“Orphan” drug exclusivity, which is intended to reward drug companies’ investment in the development of certain drugs, might soon be harder to get—and keep.

Over the past several months, Congress introduced two similar bills to amend a “loophole” in the Orphan Drug Act (ODA).  On October 17, 2019, a bipartisan group of House members introduced H.R. 4712 (“Fairness in Orphan Drug Exclusivity Act”) (“the House bill”).  On February 11, 2020, bipartisan Senators sponsored a companion bill bearing the same title (S. 3271) (“the Senate bill”).  Consistent with recent political interest in curbing high drug prices, the proposed legislation is intended to limit the availability of orphan drug exclusivity for certain drugs, with the goal of thereby promoting competition.

The proposed bills arise from concerns regarding potential misuse of the ODA’s protections as, for example, certain lucrative and widely-used drugs have orphan drug exclusivity.   The ODA was intended to incentivize the development of drugs for “rare” diseases—for example, conditions affecting fewer than 200,000 people in the United States—by helping companies recoup development-related costs.  See 21 U.S.C. § 360bb(a)(2)(A).  Once a drug obtains orphan drug exclusivity, the FDA cannot approve another drug for the “rare” condition for seven years.  See 21 U.S.C. § 360cc(a).

Even if a drug is used for a condition that affects a larger population, it can also qualify for orphan drug exclusivity if it is expected to be unprofitable.  See 21 U.S.C. § 360bb(a)(2)(B).  As summarized below, the proposed bills would place a burden on drugmakers seeking to obtain or retain orphan drug exclusivity for this latter category of “§ (a)(2)(B)” drugs.

Sponsors Must Prove “No Reasonable Expectation” of Recouping Costs

To obtain orphan drug exclusivity, both proposed bills require a drug’s sponsor to demonstrate that, on the date a drug’s application is approved (or licensed, if the drug is a biologic), the sponsor did not reasonably expect to be able to recover costs associated with developing that drug and making it available in the United States.

The same showing would be required for existing orphan drug exclusivities.  If either bill is enacted in current form, a sponsor will have 60 days to show that, at the time of approval (or license), the sponsor did not reasonably expect to recoup these costs.  Without this showing, the FDA “shall revoke” the existing exclusivity.

The House bill additionally requires drugmakers to make a similar showing each year of the exclusivity.  Sponsors would need to demonstrate that “there continues to be no reasonable expectation” for recovering these costs.

Sponsors Must Account for “All” U.S. Sales “Made or Reasonably Expected to be Made”

Both proposed bills require the sponsor to account for “all” sales of the drug in the United States, which are “made or reasonably expected to be made without a time limitation.”  Sales should be considered regardless of whether the drug is made or marketed by the sponsor or by “related entities” (such as licensors or predecessors-in-interest).

The bills define the scope of the “sales” differently, however.

The House bill requires the showing to include sales of all drugs that “contain the same active moiety” as the drug—that is, the portion of the molecule that is responsible for its druglike activity—“regardless of whether or not the drugs also contain different or additional active moieties.”  Notably, the term “active moieties” is associated with small-molecule drugs, not typically with larger molecules such as biologics.  See 21 C.F.R. § 316.3 (14)(i), (ii).

In contrast, the Senate bill requires this information for all drugs that “are covered by the same designation” as the § (a)(2)(B) drug.  Thus, the House bill’s analogous provision may be more burdensome because it encompasses sales information for each drug with shared structural features, regardless of how closely the drugs are otherwise related.

Broad Rule of Construction

Perhaps to preclude litigation, both proposed bills contain a rule of construction which dictates that the bills’ requirements attach to “any” drug which has been or will be designated under § (a)(2)(B).  These requirements would apply without regard to the date of the drug’s designation (or requested designation), or date of approval or license, or date that the drug received orphan drug exclusivity (or that exclusivity was requested).

What Next?

Both proposed bills are under consideration.  The House bill has been referred to the House Committee on Energy and Commerce’s Subcommittee on Health, and the Senate bill has been referred to the Committee on Health, Education, Labor, and Pensions.  We will continue to monitor the bills’ progress and provide updates.