$300,000 A Year 'Orphan Drugs' Are Becoming A Hugely Profitable Business
Companies haven't found replacements and haven't been able to break into potentially huge markets like Alzheimer's treatment, despite spending billions of dollars on research.
One increasingly popular strategy is to go the opposite direction, and bet on treatments for extremely rare diseases. Because these small populations are desperate for treatment and have few options, they pay a massive premium, often $300,000 or more for a year's worth of treatment.
With no competition, the drugs can be wildly profitable, it's already a $50 billion business, according to Thomson Reuters.
Some companies are betting their whole future on these drugs. For example, NPS Pharmaceuticals has only one approved drug, Gattex, which treats a condition called short bowel syndrome. Fewer than 5,000 people suffer from the disease in the U.S.
Katie Thomas at The New York Times writes:
Much is riding on the drug’s success: Gattex is the centerpiece of a comeback plan for NPS, which nearly folded six years ago after a previous drug, to treat osteoporosis, failed to win approval from the Food and Drug Administration. After that setback, the company closed its Utah office and laid off nearly all of its more than 400 employees. NPS has since shifted its focus to orphan drugs and now employs about 140 people, including 27 new sales representatives hired to sell Gattex."
The company hopes it can bring in more than $350 million a year, if it's successful.
The strategy isn't limited to small companies making big bets; Pfizer has a rare disease unit, as well. Because of their incredible cost, companies have to prove their worth almost on a patient-by-patient basis. Beyond the already high standard of approval of the FDA, companies have to convince insurance companies and government programs of these drugs' worth.
When it's a rare disease and tiny population, even finding people can be part of the battle. Every person out of say, 5,000, whom they don't get on board is a relatively big percentage loss, and low uptake means the money spent developing the drug can go to waste.
And as cost reduction becomes an increasing priority, patients may not be able to count on government programs to pay for $300,000-a-year drugs, especially when they treat a tiny pool of people. For example, such drugs could have a higher barrier to climb in Britain where cost relative to efficacy is rigorously evaluated by the National Health Service.
Still, these are research areas that haven't been mined to death, and when the drugs are successful they're big moneymakers. It could be a supplement, or even a partial replacement for a research model that's failed in recent years. And even when it's risky, the reward of treating people that may have lost hope can also be extremely powerful.
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