Makena and the Orphan Drug Act

by on March 15, 2011 at 8:30 am in Economics, Law, Medicine | Permalink

Makena is a drug used for premature birth therapy. It’s been available off-label for a long-time but KV pharmaceuticals ran a clinical trial and applied for FDA approval under the Orphan Drug Act (ODA). Under the ODA, KV is entitled to seven years of market exclusivity, this is even stronger than a patent because it gives KV the right to exclude from the market any drugs (not just similar drugs) that treat the same condition.

Now that KV has a monopoly—enforced against compounding pharmacies by threats from the FDA—the price will rise from about $10 to a listed price of $1,500. Naturally a lot of people are outraged.

In The Blessed Monopolies (pdf) I  explained how the ODA and similar rules such as pediatric exclusivity can be gamed by pharmaceutical firms for big profits. The early AIDS drug AZT managed to get market exclusivity under the ODA, for example, because it appeared when the patient population was below 200,000, thus meeting ODA requirements, even though everyone knew the patient population was expanding rapidly.

Once a drug is off-patent, however, there is very little incentive to study it further or to run the clinical trials necessary to get FDA approval. Although the drug has been used off-label for some time (another example of the importance of off-label prescribing) a decent clinical trial still has considerable value. The problem is that as with patents there is very little connection between the effort required to get exclusivity under the ODA and the potential profits (see my paper Patent Theory v. Patent Law).

Despite my skepticism of the ODA, however, I was convinced by Lichtenberg and Waldfogel’s Does Misery Love Company that the ODA as a whole has done some good. Lichtenberg and Waldfogel find that after the ODA was passed (but not before) mortality rates for people with orphan diseases decreased faster than mortality rates for those with more common diseases. The decrease in mortality was consistent with the introduction of more new drugs for orphan diseases.

The important point is that like patents the ODA should be evaluated as a rule and not on a case-by-case basis. I am all for patent reform and FDA/ODA reform but this is truly a case where we don’t want to throw the baby out with the bathwater.

Hat tip: Eddie W.

Addendum: See also Derek Lowe who, as usual, offers intelligent comments.

Jonathan Beerhalter March 15, 2011 at 9:57 am

I don’t think the problem is with the ODA, but the FDA. How can a company get FDA approval by simply doing some trials on a drug that people had been using for years? The ODA is designed to promote research into treatments for rare diseases, NOT promote patenting of already used off-label treatments.

It’s extremely hard for a rational person not to see KV as a group of blood sucking vampires and look to our government to say “how could you let this happen?”. I’m not expert in the law, but it feels like our laws have failed us here.

Andrew March 15, 2011 at 11:26 am

The patients and doctors working off-label are the ones taking the risks. It seems like the ODA between the drug companies and the government is a deal between wolves.

JordanT March 15, 2011 at 12:21 pm

How can a company get FDA approval by simply doing some trials on a drug that people had been using for years?

The ODA is worded in a way that would encourage already off-patent compounds to be put through a clinical trial to prove off-label usage of the drug. In many of these cases, there will be some literature that claims the effectiveness of the drug, but oftentimes these trials are underpowered in terms of number of patients. The specific issue with Makena, is that the off-label use was the standard treatment and had been in use for decades. In many cases for orphan drugs, the off-label use is not as clear cut. One of the main issues is that the FDA rarely will accept clinical trials published in the literature.

Jonathan March 15, 2011 at 1:02 pm

Given that the social function of short-run profit is to induce entry into a market where consumers are inadequately served, the ODA seems a bit perverse. If a drug company is making millions selling a drug to treat a rare condition, that would normally serve as a signal to other firms to enter the market, right? Legally excluding them from the market through a grant of monopoly doesn’t seem like a good idea.

Right Wing-nut March 15, 2011 at 1:18 pm

The point is to encourage them to do the research in the first place. This result is a perversion. Consider the situation where there is some rare disease with no known cure. The benefits of a normal patent don’t justify the cost and risk of development. This “super-patent”, then, is designed to increase the benefits to that the risk becomes justified.

mulp March 15, 2011 at 1:59 pm

ODA is based on the government paying the high prices for the ODA drugs – the poor mothers where the drug will provide a benefit will get government aid to pay the $1500, especially if ACOs or similar mechanisms are put in play – the $1500 price is based on the savings from the less than 10% reduction in preemies and their high cost of care, also paid for by government in many cases. And for wealthier mothers, the terms of Federal requirements on large employer health plans create the same trade-off that results in the $1500 price being paid.

All the research for the drug was done with public money, and only the drug trials which established objective standards of drug use were done by the drug company. ODA is based on the theory that government run drug trials would cost more than $1500 per at risk mother over 7 years, so ODA is a socialist method of funding private for-profit drug trials as a follow-up for public drug research.

In a free market, this drug would remain in the public domain with small businesses supplying the drug at $10 instead of the 10 cents it will cost in 7 years. Until it was made a standard drug in Europe and Asia, and based on the history of use outside the US, the FDA approves it in the US.

ODA is simply socialism for for-profit drug makers.

Ted March 15, 2011 at 2:18 pm

It is $1500/dose, not $1500 per patient. A typical patient using this medication would receive 20 injections over the course of the pregnancy, and a per patient change from $300 to $30000.

Per comments on linked article by Derek Lowe.

mbt footwear March 15, 2011 at 11:05 pm

It’s extremely hard for a rational person not to see KV as a group of blood sucking vampires and look to our government to say “how could you let this happen?”. I’m not expert in the law, but it feels like our laws have failed us here

Rahul March 16, 2011 at 3:13 am

Would it be legal to anchor a casino ship just off the territorial waters of the US and sell $10 generic Makena? If the dosae is really going to cost $30,000 I see a huge incentive so long as we can signal trust and quality. Don’t get mad. Get even.

mbt March 18, 2011 at 5:38 am

drug is off-patent, however, there is very little incentive to study it further or to run the clinical trials necessary to get FDA approval. Although the drug has been used off-label for some time (another example of the importance of off-label prescribing) a decent clinical trial still has considerable value. The problem is that as with patents there is very little connection betwee

Aviral April 5, 2011 at 2:29 am

can physician get patent for discovering off lable use of drug? how can one get patent for other indication for already existing drug?

Comments on this entry are closed.

Previous post:

Next post: