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As Congress pushes new legislation to speed medical innovations, a consumer watchdog group warns that one provision in the bill could cost US taxpayers, private insurers, and patients anywhere from $3.9 billion to $11.6 billion over a 10-year period.

At issue are so-called orphan drugs, which are used to treat rare diseases that affect fewer than 200,000 people. Hoping to spur drug development, Congress passed the Orphan Drug Act in 1983 to provide companies with such incentives as tax credits and seven years of marketing exclusivity.


But in a new analysis, Public Citizen argues that the 21st Century Cures Act — which the House passed earlier this year, in part, to get more drugs to market more quickly — would give the pharmaceutical industry a “gift” by awarding still more marketing exclusivity.

Specifically, the bill would allow drug makers to repurpose existing medications for new uses and receive orphan designations. And this would confer an extra six months of marketing exclusivity. Public Citizen maintains this passage in the law amounts to a costly “monopoly protection.”

The Congressional Budget Office estimated that adding six months of exclusivity to drugs with new orphan indications would cost Medicare, Medicaid, and other federal health programs $869 million between 2016 and 2025. In reaching its own estimate, Public Citizen also included costs to patients and private insurers, as well as direct costs to the government.


The watchdog group argues that if the bill becomes law, drug makers would likely focus on winning orphan designations for their most “lucrative” medicines, notably existing blockbuster products. The group believes that each additional blockbuster drug approved for a new orphan use would cost the public another $768 million, since this would also delay the availability of lower-cost alternatives.

“The costs of the new incentive would fall not only on taxpayers but also on the backs of patients with common, nonorphan diseases, who could be denied potentially life-saving, affordable generic medicines for six additional months,” said Dr. Sammy Almashat, a researcher with Public Citizen’s Health Research Group, in a statement.

We asked the Pharmaceutical Research and Manufacturers of America, the industry trade group, for comment and will update you accordingly.

The analysis appears shortly after a paper published in the American Journal of Clinical Oncology showed that drug makers are already exploiting loopholes that allow them to widen the market for orphan drugs, which has distorted the original purpose of the Orphan Drug Act.

The researchers argued that there is a pattern in which some orphan drugs may have been submitted for Food and Drug Administration approval with the ultimate intention of being used more broadly than if they were designed only for rare disease populations. They noted that seven of the top 10 projected worldwide best-selling drugs this year have an orphan indication.

Earlier this year, the FDA Law Blog noted that new records were set last year by drug makers and the FDA. More companies sought orphan designations for medicines than ever before. And the FDA granted more orphan designations and approved more orphan drugs than in any other year.

In arguing against the provision in the 21st Century Cures Act, Public Citizen also cited a report by EvaluatePharma, a research firm, which noted clinical trial costs for orphan drugs are often lower, but the meds, on average, cost patients six times more than other medicines. The firm found that last year most orphan drugs cost patients at least $98,534 per year versus $5,153 for other medicines.

Last May, Moody’s Investor Service, the credit rating agency, found that half of the recent acquisitions among drug makers and biotechs involved an orphan drug. Of 18 deals announced since August 2014, nine involved an orphan drug.

Why? Drug makers can charge high prices without much pushback from payers; patients often require life-time treatment, which means ongoing sales; there are relatively high hurdles for creating competitive medicines; and the firms receive extra marketing exclusivity.