Stock Watch: Orphan Drug Profitability Under Threat

A recent publication in JAMA compared the sales of prescription drugs five years after launch and found that those with Orphan Drug Act designation were just as lucrative for their manufacturers as those without. The paper also speculated on whether the incentives for developing orphan drugs – including tax breaks, longer exclusivity and exclusion from Medicare price renegotiation – should continue.

Exclusion from Medicare price renegotiation under the Inflation Reduction Act (IRA) might not appear to be a significant threat to orphan drug makers. This is because orphan drugs administered to small patient populations with limited life spans are unlikely to reach the heady heights of annual sales of the first drugs identified for price renegotiation. (Also see "First Drugs That Could Be Picked For Price Negotiation Showcase Longevity Of Some Brands" - Scrip, 30 March, 2023.)On the other hand, the study attributed high orphan drug prices as the driver for their profitability