A basic fact of life is that the things in this world we want more of – time, money, resources – are in limited supply, while the few things we would like less of – natural disasters, tragic accidents, disease – exist in excess. When thinking about the fixed pie of resources available to attack the large spectrum of disease that society faces, theoretical questions emerge regarding how to best allocate these resources to tackle the challenges at hand.

In our market-based reality though, most treatments are developed by for-profit companies needing to produce solutions in an economically viable way. R&D dollars are allocated based on hundreds of factors, including:

• current portfolio,
• development expenditures,
• distribution channels,
• patient population,
• reimbursements,
• plus many other considerations.

Orphan Drug Act

In January of this year, the Orphan Drug Act celebrated its 30 year anniversary. The act encourages pharmaceutical and biotech companies to develop treatments for those diseases that affect less than 200,000 people. Combining government incentives, tax credits and extended exclusivity with smaller populations for clinical trials and higher reimbursement rates, it’s not surprising to see growth in this space.

Growth in orphan drug investment is coming from both big pharma companies and venture capital funded startups. Some pharma companies are turning to orphan drug development as they face stiff competition from generics, patent expirations and the blockbuster slowdowns. VC firms find orphan drugs attractive since the required investment is lower due to the often shorter FDA approval process.

Many would argue this is a win for all stakeholders – those suffering from rare diseases, the drug companies and the venture capitalists. Others, those who define R&D success as maximizing the number of people impacted by a treatment, would argue that the pendulum has swung too far in favor of rare diseases, the topic of a recent piece by Stewart Lyman.

In a world of fixed resources, every company is forced to make decisions that involve trade-offs, and R&D investment is just one of many. And the reality is, often times investment in orphan drugs is a trade-off to investing in treatments for diseases with larger populations. The challenge with debating this topic is finding the absolute. If one asked 100 people to give their thoughts on how resources should ultimately be invested on drug development, one could probably get 100 different answers based on personal experiences, world view, hometown, etc. Certainly, incentives can be adjusted to encourage investment in the right areas – the challenge is defining the “right” areas.