-pub ahead of print]
  4. Jain N, Hwang TJ, Franklin JM, Kesselheim AS. Association of the Priority Review Voucher with Neglected Tropical Disease Drug and Vaccine Development. 2017;318(4):388-389.
  5. Kemp R, Prasad V. Surrogate Endpoints in Oncology: When Are They Acceptable for Regulatory and Clinical Decisions, and Are They Currently Overused? BMC Med. 2017;15(1):134.
  6. Miller JE, Ross JS, Moch KI, Caplan AL. Characterizing Expanded Access and Compassionate Use Programs for Experimental Drugs. BMC Res Notes. 2017;10(1):350.
  7. Phillips AT, Desai NR, Krumholz HM, Zou CX, Miller JE, Ross JS. Association of the FDA Amendment Act with Trial Registration, Publication, and Outcome Reporting. 2017;18(1):333.

Monthly Round-Up of What to Read on Pharma Law and Policy

By Ameet SarpatwariMichael S. Sinha, and Aaron S. Kesselheim

Each month, members of the Program On Regulation, Therapeutics, And Law (PORTAL) review the peer-reviewed medical literature to identify interesting empirical studies, policy analyses, and editorials on health law and policy issues relevant to current or potential future work in the Division.

Below are the abstracts/summaries for papers identified from the month of June. The selections feature topics ranging from physicians’ views of the Sunshine Act; to a biomarker-based drug development case study of CETP inhibitors, to the potential return on public investment in detecting adverse drug effects. A full posting of abstracts/summaries of these articles may be found on our website.

  1. Chimonas S, DeVito NJ, Rothman DJ. Bringing Transparency to Medicine: Exploring Physicians’ Views and Experiences of the Sunshine Act. Am J Bioeth. 2017;17(6):4-18.
  2. Dong K, Boehm G, Zheng Q. Economic Impacts of the Generic Drug User Fee Act Fee Structure. Value Health. 2017;20(6):792-8.
  3. Hey SP, Franklin JM, Avorn J, Kesselheim AS. Success, Failure, and Transparency in Biomarker-Based Drug Development: A Case Study of Cholesteryl Ester Transfer Protein Inhibitors. Circ Cardiovasc Qual Outcomes. 2017;10(6).
  4. Huybrechts KF, Kesai RJ, Park M, Gagne JJ, Najafzadeh M, Avorn J. The Potential Return on Public Investment in Detecting Adverse Drug Effects. Med Care. 2017;55(6):545-51.
  5. Sommers BD, Maylone B, Blendon RJ, Orav EJ, Epstein AM. Three-Year Impacts Of The Affordable Care Act: Improved Medical Care And Health Among Low-Income Adults. Health Aff (Millwood). 2017;36(6):1119-28.
  6. ‘t Hoen EFM, Boulet P, Baker BK. Data exclusivity exceptions and compulsory licensing to promote generic medicines in the European Union: A proposal for greater coherence in European pharmaceutical legislation. J Pharm Policy Pract. 2017;10:19.

Copenhagen Conference: Legal Perspectives on Synthetic Biology and Gene Editing

Join us at the Centre for Information and Innovation Law (CIIR) Faculty of Law, University of Copenhagen on 20 November, 2017 to discuss Legal Perspectives on Synthetic Biology and Gene Editing.

CALL FOR PAPERS

Emerging technologies in Synthetic Biology and Gene Editing offer incredible opportunities and promising solutions to some of the most urgent challenges faced by humanity, such as climate change, environmental protection, growing population, renewable energy and improved health care. But the emerging applications also raise exceptional ethical, legal and social questions.

This conference marks the final phase of the participation of the Copenhagen Biotech and Pharma Forum (CBPF) Research Group at the Centre for Information and Innovation Law (CIIR) in the cross-faculty research project BioSYNergy. In accordance with the goals of this large cross-faculty project on Synthetic Biology, the event explores legal perspectives on synthetic biology, systems biology and gene editing. Dealing with the legal responses to ethical and scientific challenges raised by emerging life science technology. Continue reading