Growth in orphan drug sales is surpassing growth in the broader pharmaceuticals market. Analysts estimate that top-selling orphan drugs like Darzalex and Ultomiris will make up 20% of all prescription drug sales by 2026. With sales hitting $160.5 billion in 2021, estimates predict that the orphan drug market growth will hold a 9.5% Compound Annual Growth Rate (CAGR) through 2032.
More than 50% of 2021 FDA approvals were for orphan drugs designed to treat rare diseases in various fields, including hematology, oncology, endocrinology, neurology, and infectious diseases. Much of the current orphan drug success can be attributed to the 7-year market exclusivity offered under the 1983 Orphan Drug Act.
Many new biologic drugs qualify for orphan drug designation, receiving both the 7-year orphan drug exclusivity and an overlapping 12-year reference product exclusivity—with both exclusivity periods starting on the drug approval date*. This circumstance raises the following question: In the 7-year window of overlap, do the benefits of orphan drug exclusivity provide any competitive advantage?
*Other exclusivities may be available alongside orphan drug and reference product exclusivities. For example, the sponsor of an orphan biologic drug may obtain pediatric exclusivity.
When FDA awards pediatric exclusivity, the drug sponsor receives an additional six months of market exclusivity added to any existing exclusivity. Pediatric exclusivity also requires ANDA and 505(b)(2) applicants to add six months to patent expiration dates in their patent certifications. In contrast, pediatric exclusivity has no effect on biologic patent protection.
Benefits of Orphan Drug Exclusivity
Around 7,000 known rare diseases still have no approved therapy. Since 1983, the Orphan Drug Act has helped increase available drug products aimed at diagnosing, preventing, and treating rare conditions and diseases.
Under the Orphan Drug Act, drug products intended for use in fewer than 200,000 U.S. patients annually (or otherwise unlikely to recoup research and development expenses) may qualify for orphan drug designation.
Products qualifying for orphan drug designation can include small molecule and biologic products, new orphan indications, co-packaged products, fixed-dose combination drugs, and combination products with one qualifying component.
FDA has granted orphan drug designation to numerous biologic products. Of the 5,099 drugs receiving orphan drug designation between 1983-2019, 2,089 (41%) were biologics. Among the top-selling orphan drugs today is Janssen Biotech’s biologic Darzalex with sales of $1.64 billion in 2021. Darzalex is a monoclonal antibody indicated to treat adult multiple myeloma.
Orphan drug exclusivity provides a 7-year market exclusivity period that begins on the FDA marketing application approval date. During these seven years, FDA will not approve any other sponsor with the same drug for the same indication or use (except as provided by law).
Benefits of Reference Product Exclusivity
With rapid advances in research and technology, biologic products have become a major component of the global pharmaceutical industry over the past three decades. Substantial growth in the biologics arena was facilitated by the 1997 establishment of the biologics license application (BLA) under the Public Health Service Act and the 2009 Biologics Price Competition and Innovation Act (BPCIA).
Under BPCIA, all newly licensed, BLA-approved biological products (except for “same” molecules previously approved for the same sponsor) receive a 12-year “reference product exclusivity” period. During these 12 years, FDA cannot approve, as a biosimilar, another biologic product that references the previously approved biologic product.
Does Orphan Drug Exclusivity Impact Reference Product Exclusivity?
When FDA approves a biological product for an orphan indication, the product is awarded both orphan drug exclusivity and reference product exclusivity. Both time frames begin on the FDA approval date and overlap for the first seven years.
Does this overlap negate the orphan drug exclusivity incentive? In short, no, since the competitive impact of the two exclusivities is markedly different. Biologic sponsors with coinciding orphan drug and reference product exclusivities enjoy the separate competitive benefits of both.
Scope of Orphan Drug Exclusivity
The 7-year orphan exclusivity period is not jeopardized by uncertainties that arise in patent litigation regarding scope, validity, or infringement. Other benefits of orphan drug designation unrelated to exclusivity include grant support, frequent FDA interaction, PDUFA fee waivers, and a 25% tax credit on qualified clinical trials.
For the first seven years post-FDA approval, orphan drug exclusivity protects against a broader scope of potentially competitive products, including those products that might not be eligible for approval as a biosimilar. Orphan drug exclusivity can even bar the approval of products when they do not use the innovator's data.
The Limited Protection of Reference Product Exclusivity
Once the orphan drug exclusivity expires, the biologic sponsor maintains five more years of reference product exclusivity. Here, the overall protection narrows. The remaining five years of reference product exclusivity is effective only against applicants seeking a determination that the follow-on product is biosimilar to the reference product.
To be protected under reference product exclusivity, the product must be sufficiently similar to qualify as biosimilar and the subsequent applicant must rely on the innovator’s data. It only precludes subsequent sponsors from referencing the product of the original sponsor. Only when a competing sponsor relies on the approved BLA does reference product exclusivity protect the product and indication.
The subsequent sponsor can still pursue a BLA for the same product for the same indication by using its own data. If the subsequent sponsor follows this strategy, its approved product will be eligible for 12 years of reference product exclusivity. In this regard, reference product exclusivity is “sponsor-specific.”
During the remaining five years, patent protection provides the only protection from a sponsor submitting a full BLA for the same drug for the same or any other indication. Accordingly, market protections for BLA sponsors are generally more vulnerable to infringement, validity, and litigation uncertainties.
Overlapping Exclusivities with Different Competitive Effects
Although a follow-on biologic product might avoid the approval bar created by Reference Product Exclusivity – either because it is (a) not sufficiently similar to the innovator product or (b) the sponsor chooses to generate its own data – the same product might be barred from approval by Orphan Drug Exclusivity.
For instance, FDA applies different criteria in interpreting drug “sameness” for macromolecules and “biosimilarity” for follow-on biologics.
When determining “sameness” for proteins under the Orphan Drug Act, FDA may disregard structural differences caused by post-translational modifications, transcription or translation infidelity, or minor amino acid sequence differences. For monoclonal antibody products, FDA bases orphan drug sameness on the complementarity determining region (CDR). Two monoclonal antibodies with the same CDR but different frameworks, one human and one murine, would be considered the same drug under orphan drug exclusivity. On the other hand, the differences in frameworks would likely prevent a product from being “biosimilar,” thereby placing the product beyond the scope of any regulatory advantage associated with reference product exclusivity.
Avoidance of orphan drug exclusivity can be challenging for follow-on applicants. When a drug is determined to be the “same drug” as an orphan drug, the subsequent drug sponsor must prove that their drug is clinically superior to the approved orphan drug to obtain FDA approval. The subsequent drug must show greater safety, greater effectiveness, or some other significant patient benefit over the original.
In contrast, reference product exclusivity is easier to avoid at the discretion of the follow-on applicant. Reference product exclusivity can be avoided if the follow-on applicant generates its own data to demonstrate purity, potency, and safety.
In sum, the benefits of orphan drug exclusivity offer unique competitive advantages during the seven-year window of overlap with reference product exclusivity. Orphan drug exclusivity potentially creates a broader scope of protection against potential competitor products than reference product exclusivity. Additionally, orphan sponsors enjoy the benefits of grant support, tax credits, FDA interaction, and fee waivers during this period. Upon expiration, five years of reference product exclusivity remain, but the level of protection narrows in scope, generally increasing vulnerability to infringement and litigation uncertainties.