Life-saving treatments, blockbuster profits

Jenae Suderman walked into her 20-week ultrasound appointment filled with excitement. She and her husband Adam couldn’t wait to get a peek at their second child. The grainy black-and-white image clearly showed a little boy—his arms and legs, his tiny heart beating strong. Everything looked perfect … except for his kidneys. They were slightly larger than normal, but Jenae’s doctor couldn’t find any obvious signs of trouble. Jenae told herself not to worry.

But Isaiah Suderman’s kidneys remained unusually swollen, even after his birth. Doctors reassured his parents he’d grow out of it, but multiple follow-­ups showed increased swelling and decreased kidney function. They tried treating symptoms, still uncertain of the cause.

At 6 months, Isaiah stopped gaining weight and showed less and less interest in eating. As months progressed, his appetite plunged and Jenae often followed him around with a spoonful of pureed food, trying to entice him to eat. His cheeks started to hollow, and dark circles formed under his eyes. Worst of all, he wasn’t hitting any of the baby milestones parents rejoice to see.

“He was wasting away in front of me,” Jenae said, slowly shaking her head at the memory.

Finally, when he was 18 months old, genetic testing revealed Isaiah had cystinosis, a rare disease affecting only 500 people in the United States. The diagnosis brought some level of relief but no more certainty about Isaiah’s future.

The Sudermans’ son is one of 30 million Americans diagnosed with an “orphan disease.” A rare, or orphan, disease is one that affects 1 in 200,000 people or fewer. Forty years ago, such conditions had few ­treatment options. That’s because pharmaceutical companies didn’t bother developing drugs that ­promised limited—or zero—profitability due to the relatively small number of patients who needed them. They focused instead on finding treatments for the health problems plaguing the most people—things like blood pressure, diabetes, asthma—and promising the most profit.

But in 1983, new federal legislation changed that math. The Orphan Drug Act created incentives for drug companies to research, develop, and produce treatments for people with rare diseases by providing generous tax credits, a seven-year monopoly on orphan drugs, and exemptions from paying prescription user fees to the U.S. Food and Drug Administration.

The incentives worked. Before President Ronald Reagan signed the act into law, the FDA had approved only 10 orphan drugs. As of last year, it had authorized more than 800.

But those incentives came with an unexpected side effect: price gouging so profound that it amounts, arguably, to exploitation of the weak in the interest of massive profits. The gross profit margin for rare disease pharmaceuticals tops 80 percent, compared with the pharmaceutical industry average of 16 percent. Orphan drug sales are now growing more than twice as fast as the sale of non-orphan drugs. Sales of orphan drugs this year will make up 17 percent of all prescription drug sales—about $150 billion. In less than two years, they’re expected to grow to nearly 22 percent of all drug sales, according to Evaluate Americas, a company that tracks the pharmaceutical industry.

Some patient advocacy groups say pharmaceutical companies are manipulating the system to maximize profits by keeping prices high and competition at bay. But advocates face an uphill battle for reforms. Ironically, the patients they are trying to help sometimes put up the biggest fight. Those suffering with rare diseases fear drug companies will abandon vital research if Congress makes any attempt to cut their profit margins. They say any cost is worth finding a treatment or possible cure.

As of 2022, 39 percent of orphan drugs cost more than $100,000 annually, and gene and cell therapies cost hundreds of thousands of dollars or more. Source: AHIP.org

Hope and profits

Once the Orphan Drug Act became law, pharmaceutical companies began researching rare diseases almost immediately. One of the first under the microscope: cystinosis. Back then, patients like Isaiah Suderman lived only about 10 years, on average. In 1994, the FDA approved Cystagon, the first orphan drug developed to treat Isaiah’s condition. The drug works by clearing dangerous accumulation of cystine crystals that cause irreversible cell damage in all organs. It prolongs patients’ lives into at least their 20s, when most will need a kidney transplant.

The Sudermans began giving Isaiah Cystagon two months after his diagnosis. Every six hours they squirt it through a gastronomy tube surgically implanted into his stomach. One missed dose, even in the middle of the night, means rising cystine levels and possible permanent organ damage. So Isaiah’s parents wake him up at 10 p.m. and again at 4 a.m. to make sure his treatment regimen stays on schedule.

Cystagon works, but not without awful side effects: It tastes like sulfur and causes stomach pain, vomiting, and diarrhea. Patients who take the drug suffer ­halitosis—bad breath—that smells like rotten fish. Researchers at the University of California San Diego thought they could overcome those issues by creating a pill version with a time-release coating, but they needed money to fund the research. The grassroots nonprofit Cystinosis Research Foundation stepped in to help, with many of its members hosting fundraising events to cover the grant. Once the research proved it worked, pharmaceutical company Raptor acquired the rights and financed clinical trials.

In 2013, the FDA approved the time-release drug, called Procysbi. Patients only had to take it twice a day, decreasing the danger of missed doses and potential organ failure. Side effects like halitosis also declined.

But the price skyrocketed. Cystagon cost about $9,000 a year in 2013. When the new Procysbi pill hit the market that year, it cost more than $300,000 for a year’s supply.

That outraged families supporting cystinosis patients, many of whom had helped raise money to research the drug. Raptor spent about $80 million to develop Procysbi and get it approved. But in the drug’s first five years of sales, Raptor reaped $500 million, according to Kaiser Health News. When Raptor sold to Horizon Pharma, it projected Procysbi revenue would top $1.5 billion by 2026.

Still, the price continued to climb. By 2018, Procysbi cost some adults a whopping $1 million annually, according to Kaiser.

Jenae Suderman hopes one day Isaiah can take Procysbi. But for now, it’s too expensive. The family does have insurance, but they’ve been told they’ll have to fight to get coverage for the more expensive treatment.

Lucrative loopholes

That’s a fight Lucy Westerfield knows all too well. Growing up, she suffered from atypical appendicitis that led to multiple hospital stays and long-term abdominal problems, including acid reflux and irritable bowel syndrome. The only treatment that eases her symptoms is a drug called Dexilant, with a list price that tops $300 a month. Westerfield buys it from a Canadian pharmacy for a fraction of that. She also uses Restasis eye drops, to relieve severe dry eyes. Even though two generics finally came to market in February, she still pays $400 for a 90-day supply.

Westerfield’s experience and those of other family members with serious health challenges inspired her to advocate for patients and lobby for change. As a policy expert with Patients for Affordable Drugs, she spends her days working with patients struggling not only to find treatments but to pay for them. “Yes, it’s important that [Big Pharma] is investing in research and development of orphan drugs,” she said. But she insists the companies are abusing the Orphan Drug Act.

The strategies they use fall into three categories. First, a technique critics call “salami slicing,” when a company takes a drug already on the market and gets FDA approval to redesignate it as an orphan drug, ­garnering billions in orphan drug benefits for medicine already developed, sold, and marketed. Cancer treatments often fall into this category, with drugs developed to treat more common forms redesignated to treat rare mutated cancers. The orphan drug Gleevec, used to treat myeloid leukemia, got nine additional orphan approvals for treating other types of cancers.

Another strategy involves taking approved orphan drugs and repurposing them for common diseases—keeping the high orphan drug pricing for everyone. That’s what Amgen Inc. did with the drug pegfilgrastim, originally designated to treat rare acute radiation syndrome. But Amgen sells nearly all of it to treat a common problem of low white blood cells after cancer treatments. List price for one dose: nearly $6,500.

Another example is practically a household name. Drug company Allergan developed Botox to treat rare eye problems. But now the company mass-markets it as an anti-wrinkle and anti-migraine drug—even though it still has three orphan drug approvals and accompanying financial incentives.

A third strategy involves what Horizon did with Procysbi. First, it extended the drug’s original exclusivity by redesignating a form of the drug for young ­children. Then it applied for a patent—a property right granted by the U.S. government—on its time-release coating.

Whereas orphan drug exclusivity guarantees no competition for seven years without a new application for orphan drug status, a patent usually lasts 20 years and means any eventual competitor must find a new way to accomplish something that doesn’t encroach on the patent. Any company hoping to compete with Procysbi will have to find a different pill ­coating, but not until the patent expires in another 15 years. By then, Isaiah Suderman will be nearly 18 years old.

Spiraling prices

Procysbi and its spiraling cost is not an outlier. According to the Institute for Clinical and Economic Review, the price of orphan drug treatment in 2019 ranged from $6,000 to $1 million a year, averaging out at $32,000. Almost 40 percent of orphan drugs cost patients more than $100,000 annually. If only 10,000 patients need one of those drugs, that would generate $1 billion in revenue.

Drug companies call that a “blockbuster orphan.”

This summer, the FDA approved Bluebird Bio’s new one-time-use gene therapy said to cure a rare inherited blood disorder. Its price tag? $2.8 million for one dose.

These eye-popping costs are one of the biggest ­contributors to high drug prices across the industry, according to AHIP, a political advocacy group for health insurance companies. The average annual orphan drug cost increased 26-fold within a five-year period, while specialty and traditional drug prices merely doubled.

And doctors often prescribe expensive orphan drugs for common maladies. That’s partly because pharmaceutical companies have historically offered doctors and nurses financial incentives to promote ­specific drugs to their patients. In 2017, 7 of the top 10 best-selling drugs were orphan drugs prescribed for common conditions.

Lucy Westerfield cites Humira—the most lucrative drug in the world—as one egregious example. The drug developed by AbbVie primarily treats rheumatoid arthritis. The FDA gave it orphan status in 2008 to treat juveniles even though more than 90 percent of its prescriptions are for non-orphan adult rheumatoid arthritis. Annual cost? Nearly $70,000. Until its orphan status expires next year, no alternatives exist. AbbVie earned more than $20 billion last year, with Humira generating over 60 percent of that revenue.

And AbbVie seems determined to protect its ­profits: It has filed more than 132 patents for Humira.

But patients aren’t the only ones paying for Humira. Medicare and Medicaid sometimes cover or reduce Humira costs to patients, illustrating how the U.S. government allows companies to triple-dip: taxpayer funds help companies develop drugs; taxpayers pay out-of-pocket or insurance costs to get the drugs; and more taxpayer money pays part or all of low-income patients’ costs.

Because of the astronomical prices, about 30 percent of insurance companies exclude orphan drug coverage. And some employers who self-insure—meaning they pay claims out of their own pockets—have reduced coverage or axed the most expensive gene and stem cell therapies. Westerfield said getting drugs covered often requires a fight involving an avalanche of letters, phone calls, denials, and appeals. “I talk to patients every single day who are dealing with this, not knowing what their copays are going to look like … how much they’re going to have to pay out-of-pocket, whether insurance will cover anything. It’s really, really frustrating.”

The Sudermans outside their home in Halstead, Kan. Original photo by Earl Richardson/Genesis (Illustration by Krieg Barrie)

Dueling agendas

Westerfield’s organization helps patients lobby for more affordable drugs by making their appeals directly to lawmakers. Their stories help put faces on the real cost of expensive drugs. Westerfield has worked with patients who’ve had to mortgage houses or go bankrupt trying to pay for their medication. Some simply stop taking it because they can’t afford it.

“So often lawmakers are caught in the D.C. bubble, but when they hear from their own constituents … asking them to stand with them to lower drug prices, it makes the issue personal and human,” Westerfield said.

Lawmakers on both sides of the aisle are sympathetic. Westerfield said bipartisan groups agree something must be done to close loopholes and curb high orphan drug prices because directly or indirectly the problems affect everyone. But the last substantial legislative change to the Orphan Drug Act came in 2017, when lawmakers halved the tax credit to 25 percent. Not surprisingly, the powerful pharmaceutical industry lobby fights every proposed change with armies of lawyers and lobbyists.

And it has an influential and sympathetic ally. The National Organization for Rare Disorders (NORD), created the same year as the Orphan Drug Act, advocates for research and development for treatments. It also provides resources to families, including financial support. But it opposes changes to the incentive program, especially any that would limit the number of orphan designations a drug can receive. NORD says companies should be encouraged—not discouraged—to find more rare disease uses for a drug and argues orphan drug prices are rising more slowly than other drug prices, despite data showing the opposite.

NORD has also remained neutral in the fight to get Medicare to negotiate lower drug prices. Its position exemplifies the fear shared by other patient groups: that any attempt to interfere with pharmaceutical ­companies or decrease orphan drug prices will lead to less innovation.

But that may not be its only motivation. According to a study completed last year by Westerfield’s organization, NORD and all but one of 15 prominent patient advocacy groups have strong ties with pharmaceutical companies. The study says NORD accepts an undisclosed amount of money from drug companies, three of its board members have ties with pharmaceutical companies, and dozens of drug company and trade association representatives serve on four NORD ­corporate councils.

Pharmaceutical company representatives did not return multiple phone calls or requests for interviews. But Andrew Powaleny, a spokesman for drug lobby group PhRMA, sent statements insisting orphan drug costs are a minute percentage of overall healthcare spending. He blamed insurance companies for high prices: “Insurance companies and [pharmacy benefit managers] impose strict formularies and burdensome utilization management procedures like prior authorization that put barriers between patients and these ­crucial treatments.”

Pharmaceutical companies also argue they pour much orphan drug revenue back into research, including for the 95 percent of rare diseases still without treatment. But the Congressional Budget Office puts the amount of reinvestment at about one-quarter of profits, on average.

And Westerfield notes the biggest investment comes from taxpayers, who have funded research and development for every drug that’s come to market in the last 10 years: “The U.S. government is the one ­taking the risk … vital to bringing a drug to market.”

What does all this mean in practical terms? First, taxpayer money funds much drug research. Then pharma companies charge exorbitant prices for the resulting drugs, earning profits far above their own investment costs. The companies use these profits to influence policies that protect their profit. Still, some continue to argue that’s the price of innovation.

But should the sick really have to mortgage their homes to be well … or just stay alive? The biblical answer is no: Scripture roundly condemns the practice of exploiting the poor and the powerless.

Illustration by Krieg Barrie

A never-ending spiral

Westerfield hopes the recently signed Inflation Reduction Act (IRA) signals the beginning of an effort to hold drug companies more accountable. Starting in 2026, the law allows Medicare to negotiate prices for 10 drugs, and that list will grow every year. No true orphan drugs are included in the initial list, and some say the act will have a minimal financial impact on pharmaceutical companies this decade. But Westerfield says it’s the first major legislative reform in 20 years and could create momentum for further change.

She credits hundreds of thousands of patients around the country, like ones she works with, for propelling that change: “It’s the power of patient stories that drives reform.”

But the new law may be a double-edged sword: In October drug manufacturer Alnylam said it’s nixing research on a rare eye disorder while it evaluates the IRA’s impact. Eli Lilly has said the same about some of its rare cancer research.

Meanwhile, the spiraling cost of orphan drugs shows no sign of abating, especially in light of new treatment methods rapidly coming to market. More than 70 percent of the 7,000 known rare diseases are genetic, and thanks to the Human Genome Project, completed in 2003, scientists have new, possibly better ways to target them. And of course, they’ll use Orphan Drug Act incentives to bring those treatments to market.

Isaiah Suderman is too young to tolerate the chemotherapy that accompanies experimental cystinosis gene therapy, but someday he may be a candidate. For now, his mom Jenae is just grateful he has medicine to treat his condition. After taking Cystagon for five months, Isaiah has the energy to walk, giggle, and be a regular little boy. The dark circles under his eyes are disappearing. His cheeks are filling out. Doctors say Isaiah could live into his 50s, although Jenae says they’ve told her the mid-30s is more realistic. His present and future needs include physical, occupational, and feeding therapies, plus he’ll need a kidney ­transplant by the time he’s ready for middle school.

Jenae says she and Adam struggle with anxiety, ­balancing Isaiah’s care while making sure his older brother, Josiah, feels loved, too. But she draws comfort from the verse in Isaiah they picked for their son before he was born: “For I, the LORD your God, hold your right hand; it is I who say to you, ‘Fear not, I am the one who helps you.’”