One of the most compelling examples of how profit incentives can distort drug development has its roots, oddly, in the popular television series Quincy, M E (1976-1983). In an episode that aired on 4 March 1981, the well-known American actor Jack Klugman played a gritty Los Angeles medical examiner investigating the suicide of a boy with Tourette’s syndrome, a neurological disease that causes uncontrollable tics and verbal outbursts. On the show, Congressional hearings took place to investigate why no drugs were available for the disease. Mock representatives from the pharmaceutical industry explained that many diseases, including Tourette’s, were thought to be sufficiently rare that there was no financial incentive to develop medications.
The episode struck a national cord, and Klugman was invited to testify before a real Congressional panel investigating the same issue – non-existent treatments for rare or ‘orphan’ diseases. The New York Times featured Klugman’s testimony. Public opinion rallied, and Congress passed the Orphan Drug Act in 1982.
The bill provided incentives for the pharmaceutical industry to develop treatments for rare diseases, including large subsidies for development costs, accelerated regulatory approval, and seven years of market exclusivity – a temporary monopoly. The bill has largely been considered a success. Before its passage, only 10 drugs existed for orphan diseases; by 2014, that number had grown to more than 450.
By other measures, though, the Orphan Drug Act has been too successful. The Act’s incentives, coupled with the fact that pharmaceutical companies can set any price they like for a drug in the US, have made the orphan market astonishingly profitable. A leukaemia drug called Gleevec became one of the first orphan blockbusters when it debuted in 2001 for an unprecedented $26,400 per year, demonstrating just how lucrative orphan drugs could be. Today, Gleevec sells for nearly $150,000 per year, with total sales approaching $5 billion. But it’s not even among the 10 most expensive orphan drugs, many of which sell for over $500,000 per year. An analysis by Thomson Reuters found that the ‘economics and investment case for orphan drug development’ was ‘more favorable than for non-orphan drugs’. Put another way, pharmaceutical companies make way more money creating orphan drugs than they would in developing better treatments for more common maladies.
Orphan drugs illustrate how financial incentives distort the development of treatments in ways that don’t always provide the greatest benefit
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