Aaron S. Kesselheim serves as the editor for Health Policy Portal. Dr. Kesselheim is the JLME editor-in-chief and director of the Program On Regulation, Therapeutics, And Law at Brigham and Women's Hospital/Harvard Medical School. This column features timely analyses and perspectives on issues at the intersection of medicine, law, and health policy that are directly relevant to patient care. If you would like to submit to this section of JLME, please contact Dr. Kesselheim at akesselheim@bwh.harvard.edu.
The Orphan Drug Act was enacted to spur research and investment in rare diseases. The sponsor of an orphan-designated drug qualifies for various development incentives, including tax credits for clinical trial expenditures and waived user fees.1 But one of the primary benefits of orphan designation is the potential to receive seven years of market exclusivity, which precludes the U.S. Food and Drug Administration (FDA) from approving any direct competitors to that drug for its approved indication during this period.2
The FDA does not, however, grant exclusivity to a drug if it has previously approved the same drug for the same disease.3 The FDA seeks to limit orphan drug exclusivity to the first sponsor that obtains approval for a specific drug targeting a rare disease. Such restrictions prevent repetitive periods of exclusivity, known as “serial exclusivity.”
Despite the FDA's intentions, Eagle Pharmaceuticals used a legal loophole to achieve serial exclusivity for the drug bendamustine (Bendeka), a cancer treatment that was FDA-approved in December 2015 (see Figure 1). Both Bendeka and an older formulation of bendamustine, which had the brand-name Treanda, have the same active ingredient (bendamustine) and were approved to treat the same types of cancer (chronic lymphocytic leukemia and indolent B-cell non-Hodgkin lymphoma).4 Except for Bendeka's shorter infusion time, they are otherwise clinically the same drug.
Timeline of Major Events in Bendeka Case
Treanda lost its market exclusivity in 2015, and generic versions of Treanda were primed to enter the market in November 2019.5 (The delay was related in large part to patent litigation and settlements between the manufacturer of Treanda and potential generic entrants.) However, since Bendeka received orphan drug exclusivity when it was approved in December 2015, the question arose whether the FDA could allow generic versions of Treanda to reach the market, given that Treanda had the same active ingredient and was approved for the same indications as Bendeka. Thus, the FDA's own application of the Orphan Drug Act appeared to trap it into extending the monopoly of an old drug for an additional 7 years after generics could have entered the market.
Bendeka's serial Orphan Drug Act exclusivity resulted from a complex interplay between the courts, Congress, and the FDA each addressing the phrase “same drug.” The story of Bendeka illustrates how well-intentioned programs designed to incentivize certain types of drug development can inadvertently lead to prolonged extensions of drug monopolies.
Court Creates Exclusivity Loophole
Bendeka earned orphan designation during its development, but when the FDA approved Bendeka in 2015,6 the agency refused to grant it orphan drug exclusivity because Bendeka had not demonstrated clinical superiority over Treanda. From the FDA's perspective, Bendeka and Treanda were the “same drug” — containing the same active ingredient and indicated for the same type of cancer — and thus not deserving of additional market exclusivity.
Eagle Pharmaceuticals subsequently sued the FDA for failure to award exclusivity to Bendeka.7 Eagle argued that Bendeka's exclusivity flowed automatically from its orphan designation. Eagle contended that the FDA exceeded its statutory authority by requiring evidence of clinical superiority. The FDA responded that granting exclusivity to Bendeka would be contrary to its long-standing regulations requiring clinical superiority if an orphan-designated drug has the same active ingredient and is directed at the same indication as a previously-approved drug.
In 2018, a federal district court ruled in favor of Eagle based on a textual reading of the Orphan Drug Act.8 The court ruled that nothing in the Act's plain text left room for the FDA to apply this clinical superiority requirement. The court decision thereby created an exclusivity “loophole” that allowed new orphan-designated formulations of old drugs to automatically be entitled to exclusivity once approved for marketing, with no required showing of clinical superiority. From a public policy point of view, such a loophole makes little sense, as the Orphan Drug Act incentives were designed to incentivize development of drugs to treat rare disease — if a drug with a particular active ingredient has already earned the incentive, what would be the goal of giving another drug with the same active ingredient the incentive a second time?
Congress Enacts FDARA Fix
Responding to the problem initiated by the district court in the Eagle case, Congress tried to fix the loophole in the FDA Reauthorization Act of 2017 (FDARA).9 FDARA amended the Orphan Drug Act to codify the FDA's clinical superiority requirement. Under the new federal law, if a sponsor seeks exclusivity for an orphan-designated drug that has the same active ingredient as a previously approved drug, the sponsor must demonstrate clinical superiority of the new drug over the old version. The changes effectively closed the court-created exclusivity loophole, updating federal law to be consistent with the FDA's goal of preventing serial exclusivity.
The FDA has filed an appeal of the Bendeka decision. If the district court's decision is reversed, Bendeka's court-ordered award of orphan drug exclusivity would be invalidated, allowing market entry of generic Treanda. Moving forward, the Bendeka case emphasizes the importance of considering the likelihood that manufacturers will seek loopholes to delay competition when grants of market exclusivity are written into future legislative and regulatory policies — and using language that is as clear and limited as possible.
FDA Grants Broad Exclusivity
The FDARA amendments, however, did not apply retroactively. The amendments did not affect the exclusivity of Bendeka or other pre-FDARA drugs granted Orphan Drug Act exclusivity prior to August 18, 2017. Eagle therefore retained its court-ordered orphan drug exclusivity for Bendeka.
Thus, even after the legislative fix, FDA found itself in a position in which it had to determine the scope of Bendeka's exclusivity. Specifically, the FDA had to decide whether Bendeka's court-ordered exclusivity would bar entry of generic Treanda. In February 2019, the FDA issued a letter declaring that Bendeka's exclusivity would indeed extend to “all applications containing the same active moiety.”10
The FDA was effectively trapped by its own regulations. Since Bend-eka has never been proven clinically superior to Treanda, the two drugs are considered to be the “same drug.” And since Bendeka's exclusivity blocks approval of all “same drugs,” it blocks approval of any branded or generic versions of Treanda.
Patients expecting generic Treanda now face an unfortunate predicament: despite manufacturers having received approval to market generic products that would be expected to reduce the price of the drug, these products have been blocked from entering the over $600 million bendamustine market for an additional three years.11
Policy Options
Fortunately, the FDARA amendments appear to prevent a repeat of the Bendeka case. A new formulation of a drug will no longer be granted Orphan Drug Act exclusivity without first proving clinical superiority. If a new formulation can prove clinical superiority and receive exclusivity, such exclusivity would not block generic entry of the old formulation, since the products would not be considered the “same drug” due to the finding of clinical superiority.
However, this leaves a subset of pre-FDARA “legacy” drugs with Orphan Drug Act designations that could potentially delay generic entry of existing drugs. The FDA predicts the number of such legacy drugs to be limited, but they could include drugs such as treprostinil (Orenitram) and rituximab (Rituxan Hycela).12
The FDA has filed an appeal of the Bendeka decision. If the district court's decision is reversed, Bend-eka's court-ordered award of orphan drug exclusivity would be invalidated, allowing market entry of generic Treanda. Moving forward, the Bendeka case emphasizes the importance of considering the likelihood that manufacturers will seek loopholes to delay competition when grants of market exclusivity are written into future legislative and regulatory policies — and using language that is as clear and limited as possible.
