BioWorld International Correspondent

BRUSSELS, Belgium - Biotechnology firms in Europe are worried about being robbed of the incentive to develop orphan drugs. Less than five years after the European Union introduced its orphan drug regulation, officials are discussing ways to get back what they perceive as excess profits that companies are receiving. That has the biotechnology sector sounding the alarm bells.

"If the rules are going to be tightened up to prevent any profits being made from the scheme, it is going to lose its appeal to companies," a senior biotechnology industry executive told BioWorld International last week.

The industry is concerned that officials see the benefits of the scheme as too indiscriminate. All medicines that win orphan drug status are entitled to a period of market exclusivity, but EU officials are discussing changes that would limit those benefits, perhaps favoring medicines that are considered a breakthrough in treatment options. Medicines offering only incremental therapeutic improvements could have a cap on revenues or marketing exclusivity, under modifications now being examined.

What the EU is particularly worried about is that products that have been granted exclusivity have more negotiating power when setting prices with national authorities. In addition, when the price of an orphan product is high, the market might attract competitors that previously were not interested, and that could erode the justification for exclusivity for one product, the EU argued.

When the EU's orphan drug scheme was introduced at the end of 1999, the 10-year period of market exclusivity was presented as the main measure aimed at increasing the economic profitability of those products. The regulation included a safety measure to account for changes in the market, which was supposed to prevent abuse: If, at the end of the fifth year on the market, the conditions justifying the designation as an orphan medicinal product were no longer met and the product was sufficiently profitable, the exclusivity period could be reduced to six years.

Now a study of how the scheme is operating has produced data on the prices granted to orphan medicines. Central to the study is an attempt to establish "objective criteria for determining whether a price is reasonable." In addition, the study has attempted to assess, in detail, the price components of a pharmaceutical product, under categories such as development costs, production costs, marketing, financing of future research, distribution and financing costs. Research-based European pharma firms always have resisted that approach to industry economics, and biotechnology companies even more so. So the European biotechnology sector now is steeling itself for a fight over the interpretation it fears the EU might put on concepts such as "reasonable price" or "acceptable profitability."

So far, nearly 150 medicines have been designated orphans under the EU scheme, and the first with a 10-year exclusive marketing authorization already are on the market.