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Exclusive Life Science Feature "ORPHAN-TYPE DRUGS ARE OFTEN BIOLOGICS WHICH TEND TO BE VERY COMPLICATED TO PRODUCE." Ron Cohen, M.D., CEO, Acorda Therapeutics years, market research intelligence firm EvaluatePharma projects 7 of the top 10 bestselling drugs (by revenue) will be specialty drugs and the category accounting for nearly half of all pharmaceutical manufacturer sales. Some have described the category's growth as staggering and question how insurance companies will be able to afford paying for what often proves to be lifesaving treatments for patients suffering from rare diseases. Ron Cohen, M.D., would like to remind people who are concerned about insurance companies being able to afford paying for medicines of one simple fact: Prescription drugs account for about 10 to 12 percent of the total U.S. healthcare spend. "We are one of the great innovative engines providing society with desperately needed goods which are more valued than the latest iPad or video camera," he attests. Cohen founded Acorda Therapeutics (NASDAQ: ACOR), a specialty pharmaceutical company, back in 1995. The physician-turned-CEO shares insights on the evolution of the U.S. specialty pharmaceutical industry from obscurity to significance. In addition, he explains the current insurance conundrum and his concern around its having the potential to stifle pharmaceutical industry innovation. Finally, Cohen places a call to action for industry leaders to educate U.S. stakeholders (i.e. consumers, patients, families, media, and elected officials) on the value proposition specialty drugs offer as drivers of innovation. FROM OBSCURITY TO SIGNIFICANCE — THE EVOLUTION OF SPECIALTY PHARMA For the 10 years prior to the passage of the Orphan Drug Act (ODA) of 1983, the pharmaceutical industry averaged less than one specialty pharmaceutical product per year. In the 30 years since, the FDA Office of Orphan Products Development (OOPD) notes industry having developed and marketed more than 400 rare disease drugs (a little over 13 per year). Under the ODA, drugs, vaccines, and diagnostics agents would qualify for orphan status if they were intended to treat a disease affecting fewer than 200,000 American citizens. "Unlike the usual chemistry-based pills," Cohen notes, "Orphan-type drugs are often biologics which tend to be very complicated to produce." In addition, these drugs 26 LifeScienceLeader.com November 2013 are for relatively small populations and manufactured in fairly low volumes. The result is products that are very risky to develop, costly to produce, and thus, very expensive when they make it to market. For example, in January, Sanofi's Kynamro (mipomersen sodium) injection received approval for treatment in patients with homozygous familial hypercholesterolemia (HoFH) — a disease occurring in approximately 1 in 1 million people. The annual cost for Kynamro is about $176,000 a year. It will be competing with Aegerion Pharmaceuticals' Juxtapid (lomitapide) capsules which cost $235,000 to $295,000 a year. In the U.S. these two drugs have a viable market of about 300 patients annually. To encourage companies to develop specialty pharma drugs for such small markets, the ODA included a number of incentives including tax credits, drug development grants, fast-track FDA approval, and a seven-year market exclusivity period. This was different from traditional patent protection, as the period of exclusivity did not begin until the drug was granted FDA approval. THE INSURANCE CONUNDRUM Though there is some debate as to whether the ODA really stimulated the production of rare disease drugs, the increased output of the past 30 years cannot be denied, having resulted in $80 billion in sales a year in the U.S. alone. As specialty pharmaceuticals gained in popularity, so too did issues surrounding the process of managing their costs. The passage of the Medicare Modernization Act in 2003 and the subsequent implementation of the Medicare Part D program included a specialty tier in order to help define what qualified as a specialty drug. "Those specialty tiers are entirely cost-based, so it's irrespective of whether it's a biologic or chemistry-based or oral or injectable," Cohen states. "Basically, if it costs more than $600 a month, it gets specialty status." Other characteristics include: • complex treatment regimens requiring ongoing clinical monitoring and patient education • special shipping, storage, or delivery requirements. generally biologically derived, available in injectable, infusible, and oral forms • dispensed to treat individuals with chronic or rare