Leadiant given pause for thought by Dutch view of 'orphan drug' price hikes

14 November 2018 3:05pm

14 November 2018. By Matthew Newman.

Drugmaker Leadiant Biosciences will take little comfort in recent comments by the Dutch competition authority critical of price hikes on "orphan" drugs used to treat rare diseases.

The Italian company has a pricing complaint pending against it in the Netherlands, and the regulator looks ready to flex its muscles — at least on the evidence of a policy paper it has issued.

The Netherlands’ Authority for Consumers and Markets, or ACM, said in the paper that “it may be necessary” to apply competition law and possibly more restrictive regulations, including price controls, to address “excessively high prices for pharmaceutical products” — though it did give the caveat that current policy was broadly working well and only small tweaks were needed.

The paper, released last Friday, was prepared for a Nov. 28 discussion at the Organization for Economic Cooperation and Development on excessive pricing by drugmakers.

Competition authorities are increasingly interested in allegations of excessive pricing in the pharmaceutical industry. The European Commission in 2017 opened a probe into Aspen Pharma for allegedly charging excessive prices for five cancer drugs. Authorities in the UK and Italy have pursued similar investigations.

In the Netherlands, Leadiant has drawn attention after an antitrust complaint filed at the ACM by the Pharmaceutical Accountability Foundation, or PAF, a new Dutch group focused on reducing drug costs, in September.

The group claimed that Leadiant increased the annual cost of treatment for a rare genetic metabolic disorder by a multiple of almost 500, to 153,300 euros ($172,000). The drug in question contains chenodeoxycholic acid, or CDCA.

Leadiant allegedly bought and some years later discontinued a drug, Chenofalk, containing CDCA. Although prescribed for gallstones, this drug was in practice used "off label" to treat the disorder cerebrotendinous xanthomatosis, which affects only a few dozen people in the Netherlands.

Two years after discontinuing Chenofalk, Leadient rolled out a new medicine specifically approved to treat cerebrotendinous xanthomatosis, containing CDCA and costing 140 euros per capsule. Chenofalk had cost 0.28 euros per capsule.

The PAF also queried why the European Medicines Agency had accorded the drug “orphan" status — the designation for drugs intended to treat very rare conditions and thus offering limited profitability.

That designation effectively gave Leadiant 10 years of market exclusivity in the EU, and the PAF said in its complaint that this exclusivity was "obtained without much effort with regard to research."

Dutch signal

The ACM’s proposed changes, while significant, are incremental. The authority said regulators must examine closely the tension between “innovation and cost control” — in other words, be careful not to discourage drug companies from making the big investments necessary to develop orphan drugs.

The authority suggested further research to realign "incentives" in drug regulation, particularly for orphans. The conditions needed for a drug to win orphan status could be cumulative instead of alternative. That could remove the "perverse incentives" for companies to seek out orphan status for a drug to "maximize profits."

The authority said its “working assumption” is that EU and national drug regulation is “broadly in working order” and that competition policy serves as correcting “regulatory and/or market failures at the margins.”

There isn't necessarily a conflict between intellectual property rights and excessive pricing, the ACM added. Its paper describes how the incentives to innovate should be taken into account, such as the probability that a drug will be authorized for sale and achieve commercial success, as well as the cost of research and development and capital.

When looking at these incentives, however, not all innovation is the same, the ACM says. While there may be some "bona fide" innovation with orphan drugs, in other cases designation as an orphan “merely formalizes already existing practices, for instance if the drug was already used off label.”

Pursuing an excessive pricing case in such a scenario is “obviously less complicated regarding the balance between innovation and cost containment than a case concerning truly innovative products based on original research,” the authority said.

As a result, the “probabilities of success, capital costs and the life cycle approach are less (or not at all) relevant.”

While the authority didn't name any specific cases in its policy paper, the circumstances that it describe are closely in line with the complaint against Leadiant, according to Ellen ‘t Hoen, a lawyer for the PAF.

For now, taxpayers are footing the bill to treat the 52 Dutch patients with Leadiant's drug, she said. The ACM policy paper is a strong indication that the Dutch authority is taking the complaint seriously.

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