Adopting The Orphan: The Exploitation Of The Interplay Of Patents And Exclusivity In The Orphan Drug Industry Of The U.S – A Legal Analysis


Around 4% of the total world population stands affected by any rare disease at any given point in time. These rare diseases require new research and innovation in the drug field, as the existing drugs and medicines are insufficient to meet the new genetic and biological challenges placed by such rare diseases. Sponsors shy away from facilitating research on such drugs considering the low patient pool for the same, and the comparatively lesser market scope of these drugs. With low funding, and lower research and data, rare diseases stand orphaned, neglected, and all but ‘rare’. In light of this issue, it becomes necessary to evaluate the legal mechanisms surrounding the same.

In 1983, the United States of America became the first country to enact the Orphan Drug Act.  This Act intended to provide incentives or rewards of sorts to pharmaceutical companies for developing and bringing forth drugs meant for diseases designated as ‘rare’. With respect to the United States’ Orphan Drug Act, a rare disease is defined as a disease or condition that affects less than 200,000 people in the United States. Taking inspiration from the USA, more countries came forward with their own legislation with regard to Orphan Drugs. Singapore rolled out such legislation in 1991, Japan followed in 1993, and shortly Australia also threw its hat in the ring. 

Exclusivity and Patent Protection – A Juxtaposition in the Light of Rare Diseases and Orphan Drugs

Patenting a drug becomes crucial to its survival and performance in the market. Exclusivity is a similar approach, but it carries its own distinct features. While many attempts have been made to demarcate the two, it must be done so, with a special focus on orphan drugs and the implications these mechanisms have on the orphan drug industry.

A patent can be expounded as a property right, which may be accorded by the relevant authority in a State to the inventor. The impetus for issuing a patent is to restrict others from making, duplicating, copying, using, or commercialising (offering for sale) for a limited specific period of time. This can be seen as a quid pro quo apparatus, whereupon the public disclosure of the invention, the inventor is provided with the exclusive right over his or her invention. For the drug originator to obtain the patent, he must disclose the technical information with respect to the manufacturing of the drug, its chemical composition, etc.  Further, an element of novelty in the proposed drug is a prerequisite.

On the other hand, exclusivity restricts approvals of competitor drugs available.  Exclusivity refers to complete and absolute marketing and manufacturing rights for a certain time period. Exclusivity is a mechanism which ensures that the originator of the drug is able to recover most of the developmental and research costs of the drug. The period of exclusivity granted may differ from nation to nation, based on their legislations and drug policies. Once the exclusivity period expires, other companies in the drug industry may come forward to access the technical information previously disclosed by the originator and bring to the market similar products. The exclusivity period for orphan drugs in the U. S is seven years and five years for other drugs.

Bringing a drug to the market and acquiring rights over the same, is a long, exorbitant process. The stages of research involve a colossal amount of time, manpower, and money. This becomes amplified in the case of rare diseases, due to the lack of solid, scientific data on the occurrence of the disease, the morbidities and mortality attached to it, the number of persons being affected, and the general absence of awareness of such orphan diseases. Market exclusivity is not the only such incentive provided. Tax breaks and waivers of certain fees are also made available to those eligible.

Orphan Drug Market Exclusivity in the U.S. – A Shield or A Sword?

When a drug originator in the USA, bags the approval of a drug for an orphan disease, the originator obtains seven years of exclusive, absolute rights to the market. This implies that the U.S Food and Drug Administration body will not be able to approve any other version to treat that particular rare disease for the next seven years. Here, it becomes necessary to understand the intertwining of patent and exclusivity. Even when the originator’s patent expires during the period of exclusivity, the FDA would still not be equipped to approve other versions of this drug. This thus gives the exclusivity regime, a certain overpowering element over that of the patents system.

Market exclusivity is granted to provide some medical relief to otherwise orphaned patients of rare diseases. These patients find it extremely difficult to avail treatment, due to the lack of awareness among the medical fraternity about such diseases. Further, low research data aggravates the situation. To push pharmaceutical companies to come forward and fund research and development for orphan drugs, various incentives such as market exclusivity is provided.

But this mechanism has moved beyond being just an incentive. It has paved the way for big pharmaceuticals to obtain a monopoly and run the market for a long time. The monopoly results in high prices being charged for orphan drugs. Drug manufacturers no longer shy away from the orphan drug industry but vie with each other to obtain the status of an ‘orphan drug’.  Many times, drug manufacturers obtain the ‘orphan status’ for conditions which are not even ‘rare’. Pharmaceutical companies have taken undue advantage of the law. The law was initially made to benefit patients diagnosed with rare diseases but currently serves as an instrument for companies to make enormous profits. It is under these circumstances, that we must analyse, how the patent system and the exclusivity mechanism work simultaneously, in the light of the orphan disease community

Exclusivity and Patents in the Orphan Drug Market

When the patent for a certain name-brand orphan drug expires, other pharmaceutical companies move in like vultures waiting for the death of their prey. They quickly fill the pharmaceutical shelves with their own version of the drug at a lower price, thus attracting a higher market. It is not just the companies that are benefited, but consumers can now avail of orphan drugs and treatments for significantly lower costs.

The patents system and the exclusivity regime are two distinct yet complementary mechanisms, which have evolved to strike a balance between innovation in the drug industry and increasing consumer access to orphan drugs. The patent term for a drug and the exclusivity term for the same drug may run at the same time. But even upon the expiry of the patent of a drug, the exclusivity term continues to apply, thus holding the market a prisoner.

During the term of exclusivity, those diagnosed with a particular rare disease have no choice but to buy their drug supplies from this company. The company exercising complete monopoly with regard to this one orphan disease can set the prices at high pedestals according to their whims and fancy. In the case of exclusivity, the same is granted with respect to the disease for which the drug is administered. Exclusivity prevents any approval of similar drugs for this one rare disease. That means the same drug company may obtain different grants of exclusivity for the same drug, but for other diseases. Giant pharmaceutical companies, with enough resources, conduct trial studies for the same drug against different diseases and repeatedly exploit the market by obtaining separate exclusivities for each of these diseases.

Currently, orphan drug manufacturers obtain around the same, if not more profit from a small population, than the non-orphan drug manufacturers receive from a significantly larger population.  Critics have often pointed out that some drugs which hold the orphan drug status, are not ‘true orphans’. These include drugs which were first approved for the general market, but later bagged the approval for the status of a rare disease. According to statistics, 7 of the 10 best-selling drugs in the United States in the year 2015 were orphan drugs. This makes the orphan drug industry largely unfairly commercialised.

It is true that such companies must be rewarded for coming forward to take the risk and costs of manufacturing for a small crowd. However, this must not be done at the cost of exploiting the already inconvenienced minority. People suffering from orphan diseases struggle to avail healthcare. It takes decades to even properly diagnose such diseases due to its rare nature. Further, due to the chronic attribute of most of these rare diseases, consumers have to bear the brunt of such extreme prices for a long time. The increasing commercialization and the problem of pharmaceuticals taking advantage of extremely helpless patients must be checked and condoned. A tier system must be constituted in the process of granting the status of orphan drugs and the system for patents and exclusivity grants must be strictly monitored through bodies to oversee and check the functioning of the same. It is time that the law steps in to protect the innocent and the weak ,and put in certain checks and balances, sealing the economic and legal loopholes shut.

This article is authored by Ananya Arun, a second-year student at the National University of Advanced Legal Studies, Kochi.

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