ORPHAN MEDICINE INCENTIVES - How to address the unmet needs of rare disease patients by transforming the European OMP landscape - Copenhagen Economics
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ORPHAN MEDICINE INCENTIVES How to address the unmet needs of rare disease patients by transforming the European OMP landscape European Expert Group on Orphan Drug Incentives June 2021
Established in 2020, the European Expert Group on This Report builds on the work of the European Expert
Orphan Drug Incentives (OD Expert Group) brings Group for Orphan Drug Incentives (hereafter, OD Expert
Group).
together representatives of the broad rare disease
community, including researchers, academia, patient The OD Expert Group is a cross-disciplinary group of
representatives, members of the investor community, rare experts representing different stakeholders in the rare
disease companies and trade associations. disease community. The group includes experts from
research, academia, patient groups, rare disease
companies, investors and trade associations.
The group aims to become the source of ground-
breaking ideas and potential solutions that will provide The OD Expert Group worked together with Copenhagen
input to the OMP Regulation evaluation. The initiative is Economics in a series of workshops and interviews to
led by a steering group composed of EURORDIS, the investigate how the current policy framework for OMP
Voice of Rare Disease Patients in Europe, and the incentives needs to change to fit the unique challenges
and needs of the OMP development landscape today, to
European Confederation of Pharmaceutical the benefit of rare disease patients.
Entrepreneurs (EUCOPE) representing several companies
focused on finding new therapies for rare diseases. In this report, the OD Expert Group makes a set of policy
proposals that will improve the OMP incentive framework
The group is co-chaired by former MEP Renate Sommer while reflecting the different stakeholder perspectives.
and Professor Maurizio Scarpa, Coordinator of MetabERN. This report presents the variety of proposals discussed in
The following EUCOPE member companies are sponsoring the OD Expert Group but may not reflect in detail the
and providing expertise to the initiative: Alexion, Biogen, views of every individual member of the group.
Bristol Myers Squibb, Chiesi, PTC Therapeutics and Takeda.
Source: https://od-expertgroup.eu
2List of acronyms
AI Artificial intelligence IRDiRC International Rare Diseases Research Consortium
CE Cost-effectiveness MA Marketing Authorisation
CHMP Committee for Medicinal Products for human use MOCA Mechanism of Coordinated Access
COMP Committee for Orphan Medicinal products NBS Newborn screening
EC European Commission
ODD Orphan Drug Designation
EEA European Economic Area
OMP Orphan medicinal product
European Federation of Pharmaceutical
EFPIA ODTC Orphan Drug Tax Credit
Industries and Associations
EIB European Investment Bank PPP Private-Public Partnership
EJP RD European Joint Programme on Rare Diseases P&R Pricing and reimbursement
EMA European Medicines Agency
ROI Return on investment
ERN European Reference Network
EU European Union RWE Real-world evidence
The European Confederation of Pharmaceutical SME Small and medium-sized enterprise
EUCOPE
Entrepreneurs
R&D Research and development
European Network for Health Technology
EUnetHTA
Assessment VC Venture Capital
FDA Food and Drug Administration WES Whole-exome sequencing
HTA Health Technology Assessment WGS Whole-genome sequencing
3Glossary of key terminology in this report
Percentage of drug development projects abandoned at different stages of development or
Attrition rate
market access
Incentive Any measure meant to promote the development of medicines to treat rare diseases
Indication The labelled use of a specific drug (an OMP) for treating a particular disease
Investment case Assessment of the viability of an investment from an investor’s perspective
Marketing Authorisation
The approval to market a medicine in European Union Member States
(MA)
Market required return on
Minimum level of return required for an investment given the level of risk present
investment
10-year period after the marketing authorisation of an orphan medicine when similar medicines for
Market Exclusivity
the same indication cannot be placed on the market
A measure for the amount of return on a particular investment, relative to the investment’s cost.
Return on investment Ex-ante ROI: estimated return that investors can expect to earn from an investment at the end of a
(ROI) specific period. Expected ROI: the anticipated profit or loss on an investment that takes into
consideration systematic and unsystematic risk
A status assigned to a medicine intended for use against a rare condition. The medicine must fulfil
Orphan Drug Designation
certain criteria for designation as an orphan medicine so that it can benefit from specific
(ODD)
incentives
Pricing of a product (OMP) based on perceived outcomes (e.g. value to patients and to society
Outcome-based pricing
at large), and not costs
Evidence on the usage and potential benefits or risks of a medical product derived from analysis
Real-world evidence
of (real-world) data
Supplementary protection
An intellectual property right that serve as an extension to a patent right
certificate (SPC)
4EXECUTIVE SUMMARY
Executive summary
Today, between 27 and 36 million neurological disorders, are among the areas 1. Conceive a holistic policy framework for
Europeans suffer from rare diseases. In with large unmet need. the OMP development path recognising that
the European Union (EU), rare diseases the challenges to OMP development occur all
are those diseases that affect less than 5 Hence, today, policy makers face the along the OMP lifecycle, from very early
out of every 10,000 people. challenge to devise a policy framework that research to market access. Incentives to foster
improves OMP development incentives to OMP development must be designed to
Addressing the needs of rare disease patients deliver treatments where there are none and to address these challenges and should improve
through effective, accessible and affordable deliver innovative, transformative treatments the entire OMP incentive framework – because,
treatments became a priority policy when the where treatments already exist. as the saying goes, a chain is only as strong as its
European Commission introduced the OMP weakest link.
Regulation in the year 2000. The logic pursued The European Expert Group on Orphan Drug
by the Regulation was to provide OMP Incentives (hereafter, OD Expert Group) came 2. Lead the revision from a multi-
developers with the appropriate incentives for together in 2020 to develop policy proposals stakeholder perspective incorporating the
the research, development and marketing of that will allow EU policy makers to meet this needs and ambitions of all stakeholders
OMPs, and to thereby achieve the goal of challenge. The group’s work builds on the involved in the development of rare disease
serving a greater share of rare disease patients recognition that only an ambitious policy treatments, from basic researchers and OMP
with effective and centrally authorised agenda developed in a multi-stakeholder developers to, most importantly, rare disease
treatment options. Importantly, alongside the setting can bring about the quantum leap patients. Only by adopting a multi-stakeholder
OMP Regulation, the EU Member States were needed to address unmet needs of rare disease perspective can policymakers achieve the
willing to pay for these treatments. patients today. This report presents the results of greatest impact - where the challenges of all
the OD Expert Group work as a set of guiding stakeholders are understood and addressed.
Today, the positive impact of this policy principles that the revision of the policy
change is visible. The number of annual framework should follow and a set of 14 policy 3. Think policy changes from an
designation applications has tripled since the proposals that address the main needs of OMP investment perspective recognising that
year 2000 and the total number of authorised development in Europe today. OMP developers require their investments in the
OMPs has increased from 3 in 2001 to 169 in development of innovative and effective
2019. However, despite this first success of the Guiding principles for policy revision treatments to be commercially viable. As OMP
OMP Regulation, European rare diseases Improving the OMP policy framework to address development is a long, costly and risk-ridden
patients still have unmet needs today. Not only unmet needs is not an easy task as the rare venture, incentives need to be geared towards
are 95% of rare diseases still without authorised disease environment is both complex and improving the investment case, in particular for
treatment, but the treatments that are available heterogeneous. To manage this complexity, the areas where patients’ needs are still unmet.
for the 5% are not necessarily transformative or OD Expert Group sets out four guiding principles Therefore, any modulation of incentives should
curative, in which case they would lead to a that policy makers should follow in their revision take account of the differences in investment
true improvement in patient outcomes. In of the policy framework. These guiding cases across OMP projects.
particular, children’s diseases, extremely rare principles have also informed work of the group
diseases and certain therapeutic areas, such as itself.
6Executive summary
4. Ensure a competitive EU policy areas’ or ‘priority diseases’ eligible for additional with a strong research pipeline, no OMP
framework that is on par and aligned with the incentives. development can take place. In fact, the lack
OMP Regulation in other regions of the world. of basic research is among the key reasons for
This implies improving the attractiveness of the Implementing the fourteen policy proposals the absence of development in certain disease
EU as a region for OMP development and requires policy action both in the short term and areas. While dispersed and small patient
eliminating any unnecessary discrepancies with the longer run. populations make research in rare diseases
the regulatory procedures in other jurisdictions. challenging in itself, the lack of a functioning
Seven of the proposals can be implemented by R&D ecosystem in Europe hampers further
An ambitious set of policy proposals EU policymakers today, either partially or fully, research activity and company take-up.
Along the OMP development path, the OD within the revision of the OMP Regulation itself
Expert Group has identified four main needs (dark blue boxes on figure, page 8). The other Although various initiatives, such as the ERNs,
that a policy revision should address, see page seven proposals require EU policy makers to have enabled a clustering of knowledge on
8: from improving the ecosystem for Research commit to a wider, more ambitious policy rare diseases, rare disease research is still
and Development (R&D), over providing better agenda for OMP development (light grey boxes dispersed across many different institutions and
financial incentives, to designing regulatory on figure, page 8). the respective expertise is held by few
approval and market access in ways that specialists, who also operate at different
increase predictability and are better adjusted Such a commitment could initially take the form geographical locations. This implies that
to the specific challenges of OMPs. of a Commission Communication that research activity lacks scale and visibility
accompanies the OMP Regulation and that among researchers and companies with
To address those four needs, the group has outlines a roadmap of policy actions the EU potential commercial interests for development.
developed fourteen policy proposals. While pursues to improve the OMP development In addition, research is often not ‘development-
some of these policy proposals are geared framework in Europe. To give greater weight to ready’ and securing funding for research is
towards improving OMP development such a commitment, the OD Expert Group urges difficult.
incentives overall, others specifically pursue a policy makers to set up a multi-stakeholder
modulated approach for instance by proposing forum which can accompany the development Therefore, policy makers should take measures
additional incentives for those areas of unmet of further policies and initiatives. to improve the R&D ecosystem for rare diseases
need where the investment case is particularly in Europe. Policy solutions should build on the
weak. A modulated approach captures the Need 1: Improve the R&D ecosystem many existing structures and initiatives that
heterogeneity in development incentives across for basic research and company take- already make up the EU rare disease R&D
different types of OMP development projects up of development infrastructure – and include better funding,
and should be a key feature of the Regulation incentives for development-ready research and
going forward. Importantly, any modulation the necessary collaborative infrastructures for all
must build on a solid understanding of the Basic research and clinical development are stakeholders in R&D.
reasons for lack of investment in specific the backbone of OMP development. Without
diseases areas and presupposes a clear a solid understanding of underlying disease
framework and selection mechanism for ‘priority mechanisms, biomarkers and targets, coupled
7Executive summary
€
Basic Clinical development Regulatory approval Market Patient
research access access
1 2 3 4
Need to improve the R&D Need to improve the Need to improve the
Need to improve the
ecosystem for basic flexibility, predictability coherence and
system of financial
research and company and speed of the predictability of demand
incentives and rewards
take-up of development regulatory pathway and pricing for OMPs
1. Form an EU rare disease hub 7. Strengthen EMA’s role in
5. Modulate market exclusivity 11. Establish an iterative early
for large-scale collaboration, based on agreed criteria advising OMP developers dialogue for EMA-HTA bodies
data sharing and generation, through the OMP pathway and OMP developers
and diagnosis. 4
6. Introduce additional financial 8. Increase legal certainty around
2. Provide guidance and
incentives, such as a the concept of Significant 12. Create a common EU value
incentives for translational transferable voucher or tax Benefit assessment for OMPs
basic research credits for drug development 4
9. Adopt guidelines on the use of
3. Form a Rare Disease PPP fund
alternative treatments (e.g. off- 13. Pilot a common EU access
for basic research and early
label use and pharmacy pathway for “priority”
development (extremely rare) OMPs
preparations) in the presence
of approved OMPs
4. Establish a coherent policy
framework for the use of RWE 10. Adapt the regulatory
14. Facilitate homogeneous
pathway to the specificities of
access to OMPs across EU
OMP groups with additional
Member States
1 3 4 challenges
These proposals pursue or open up for a These proposals can be addressed, partially or fully,
modulated approach to OMP incentives through the revision of the OMP Regulation
8Executive summary
Policy proposals for Need 1 existing financial incentives in a modulated way A predictable regulatory (and corresponding
that steers investment towards ‘priority diseases’, access) pathway, in which guidelines,
1. Form an EU rare disease hub for large- while still incentivizing continued research across requirements and expectations are clear and
scale collaboration, data sharing and all rare disease areas. aligned, is important to maximise the benefits of
generation, and diagnosis. the incentives provided by the OMP Regulation.
Policy proposals for Need 2
A lack of predictability over certain aspects of
2. Provide guidance and incentives for 5. Modulate market exclusivity based on
the regulatory pathway increases the risk of
translational basic research developing OMPs and thereby discourage
agreed criteria
investment.
3. Form a Rare Disease PPP fund for basic 6. Introduce novel financial incentives, such The current regulatory pathway is not optimally
research and early development as a transferable voucher or tax credits designed to incentivise (fast) OMP
for drug development development. Policy solutions need to include
4. Establish a coherent policy framework for closer and more frequent collaboration
Need 3: Increase the flexibility and between the EMA and OMP developers, clearer
the use of RWE
predictability of the OMP regulatory guidelines and higher certainty concerning the
pathway regulatory provisions and more flexible
requirements for sub-groups of OMPs with
Need 2: Improve the system of The regulatory pathway comprises the set of additional challenges.
financial incentives and rewards steps required for the regulatory approval of
OMPs. Policymakers need to turn their attention Policy proposals for Need 3
to the unnecessary uncertainties and hurdles
The current OMP Regulation foresees certain associated with the OMP regulatory pathway, 7. Strengthen EMA’s role in advising OMP
direct and indirect financial incentives and which increase costs and time to market and developers through the OMP pathway
rewards. These include the main incentive, the discourage investment into important and
10-year market exclusivity period upon demanded rare disease treatments.
obtaining marketing authorisation. However, the Uncertainties in the regulatory pathway could 8. Increase the legal certainty around the
fact that 95% of rare diseases remain without also be a key causal factor behind the high concept of Significant Benefit
authorised treatment suggests that the current attrition rate of OMPs at this stage of the
financial incentives are not sufficient to steer development path. 9. Adopt guidelines on the use of
development into areas of unmet need. Only a alternative treatments (e.g. off-label
well-designed set of targeted financial Having a flexible regulatory pathway, which use and pharmacy preparations) in the
incentives, in conjunction with the improved accommodates for the unique challenges of presence of approved OMPs
R&D development ecosystem, will encourage developing OMPs (e.g. lack of comprehensive
10. Adapt the regulatory pathway to the
development into addressing unmet needs. evidence pre-authorisation), is important to
Policy solutions include working with new and ensure that innovative rare disease treatments specificities of OMP groups with
can reach patients in a timely manner. additional challenges
9Executive summary
Expert Group recognises the link between strong
Need 4: Improve the coherence and demand-side incentives and the EU’s goal to
predictability of demand and pricing for foster wider and more equal access to OMPs.
OMPs The following policy solutions could therefore
bring the EU closer to an integrated OMP path
where incentives are fully aligned to the market
After obtaining central marketing authorisation, access stage.
OMP developers need to seek market access in Policy proposals for Need 4
each EU Member State where they intend to
market their OMP. The final price level and the
11. Establish an iterative early dialogue for
size of the accessible market are crucial factors
in the investment case for OMP development, EMA-HTA bodies and OMP developers
demand and pricing for OMPs are not explicitly
tied into the EU incentive framework. Currently, 12. Create a common EU value assessment
the heterogeneous national HTA and P&R for OMPs
procedures contribute to a lack of alignment
between OMP development and payers,
prescribers and patients’ needs. This creates 13. Pilot a common EU access pathway for
uncertainties on the willingness to pay for OMPs, “priority” (extremely rare) OMPs
the size of the patient population, the access
conditions and the price level.
14. Facilitate homogeneous access to OMPs
across EU Member States
The resulting situation is an incentive imbalance
in the OMP development pathway where
incentives set on the supply side (up until
regulatory approval) are not mirrored, and at
worst even undermined, by measures set by
national systems on the demand-side (from
market access onwards). Truly incentivising OMP
development therefore means improving the
coherence and predictability of demand and
pricing for OMPs.
Moreover, while the challenge of equal patient
access to OMPs across EU Member States is not
an explicit subject matter of this report, the
10Table of contents A LOOK BACK THE GUIDING PRINCIPLES Pages 12-16 Pages 17-22 THE POLICY PROPOSALS THE ROADMAP Pages 23-47
CHAPTER 1 A LOOK BACK
The OMP Regulation aimed to incentivise research and
development in rare diseases
Rare diseases are diseases with a particularly While any medicinal development path is costly Against that background, the EU Orphan
low prevalence. In the European Union (EU), a and failure-ridden, the complexities are even Medicinal Products (OMP) Regulation,
disease is considered rare when it affects less higher for OMPs. The small number of patients introduced in 2000, aimed at ensuring higher
than 5 per 10,000 people.1 affected by a given rare disease may mean availability of OMPs6 through a specific set of
that it attracts relatively less attention and incentives7: a ten-year market exclusivity period
While the number of persons suffering from an funding in the research community, makes for designated orphan medicinal products
individual rare disease is small, overall, rare research and clinical trial studies more difficult (OMPs), protocol assistance from the European
diseases affect many Europeans. Currently, we and riskier, makes regulatory approval more Medicines Agency (EMA), fee reductions during
know of over 6,000 rare diseases affecting difficult to achieve and, overall, makes the the approval process, and EU-funded research
approximately 30 million Europeans, i.e. 6% of investment case less attractive for OMP for OMP development aimed at increasing
the European population2. In addition, 80% of developers. research in rare diseases. The OMP Regulation
rare diseases are of genetic origin and are also invited Member States to provide national
chronic and life-threatening.3 For most rare Given these features, incentivising the incentives, such as tax benefits.
diseases there is no authorised treatment development of medicinal products to address
available.4 rare diseases (orphan medicinal products, Next to the OMP Regulation, the wider
OMPs5) is not an easy task. We define an regulatory landscape, including for instance the
In and by itself, the process for developing and incentive in this context as any measure meant EU Clinical Trials Directive 8 and national pricing
bringing medicines to the market is complex, to promote the development of medicines to and reimbursement procedures, influences
costly, and requires the collaboration of many treat rare diseases.6 Various types of incentives development incentives for OMPs.
stakeholders (researchers, industry, patients, are available to policy makers to increase
medical professionals, investors, funding bodies research in and the development of OMPs, see
and regulators). Figure 1.
Figure 1. Incentives for OMPs development
€
Basic research Clinical development Regulatory approval Market access Patient access
Increasing the available Knowledge transmission Market exclusivity, Market exclusivity, patient Market exclusivity, patient
funding, knowledge of basic research, mitigating regulatory population size, number of population, number of
sharing incentives and mitigating regulatory challenges, protocol patients for which the patients for which the
databases challenges, fee assistance, fee waivers and treatment is reimbursed, treatment is reimbursed,
reductions. reductions. price. price.
Notes: 1) European Commission (2020a), p. 5. / 2) Wakap et al (2020); RARE 2030 Foresight study, see https://www.rare2030.eu/ / 3) https://www.eurordis.org/about-rare-diseases / 4) Tambuyzer et al. (2020) ( 5) The
terms orphan medicinal products, orphan medicines and OMPS are used interchangeably in this report / 6) European Commission (2020a) / 7) European Commission (1999, 2020) / 8) European Commission, Clinical
trials Directive (The Directive will be replaced by the Clinical Trials Regulation)
13Since the advent of the OMP Regulation, development of orphan
medicines has greatly increased in Europe
The advent of the OMP Regulation, in Figure 2. Applications submitted, designations granted and authorised
combination with EU driven funding and OMPs by year
reimbursement at the Member State level, has
Number in each year
greatly increased the number of OMPs authorised
in Europe and has made OMPs a cornerstone of Orphan designation applications submitted OMPs authorised
pharmaceutical markets. Since the year 2000, Orphan designations granted
when the OMP Regulation came into force, the
number of annual designation applications has 400
nearly tripled and the number of annual OMP 300
authorisations has increased from only 3 in 2001 to 236
22 in 2018 , see Figure 2. 200
83
Between 2000 and 2019, 3,443 OMP applications 100
3 22
were submitted and 169 OMPs were authorised,
see Figure 3.1 Not all of these authorised OMPs can 0
2000 2005 2010 2015 2019
be attributed to the OMP Regulation, but recent
estimates indicate that up to 74% of the OMPs Source: European Commission (2020a) and European Medicines Agency (2020)
authorised between 2000-2017 were developed
as a result of the OMP Regulation.2 Figure 3. Applications submitted, designations granted and authorised
OMPs cumulative
Despite the significant increase in authorised Number in each year
OMPs, empirical evidence demonstrates that
OMPs continue to represent a small fraction of EU Orphan designation applications submitted OMPs authorised
Member State pharmaceutical budgets - Orphan designations granted
approximately 7% on average3. A recent study4
showed that annual per patient treatment costs of 3,500 3,443
OMPs can range anywhere between EUR 755 to 3,000
over EUR 1 million in the EU. However, 2,500
approximately 24% of OMPs have an annual cost 2,000 2,276
less than EUR 10,000 and only 18% had an annual 1,500
cost greater than EUR 100,000 – with 58% of OMPs 1,000
falling between these two thresholds5. 500
169
0
2000 2005 2010 2015 2019
Source: European Commission (2020a) and European Medicines Agency (2020)
Notes: 1) These numbers include applications and authorised OMPs that have been withdrawn // 2) Dolon. (2020) // 3) See Mestre-Ferrandiz et al. (2017)// 4) see Medic et al. (2017) // 5) Onakpoya et al. (2015)
14European rare disease patients still have unmet needs
Despite the increase in authorised OMPs, the all authorised OMPs between 2000 and 2017, development lie today.
OMP Regulation has not achieved consistent 72% target diseases that have at least one other
investment in and development of OMPs. In authorised treatment available, see Figure 4. A first look at these diseases (see next page)
fact, the needs of rare disease patients in the EU Conversely, only 28% of authorised OMPs target imposes three preliminary impressions: children
are far from being met. rare diseases for which there is no authorised with rare diseases have benefitted significantly
treatment. The clustering in certain disease less from OMP development than adults, OMP
First, approximately 95% of rare diseases remain areas is not necessarily a problematic development has so far focused on the least
without authorised treatment1. In fact, the lack development: more innovation and the rare of the rare diseases, and certain
of authorised treatments in rare diseases is emergence of multiple treatment options in a therapeutic areas, such as sensory organs and
broader today than what it was 20 years ago specific disease area can benefit patients and the respiratory system, have received little
due to the unprecedented rate of newly- meet their therapeutic needs. It also gives attention in R&D so far.
emerging diseases.2 It is important to note that healthcare professionals and health authorities
this 95% figure does not translate to an equal larger choice and increases competition in Policy makers’ challenge today is to better
share of rare disease patients without authorised those disease areas. Nevertheless, R&D also understand those areas and to devise a policy
treatment, as the lack of treatments is needs to be directed into those areas where framework that delivers continuous innovation in
particularly eminent for the rarest diseases. In there are no authorised treatments at all. the rare disease space to deliver on patients’
fact, 98% of the rare disease population have a needs for treatment where there is none and for
rare disease that is among the 390 most Understanding this group of diseases with better treatment where treatment already
prevalent diseases (affecting 0.1-5 people per significant lack of treatment, is key to exists.
10,000 people)3, many of which have treatment understanding where the challenges with OMP
options.
Figure 4. Treatments available and OMPs authorised for rare diseases with and
Second, for the 5% of rare disease for which an without any treatments
authorised treatment is available, the treatment Per cent
is not necessarily transformative, i.e. yielding full
or partial disease stabilisation, or curative, i.e. Targeted for rare diseases
28% without any authorised OMPs
requiring no further treatment for a period of
years4.
No authorised
OMPs available 95%
These outcomes reflect a pattern in OMP Targeted for rare diseases
72% with at least one authorised
development. In the past 20 years, most of the OMP as treatment alternative
research in rare diseases built on advances in At least one
science and on the understanding of diseases. authorised OMP available 5%
This brings valuable new options, but also leads
to clustering of OMPs in certain conditions for Note: Based on authorisations between 2000 and 2017.
which an authorised treatment already exists: of Source: European Commission (2020a), p. 40.
Notes: 1) Note that there may be treatments available for some of the 95% of rare diseases without an authorised OMP such as off-label prescriptions. // 2) European Commission (2020a) // 3) Wakap et al. (2019) 4)
Faulkner et al. (2018)
15Which areas are concerned by a lack of authorised treatments?
1. Most OMP development focuses on disease areas where 2. OMP development is not equally focused on adults and
treatments already exist1 children2
100% As many as 70% of rare diseases
Of all the authorised OMPs between 2000- are exclusively paediatric onset
2017, 72% of them targeted diseases that and around 90% of all rare
57% diseases manifest themselves in
Targeted for already had at least one authorised
rare diseases
treatment available. childhood.
without any 28%
authorised 31% However, only 12% of orphan
OMPs While multiple treatment options can 12%
enhance competition and address designations between 2000-
significant patient needs, 95% of diseases All orphan Conditions Conditions Conditions 2019 related to conditions that
designations affecting affecting affecting only affect children, while 31%
remain without an authorised treatment. both adults only children
children only related to conditions that affect
and adults only adults.
Targeted for 72%
rare diseases
with at least Limitations
one authorised
OMP in the
current OMP
development
landscape
Prevalence of known rare diseases
Percent of OMP applications
per disease area Prevalence of Prevalence of
at least 1 in 10,000 less than 1 in 10,000
2%
Between 2000-2019, 67% of 3% 3% 2%
Between 2000-2019, 60% of
OMP designation 5% 1%
33% orphan designations and
applications 5% 56% of authorised OMPs 40% 44%
targeted the same three were targeted at rare
5%
disease areas (blood/blood =67% diseases with a prevalence
forming organs, 96%
7% greater than 1 in 10,000.
antineoplastic and
immunomodulating agents, 60% 56%
However, 96% of rare
and dermatology). 14%
20% diseases have a point
prevalence of less than 1 in 4%
10,000. All rare OMP Orphan
Blood & blood Antineoplastic and Dermatology [OthersCHAPTER 2 THE GUIDING PRINCIPLES
Four guiding principles to revise the OMP policy framework
Improving the OMP policy framework to development of OMPs can take up to 10-15 Significant Benefit may not be recognised in the
address unmet needs is not an easy task as the years1 and challenges with and barriers to OMP value assessment at the market access stage.
rare disease environment is both complex and development appear throughout the entire Another example is the development readiness
heterogeneous. To manage this complexity, the OMP pathway. of basic research: while OMP development
OD Expert Group sets out four guiding principles depends on research that is sufficiently evolved
that policy makers should follow such that the The current OMP Regulation focuses in on a for clinical development, researchers do not
revision of the policy framework ultimately narrow set of incentives at specific stages of have systematic guidance to produce research
benefits rare disease patients. These principles the OMP pathway, particularly clinical results that can be readily used by companies
have also informed the development of policy development, regulatory approval, and the in the clinical development phase.
proposals by the OD Expert Group itself. marketing phase. This creates two challenges.
Against this background, it is key for EU policy
The first challenge is that the current Regulation makers to take a holistic look at the entire OMP
Conceive a holistic policy does not provide the incentives in all development path and to design a policy
a framework for the OMP occurrences where they are needed along the framework that improves incentives for and
development path
OMP lifecycle. For instance, the OMP reduces barriers to OMP development overall.
Regulation focuses on incentives for the OMP The policy improvements suggested by the OD
development phase but is not fit to address the Expert Group take such a holistic approach to
Lead the revision from a multi- lack of basic research that entirely prevents the OMP landscape instead of focusing purely
b stakeholder perspective OMP development for some rare diseases. on the scope of the OMP Regulation. They
Similarly, the OMP Regulation uses market follow the vision of a fully integrated OMP
exclusivity as a main incentive while the main development path and a consistent policy
hurdle for many OMPs (especially those framework with a set of incentives that carry
Think about policy changes
c from an investment perspective indicated for extremely rare diseases2) is not the through all the way from basic research to
threat of competition on the market but making patient delivery. Only such an approach will
it to the market at a price that recovers the deliver the quantum leap needed to address
investment cost and risk. unmet needs through continuous innovation.
Ensure a competitive EU policy
d framework The second challenge from this narrow focus is The vision of a fully integrated OMP
Ensure a competitive EU that incentives along the OMP development development path cannot be achieved only
policy framework path are not fully aligned and sometimes even within the OMP Regulation revision. Instead, it
a. Conceive a holistic policy framework work against each other. One example is the will require wider policy changes and further
for the OMP development path concept of Significant Benefit, the criterion that initiatives under the umbrella of the EU
Developing OMPs and bringing them to the most OMPs need to fulfil to benefit from 10 pharmaceutical strategy. The OD Expert Group
market is a long pathway that takes place in years of market exclusivity. While an OMP may therefore makes concrete proposals for
many stages, from basic research over clinical be recognised for bringing a Significant Benefit changes that should be achieved in the current
development to regulatory approval and to patients over the existing treatment options OMP revision and changes that are more long-
market access and patient delivery. The at the regulatory approval stage, that same term in nature (see page 25).
Notes: 1) See European Commission (2020a), p. 13 // 2) The term extremely rare diseases would need to be further studied and defined for purposes of regulatory use.
18Four guiding principles to revise the OMP policy framework
b. Lead the revision from a multi- To do that, policy-makers should adopt a multi- The current OMP Regulation aims to improve
stakeholder perspective stakeholder perspective in the revision of the incentives by fostering basic research (funding),
The OMP development path involves many policy framework. By reuniting different making OMP development less costly and
actors: from researchers and clinicians, over stakeholders in the rare disease community complex (fee reductions, protocol assistance)
pharma companies and funders, to regulators across disciplines, the OD Expert Group reflects and allowing for sales revenues with a lower risk
and payers. Most importantly, the path involves the needs and ambitions of all relevant of competition (market exclusivity). In that way,
rare disease patients and their families who are stakeholder groups. the set of incentives currently included in the
not only the ultimate recipients of innovative OMP Regulation paired with a willingness to pay
OMPs but also play a role in their pathway c. Think about policy changes from an for OMPs at the Member State level has
through patient advocacy, raising funding for investment perspective increased the expected return on investment of
research and participating in clinical trials and OMP development is mostly driven by private OMP development projects, as illustrated by the
other studies. sector pharma companies, relying on the work dark blue bars in Figure 5 on the next page.
of and collaboration with researchers. The case However, the lack of approved treatment for
All actors on the pathway pursue the same for companies to invest in the development of many rare diseases shows that there is still a
goal: developing treatments that improve rare OMPs is, as such, weak due to the high cost and need to strengthen incentives for investing in
disease patients’ lives. However, while these risk in development relative to the low number areas where rare disease patients’ needs are still
actors are strongly interdependent, they do not of patients that the OMP can achieve revenues unmet.
collaborate optimally today and lack a strong, on. Companies only engage in OMP
unified R&D ecosystem to operate in. One development projects if the expected return The OD Expert Group has identified two main
example is in basic research, where compensates them for the costs, time and risks challenges that the revision of the policy
collaboration among researchers and between incurred in development. Therefore, it is useful to framework should address.
researchers and companies takes place within think about changes in the policy framework in
many, sometimes ad-hoc initiatives. Another terms of their ability to improve investment (i). Strengthen investment incentives
example is that HTA bodies, regulators and OMP incentives, see Infobox on page 22. overall
developers do not coordinate and align Investment incentives for OMP development
sufficiently early enough in the development of Improving the investment incentives for OMP overall are not as strong as they could be. One
OMPs, causing unnecessary delays and development is not a goal in itself, nor does it example is the lack of strong R&D foundations
uncertainty at later stages. Therefore, an mean that OMP policies should only be for many rare diseases. In fact, when basic
improved OMP policy should strive to strengthen concerned with improving the situation for research is insufficient or is lacking entirely, it is
the R&D ecosystem for rare diseases on the one companies. Instead, the investment case too risky for a company to take up an OMP
hand and to improve trust and collaboration framework recognises that the EU innovation development project. It may not be financially
between the actors on the other. Moreover, any model builds on a market logic where viable for a company to invest in the primary
revision should keep in mind the importance of companies drive OMP development while research over and above other R&D costs
equity and fairness in the treatment of different interacting with all actors in the OMP incurred in drug development. Conversely, an
groups of rare disease patients. development landscape: researchers, patients, R&D ecosystem that produces a high level of
medical professionals, investors, funders, and available research will significantly improve the
regulators. case for investing in OMP development.
19Four guiding principles to revise the OMP policy framework
To respond to this issue, policies can be
Figure 5. A stylised illustration of how modulated incentives can make designed to improve investment incentives
OMPs financially viable from an investor perspective overall. The expected return on investment can
be increased through measures that reduce
Ex-ante ROI costs along the OMP path, reduce the time it
takes for an OMP to go from the basic research
stage to market access, increase revenues or
set other financial rewards for bringing an OMP
Investment projects Investment projects to the market. Return on investment can also be
carried out not carried out with
with existing OMP existing OMP improved by reducing the risk of failure
Regulation Regulation throughout the regulatory process and
increasing the certainty of market access
conditions. Implementing such measures will
improve investment incentives overall, i.e. it will
expand the yellow box in Figure 5.
Market (ii). Adopt a modulated approach to
required ROI
incentives
The current policies provide one-size fits all
incentives across OMPs and insufficiently
As many as incentivises certain types of projects for which
political trade-off
determines investment incentives are particularly weak. A
Current OMP Regulation modulated approach to OMP incentives can
allows these investments provide a level of incentives that is just enough
to be carried out, which
would otherwise
to make different OMP development projects
generate below market (with different investment cases) sufficiently
ROI profitable.
0% Investment
projects This modulated approach will tackle two
inefficiencies of the current framework.
Revised OMP Regulation Existing OMP Regulation On the one hand, the current Regulation leaves
modulating for improvement disease areas where investment projects are not
without over-incentivising currently carried out. These are all projects to
Source: Copenhagen Economics, illustrated example the right hand-side of the vertical dotted line in
Figure 5. These are cases where the expected
20Four guiding principles to revise the OMP policy framework
return is below what investors can get incentives are stronger and may even resemble ecosystem on par with other regions of the
elsewhere, i.e. the projects for which the dark those for non-OMPs (in Figure 5, these are the world. Currently, this is not the case. The larger
blue bar is below the threshold of market projects to the left of the dotted-line yellow number of OMPs brought to the market in the
required ROI. box). For instance, these could be rare diseases U.S. shows that it is far more attractive to
that are close to the prevalence threshold or develop and bring OMPs to the market there.
There can be diverse causes for an expected where the existence of a large body of research For example, between the years 2016 and 2019,
return that is too low even at the current policy and knowledge facilitates OMP development. there were more than twice as many unique
incentives, such as an extremely small market In these cases, policy makers should find a OMPs in the development pipeline in the US
size or the lack of basic research which makes balance between providing sufficient incentives than in the EU1. Moreover, most of the
the project too costly and risky. to ensure continued development of better investments in gene & cell therapies, the most
treatments and softening incentives where they innovative and promising treatments in the rare
To address this, the revised OMP Regulation and are not necessarily required. disease field, are made in the U.S2.
a revised overall incentive framework (which
may include policies beyond the current scope In an ideal world, the revised OMP incentives Secondly, the more aligned the EU regulatory
of the OMP Regulation) can strengthen the framework would provide modulated incentives framework is with that of other regions, and in
incentives for as many projects as possible given that correspond to the expected level of particular, with that of the US, the better the
the political cost-benefit trade-off. These profitability that is needed to stimulate the incentives are to register OMPs already
incentives will further increase the ex-ante return development and marketing by pharma registered in those region in Europe. Recognising
on investment reaching the level required by companies. While this is not practically that most OMPs are first launched in the U.S.
the market, as shown by the light blue bars in attainable in the real world, and would require which is the most attractive market in terms of
Figure 5. Financial incentives or incentives of too complex regulatory procedures, this pricing, alignment of EU-US regulations is key.
another nature could be set to target specific framework serves as a useful guiding principle More alignment with the U.S. system, e.g. in
categories of OMPs for which the investment for the design of modulated incentives. We clinical trials procedures, will therefore increase
case is particularly weak. These could be, for discuss the practical issues around modulation the likelihood of OMPs already launched in the
instance, funding for research dedicated to in the next chapter. U.S. reaching European patients more swiftly.
specific diseases with unmet needs or additional
years of market exclusivity for specific OMPs. d. Ensure a competitive EU policy Therefore, even though the OD Expert Group’s
framework recommendations for policy improvements
On the other hand, the current Regulation may The EU policy framework for OMPs does not exist focus on Europe, the importance of the
apply to some OMP projects for which in a vacuum but determines the EU’s perceived international context must not be forgotten.
investment incentives are already stronger attractiveness for funding, developing and
today than they were 20 years ago thanks to an launching orphan medicines.
increase in knowledge in these areas, the
existence of both a strong research base and a Firstly, to attract OMP funding and investment,
market for these medicines. For these OMPs the EU needs to provide a competitive policy
(often labelled “crowded areas”) investment framework that sets incentives and provides an
Notes: 1) According to GlobalData Pharma Intelligence data, between the years 2016-2019, there were 1039 unique OMPs in the development pipeline (in pre-clinical, clinical IND/CTA, and pre-registration stages) in
the US compared to only 483 in Europe. // 2) https://markets.businessinsider.com/news/stocks/global-cell-and-gene-therapy-market-to-reach-11-96-billion-by-2025-1028421352
21Infobox: The investment perspective
Investors, in this case OMP developers, commit Time to market: The time needed from the start access procedures in different countries and
resources at the onset of an OMP development of the project to patient delivery also affects the prescribing practices.
project. They take the decision to invest in OMP investment case. The longer the timeline, the higher
development based on their expected return given the expected return needed to make the The price is determined through negotiations at the
the expected costs, risks, and timeline of the investment worthwhile. The timeline is affected by Member State level, which take into account a
development project and the expected revenues. multiple factors, such as the level of relevant multitude of elements (level of available evidence,
knowledge already available and the speed of patient value, comparator prices, budget impact).
Costs: OMP development is indisputably costly. proceeding through the regulatory pathway.
Significant investments are required all along the Incentives, i.e. policy measures meant to promote
development path, from pre-clinical and clinical Expected revenues: The expected revenue, i.e. the development of medicines to treat rare
trials, to regulatory approval and securing market the size of the patient population times the diseases, can act on all of the above elements: by
access, to production and post-market access expected price, determine whether an investment lowering costs, reducing risk or making it more
activities. All else equal, the higher the expected is worthwhile given expected costs and risks. The manageable, shortening the time needed to go
costs are for bringing a medicine to the market, the patient population depends on the disease through the development path or by
higher the expected return will need to be to make prevalence, the product’s therapeutic increasing/securing the return.
the investment worthwhile. characteristics, and the success of market
Risks: Investments in OMP development are
Figure 6. Tackling the identified challenges improves the OMP investment case
pursued only if investors expect to break even and
(illustrative)
earn a return commensurate with the risk. Bringing
an OMP to the market entails significant risks, such Investment decision Approval
as the risk of failure along the OMP development
path or the regulatory risk of losing orphan Increasing speed
Improving and flexibility of the
designation.2 In addition, not all medicinal products
basic regulatory process
that reach the market are successful in generating
research will will reduce costs,
revenues. The risk is reflected in the difference reduce risk risks and time to
between expected returns (determined from future market
prices and patient demand) and required returns
(as expected at the time of the investment).
Time
All else equal, the higher the perceived risks in
bringing a medicine to the market, the higher the Improving certainty on achievable price and
expected return needed to make the investment accessible market size will reduce perceived risk
worthwhile.
Investment period Sales period
Profits Expected profits
2) Approximately only one in ten candidate compounds that enter the clinical trial phase will succeed in obtaining regulatory approval and generate (some level of) revenues. See for instance, Alacrita Consilting
(2018).
22CHAPTER 3 THE POLICY PROPOSALS
Four needs for the EU OMP incentive framework
A comprehensive look at the OMP incentive Delivering against the four needs will lead to an Together, the set of policy proposals optimise
framework from all stakeholder perspectives improvement of the incentives for OMP development incentives along the OMP drug
shows that the barriers to and challenges with development in general and for areas without development path, thereby allowing for more
OMP development appear throughout the authorised treatment in particular. OMPs to be developed faster across the EU. The
entire OMP development path. Based on the proposals both aim to improve the incentives for
experts’ experiences with different stages of the The OD Expert Group makes 14 policy proposals developing more effective treatments and
OMP development path, the OD Expert Group that allow to serve those needs. The proposals developing treatments where none exist today.
identified four broad needs for OMP aim at improving incentives for OMP
development in the EU today: development overall by removing barriers in the Careful impact assessment needed
current policy framework or by making better With these proposals, the OD Expert Group aims
1. The need to improve the R&D use of current initiatives and expertise. to guide policy makers as to the concrete
ecosystem for OMPs to increase the scale Therefore, the proposals build as much as policies needed to improve the EU OMP
and scope of basic research and company possible on existing policies, structures and incentive framework. The force of these
take-up of clinical development. initiatives in the EU OMP space. proposals is that they have been developed in
a multi-stakeholder exercise. The precise design
2. The need to improve the system of Moreover, the proposals follow the idea of a and implementation of proposals as well as the
financial incentives and rewards to improve more modulated approach to OMP study of their exact impact was beyond the
the investment case for developing OMPs in development reflecting the heterogeneity of scope of this effort.
priority disease areas, such as disease areas the rare disease landscape.
without authorised treatments.
As described in chapter 2, modulation means
3. The need to review and improve the offering tailored incentives to reflect the
flexibility, predictability and speed of the investment case for different OMPs and requires
regulatory pathway for OMPs to better a differentiated understanding of the
accommodate for the unique needs of rare investment case for different sub-groups of
disease development projects. OMPs. Modulation to meet unmet needs
requires setting additional incentives for specific
4. The need to improve the coherence and groups of OMPs where, currently, insufficient
predictability of demand and pricing of incentives exist. While the identification of a
OMPs to integrate and align demand-side modulation mechanism is beyond the scope of
incentives with the overall OMP incentive this report, we discuss the key considerations for
framework. modulating incentives, see pages 26-27.
2414 policy proposals will improve the OMP incentive framework
€
Basic Clinical development Regulatory approval Market Patient
research access access
1 2 3 4
Need to improve the R&D Need to improve the Need to improve the
Need to improve the
ecosystem for basic flexibility, predictability coherence and
system of financial
research and company and speed of the predictability of demand
incentives and rewards
take-up of development regulatory pathway and pricing for OMPs
1. Form an EU rare disease hub 7. Strengthen EMA’s role in
5. Modulate market exclusivity 11. Establish an iterative early
for large-scale collaboration, based on agreed criteria advising OMP developers dialogue for EMA-HTA bodies
data sharing and generation, through the OMP pathway and OMP developers
and diagnosis. 4
6. Introduce additional financial 8. Increase legal certainty
2. Provide guidance and
incentives, such as a around the concept of 12. Create a common EU value
incentives for translational transferable voucher or tax Significant Benefit assessment for OMPs
basic research credits for drug development 4
9. Adopt guidelines on the use of
3. Form a Rare Disease PPP fund
alternative treatments (e.g. off- 13. Pilot a common EU access
for basic research and early
label use and pharmacy pathway for “priority”
development (extremely rare) OMPs
preparations) in the presence
of approved OMPs
4. Establish a coherent policy
framework for the use of RWE 10. Adapt the regulatory
14. Facilitate homogeneous
pathway to the specificities of
access to OMPs across EU
OMP groups with additional
Member States
1 3 4 challenges
These proposals pursue or open up for a These proposals can be addressed, partially or
modulated approach to OMP incentives fully, through the revision of the OMP Regulation
25Considerations for a modulated approach to OMP incentives
Some of the proposals presented on the and caregivers are essential elements of unmet on a solid understanding of the variety of
previous page pursue a more modulated need. The definition of unmet need has impacts reasons behind the lack of investment in various
approach to OMP incentives (outlined by the all along the OMP pathway, but in particular on groups of diseases. Investigating which groups of
black dashed line). While the case for the perceived value of the treatment. On top of diseases suffer from, e.g., lack of basic research,
modulated incentives is clear (see pages 19-21), that, the concept of unmet need has important from the infeasibility of conducting clinical trials,
identifying appropriate ways to apply such overlaps with other regulatory concepts, such as or from countries’ low willingness to pay is key
modulated incentives is still a challenging task. significant benefit. and the first step to modulating incentives
When designing a modulation mechanism, effectively. This requires policy makers to
policy makers should therefore respect four Against that background, a legally binding, conduct a separate, thorough study of i) areas
important considerations: restricted definition of unmet need that guides where current incentives may be too weak
the modulation of incentives, i.e. by limiting (where authorised treatment is currently lacking)
1. Pursue a holistic framework for unmet (additional) incentives to a strictly defined area and ii) areas where incentives already appear
needs of unmet need, is not an appropriate policy tool. to be strong (“crowded areas”). Such a study
Modulation is a tool to capture the Instead, a broad, holistic unmet need should closely involve experts in rare disease
heterogeneity of investment cases across OMP framework can recognise the many ways in development.
development projects and allows to direct which unmet needs manifests itself all while
specific incentives into certain rare disease attracting developers into underserved rare 3. Design an appropriate selection
areas. While the regulatory framework may disease areas. Multi-stakeholder dialogue along mechanism
adopt a modulated approach across different the OMP development path, including patient A modulated approach to OMP incentives
OMPs, the concepts of unmet need and orphan representatives, developers, clinicians, requires a selection mechanism, which
designation should continue to apply broadly regulators, HTA experts and payers, can then differentiates OMPs according to their unique
and not by themselves serve as tools for allow to continuously refine and update existing investment case and allows for modulating
modulation. This is because the definition of assumptions on unmet needs. incentives accordingly. Such a mechanism
these concepts has impacts that go far beyond should allow for incentives to be aligned with
the setting and designing of OMP incentives. Today, the ODD allows OMP developers to the challenges that different groups of OMPs
attract investment already at the very early face along the development path. Establishing
Today, there is no agreed common definition for stages of development. This is crucial since OMP such a selection mechanism is not a
the concept of unmet medical need and the developers need to make investment decisions straightforward task, as the investment case may
concept varies in content and in meaning for many years before a product reaches the not be simple to assess and can change over
different stakeholders (e.g. patients, developers, market. The current ODD based on a 5 in 10,000 time.
clinicians, regulators, HTA authorities, payers) prevalence threshold ensures that developers
and over time. Unmet needs do not only exist can make early-stage decisions. It is therefore Moreover, such a mechanism should avoid both
where there is no authorised treatment for rare prudent to maintain it as the main criterion for type I errors (granting additional incentives for
diseases, but depending on disease severity, the ODD award. development projects that do not actually need
burden of the illness and impact on patient them) and type II errors (failing to incentivise
quality of life, the absence of transformative and 2. Understand the heterogeneity of development projects that do require additional
curative treatments also qualifies as an unmet investment cases and underlying drivers incentives).
need. Moreover, the indirect burdens for families Any policy which modulates incentives must rely
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