Efforts to Close the Evergreen Exclusivity Loophole (HR 4712)

Top 3 Things You’ll Learn

  1. How drug manufacturers use evergreening tactics to maintain market share
  2. What the HR 4712 legislation intended to accomplish
  3. How closing the orphan drug loophole will (or won’t) affect pharmacy benefits

Evergreening is a competitive tactic used by pharmaceutical manufacturers to maintain their market share in profitable categories. This practice involves making slight modifications to existing drugs to create a “new” product. The most significant element of this technique is that the changes do not affect the drug’s clinical safety and efficacy, meaning that no additional clinical value is added. As manufacturers use these methods to compete with existing medications, unsuspecting plan-sponsors are the ones who must pay the price.

Evergreen Exclusivity History

The Orphan Drug Act of 1983 was created to assist in the development of drugs for rare diseases. Under current law, the Food and Drug Administration (FDA) may grant seven years of market exclusivity to manufacturers if the drug meets the following requirements:

  • The medication must be intended to treat a rare disease that affects fewer than 200,000 Americans.
  • The manufacturer does not expect to recover the research and development (R&D) costs from selling a drug.

Those eligible medications are labeled as orphan drugs. Orphan drugs are an emerging subcategory of specialty medications. As this drug class continues to grow, the reality is that one in 10 people have a rare condition an orphan drug treatment could target. In recent years, there has been controversy over drug manufacturers’ manipulation of the act. The FDA introduced a rule in 2017 that blocks serial exclusivity for drugs that are essentially the same, unless the manufacturers can prove it is clinically superior to its prior indication. Because of this rule, blocking drug competition under the Orphan Drug Act is primarily an issue for drugs that came to market before the 2017 regulation.

Closing the Loophole

On November 18, 2020, the U.S. House of Representatives voted unanimously to pass the Fairness in Orphan Drug Exclusivity Act (HR 4712). This bipartisan bill aims to prevent manufacturers from “piggybacking” a new indication or new formulation on an original orphan patent. However, the act requires drug makers to show that they do not expect to recover R&D expenses through U.S. sales in 12 years if they want to obtain the seven years of marketing exclusivity under one of two paths toward an orphan drug designation.

The Fairness in Orphan Drug Exclusivity Act seeks to close the loophole that allows drug makers to block competition by increasing access and affordability for rare disease therapies in the future.

Buprenorphine, an opioid addiction treatment from the specialty pharmaceutical company Indivior, was the catalyst in seeking action to close the loophole. Indivior received orphan drug status for buprenorphine, an older drug, and used that designation to block the competition with brand-name Sublocade®. Another example is the case of Dehydrated Alcohol, or Ablysinol®. For years, hospitals used an injectable medicine called dehydrated alcohol to treat chronic pain and prevent infections. In June 2018, Belcher Pharmaceuticals won approval for its version of the drug to treat a rare cardiac illness. With that came an orphan status and patent exclusivity that limited production of older versions from other drug manufacturers. Suddenly, the commonly used drug became an orphan drug, resulting in a 10-vial pack price jumping from about $1,300 to $10,000.

Expected Impact on Pharmacy

The bill’s creator Rep. Madeleine Dean (D-PA) believes the bill, if passed, would “create more treatment options for patients and providers, boost competition in the marketplace, and drive down the cost of new medicines.” However, because it was not acted upon by the Senate during the last session of Congress, it is unlikely to become law any time soon. Therefore, it is up to you to help your self-funded employer clients manage their pharmacy plans proactively to ensure they are not overspending and these costly orphan drugs are being utilized appropriately.

Learn more about the latest legislative activity and the potential impact on pharmacy benefits in our on-demand webinar, What’s Hot, What’s Not: State of the PBM Industry 2021.



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