FDA Special Status Programs (Part I: Overview)

June 16, 2019 | RP
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Drug development companies often issue press releases touting that their drug has received special designations from the FDA citing terms such as “orphan” drug status, “fast track” approval and “breakthrough therapy”. These announcements often cause share prices to spike to an extent which is not justified by the substance of such designations.

These so-called “special” designations from the FDA are actually quite common, with roughly 60% of all drugs seeking approval receiving one or more types of special status. As a result, it is important for anyone who invests in biotech to understand their real-world implications.

It is also important to understand the future of where such special programs may be headed. When it comes to overseeing the development of new drugs, the regulatory pendulum tends to swing towards overly accommodating for long periods but then swing strongly in the opposite direction in subsequent years. The growing perception that big pharma is gaming the system to the detriment of public interest may portend a curtailment in these extremely popular special status programs.

Why these programs were deemed to be in the public interest. The traditional FDA approval process is time consuming, expensive, and the chances of approval are low. According to PhRMA, the time to approval for a new drug can take 10 – 15 years while a Tufts University study stated that R&D costs for developing a new drug have now reached an average of $2.6 billion per drug (including costs for failed drugs). The traditional standard review for a new drug involves pre-clinical studies and then a clinical trial in Phases I, II and III. If results of the trials are satisfactory, the company submits a New Drug Application (NDA) or Biologics License Application (BLA) for FDA review. This is the traditional process that tends to be slow and expensive for drug sponsors.

As the time and expense of developing new drugs increased, it was inevitable that treatments aimed at rare illnesses (with smaller populations) would become uneconomic for drug companies to pursue. Separately, the lengthy approval process also prevented drug companies from responding quickly to newly emerging health threats such as the AIDS epidemic of the 1980s. To mitigate these drawbacks, Congress and the FDA adopted its “special status” programs beginning in the 1980’s and 1990’s.

In earlier years, strict regulations and protocol had been adopted in response to public tragedies involving drug safety and efficacy. The body we currently know as the FDA had its origins in The Food, Drug and Cosmetic Act (FDCA) of 1938, which was passed after a poisonous ingredient in Elixir Sulfanilamide caused the deaths of more than 100 people. But up until 1962, the FDA’s approach was still decidedly hands-off. If the FDA failed to act within 60 days to prevent a drug from being marketed, the drug would be granted approval by default. Then in 1962, the pendulum swung in the opposite direction when Congress passed the Kefauver-Harris Drug Amendments to the FDCA. These amendments were passed in response to the Thalidomide tragedy in which a widely prescribed treatment for morning sickness ended up causing thousands of cases of severe birth defects in children. These 1962 amendments marked the beginning of the current US regulatory approach to drug approvals, which requires drugs to obtain affirmative FDA approval before being marketed. In addition, these amendments also laid the foundations for our current clinical trial methodology where drug sponsors must demonstrate substantial evidence of safety and efficacy for a new drug.

But by the 1980s, rare diseases and urgent health threats were being ignored due to the time and expense of drug development. To address this, the Congress and the FDA introduced special status programs. Clearly the intention of strict regulatory measures was to safeguard the public from substances which might be either dangerous or useless. But the new regulatory approach also led to slower drug approvals and greater development expenses. By the 1980’s, the ballooning time and expense of developing new drugs was causing drug companies to ignore illnesses with small patient populations. It also prevented the drug companies from providing rapid response to changing health threats such as the newly emerging AIDS epidemic. This was when Congress and the FDA began introducing “special status” programs such as “orphan status” and “expedited approval”, which provided significant incentives to address such niche markets.

More recently, concerns are building that big pharma is “gaming the system” and that special status incentives are “crowding out” drugs which would better serve broader public interest. As of 2019, the majority of drugs approved by the FDA are now typically benefiting from some kind of special status designation from the FDA. Many individual drug candidates receive multiple preferential designations. The effect of the strong incentives has been to cause drug companies to disproportionately target ultra-expensive drugs for ultra-tiny populations. For example, Horizon Pharm (HZNP) markets Ravicti for the treatment of urea cycle disorder which costs roughly $800,000 per patient per year, creating a billion dollar revenue opportunity despite a population of only around 2,000 potential patients.

Meanwhile, the onset of the FDA’s special status incentive programs for niche indications coincided with a steep drop off in drug company efforts to address newly evolving threats such as “super bug” resistance. As a result of this “crowding out” effect, it is increasingly possible that the regulatory pendulum may once again swing back away from such heavy incentivizing of niche drugs.

Understanding the different types of “special status” designations. Confusing terminology. Overlapping categories. It can be confusing to understand the subtle differences between various special status programs for drugs and biologics. Further complicating the issue is the fact that many therapeutics may qualify for several of these programs at the same time. For example, the FDA estimates that 85-90% of diseases deemed as “rare diseases” are also considered to be “serious or life-threatening diseases”. But overall, the key to understanding these special status programs is that there are two major categories of diseases, as shown below.

1. “Serious or life-threatening diseases with an unmet medical need”. This is the designation for diseases such as AIDS, Ebola, Alzheimer’s and cancer. These illnesses may be widespread or they may be rare. The real point is that the threat to public health is urgent enough such that drugs which might address it should be “expedited” through the otherwise lengthy clinical trial process. The general term for this is “expedited status” and there are four specific designations of it: accelerated approval, priority review, fast track status and break-through therapy. In general, the purpose of these designations is to provide the drug sponsor with faster review times from the FDA, improved access for dialogue and (in some cases) lower thresholds for efficacy or benefits.

2. “Rare diseases and conditions”. According to the FDA, diseases which affect less than 200,000 people are deemed “rare”. Examples include spinal muscular atrophy, infantile Batten disease, and cerebrotendinous xanthomatosis. Companies targeting such rare diseases can apply for “orphan status”. The main benefits of orphan status are intended to compensate for the fact that there are very few patients. As a result, during clinical trials, drug sponsors can run their trials with far fewer patients (making such trials far less expensive and time consuming). And if the drug is later approved, there are financial and business incentives to compensate for the small addressable market.



See also: FDA Special Status Programs (Part II: Concerns) (Moxreports)