Despite objections from his own regulators, President Barack Obama Friday signed into law a bill that will briefly extend a voucher program that rewards drug makers for rare pediatric medicines.

As a result, the program will run through Dec. 31 while Congress attempts to further extend the effort for another few years. The focus will now turn to tucking such an extension into the 21st Century Cures Act, a sweeping piece of health care legislation that must still be negotiated by the House and Senate.

“This is important because if he hadn’t signed this extension, there would have been a gap in the program,” said Nancy Goodman, who is executive director of Kids v Cancer, a patient advocacy group. “And we need to maintain incentives for companies to develop these types of drugs.”

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At issue is the pediatric review program, which was created in 2012 and awards a voucher to a drug maker that wins approval of a treatment for a rare pediatric disease, an area of drug development that was seen as neglected at the time.

The vouchers have gained notice in the pharmaceutical industry because they are valuable – companies can later redeem them when seeking approval from the US Food and Drug Administration for another medicine to treat any illness. Moreover, the FDA is obligated to review the other drug in six months instead of the standard 10 months.

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In effect, the program is akin to a grand bargain in that public health is promoted by development of a drug that may not otherwise become available. And a drug maker can profit because a faster review means an approved medicine may be sold sooner and generate sales. Also, vouchers can be sold or transferred. So far, a few transactions have taken place, ranging in price from $67.5 million to $350 million.

Moreover, the newly signed law appears to expand the potential for awarding vouchers. How so? The language may widen the patient population for which a drug may be used by broadening the definition of a rare pediatric disease to include symptoms that emerge any time before 18 years of age.

The language reflected an effort to modify the approach taken by the FDA for viewing certain diseases, according to Paul Melmeyer, associate director of public policy with the National Organization for Rare Disorders. This could also become a boon to drug makers. As the FDA Law Blog noted, “diseases that are extremely severe in childhood but tend to be less severe in adulthood may qualify” for vouchers.

Nonetheless, the voucher program is not universally embraced.

A Government Accountability Office report issued in March concluded it is too soon to say whether the program works. About half of the requests made by drug makers for a voucher resulted in awards, suggesting industry interest. But the GAO also noted that drugs awarded vouchers were in development prior to the program, so most companies would “likely be years away” from seeking FDA approval.

Beyond such uncertainty, the FDA strongly objects to the program.

FDA officials told the GAO they have not seen any evidence the program has encouraged increased development of drugs for rare pediatric diseases. They also maintained the program hinders their ability to set priorities because agency staff must provide priority reviews of new drugs that would not otherwise qualify.

Nonetheless, the push for an extension is also a timing issue. “It’s just before the election, so it’s not surprising for Congress or the White House” to support the extension, said Diana Zuckerman, who heads the National Center for Health Research, a nonprofit think tank.

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  • Easy solution – either the selling company pays 30% as a short term gain tax (or user fee to fund the expedited review) or the purchasing company is blocked from deducting the price of the voucher from taxable revenue. After all, it’s a lottery ticket either way.

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