There is a little-known class of drugs that many people in the pharmaceutical industry don’t know about. It is a class of drugs that is gradually having a bigger impact on the pharmaceutical, biotech, and healthcare industries. What is it? Orphan drugs.
You can be forgiven for admitting that you’ve never heard of orphan drugs. Most people haven’t. Yet a recent market analysis says that orphan drugs could be worth more than $65 billion by 2026. The report suggests annual growth (CAGR) in excess of 12% over the next several years.
Needless to say, orphan drugs are having a growing impact on the pharmaceutical industry. Their growth translates to more pharmaceutical jobs, more opportunities to develop new drugs, and more options for doctors and their patients. Orphan drugs might eventually be Big Pharma’s salvation should the federal government decide to crack down on prescription drug prices in earnest.
Orphan Drugs Defined
‘Orphan drugs’ is probably not the best phrase to describe this particular class of drugs. Nonetheless, it is the term chosen by regulators. The FDA defines an orphan drug as one “intended to treat a condition affecting fewer than 200,000 persons in the United States, or which will not be profitable within 7 years following approval by the FDA.”
The definition suggests that pharmaceutical companies may not have a vested interest in developing too many orphan drugs. If there aren’t enough patients to use a new drug, profits will be limited. Furthermore, failing to turn a profit after seven years of production is obviously not ideal.
But now, it appears that pharmaceutical companies could be rethinking the orphan drug concept. That is the only way to explain double-digit growth between now and 2026. It’s the only explanation for a market capable of generating that much money. Big Pharma must be finding something attractive about orphan drug development.
Find a Way to Turn a Profit
The key to successfully pursuing orphan drugs is finding a way to make a profit. Keeping costs to a minimum is a start, but that generally means limiting labor costs. Doing so may be the biggest challenge outside of expensive government regulation. On the one hand, big pharma has tons of open pharmaceutical jobs to fill. They certainly need a bigger labor force to develop orphan drugs. On the other hand, labor costs money.
Another avenue is to pursue technologies that make producing new drugs more efficient. AI and deep learning are just two examples. If technology can produce superior results with less labor, you have the recipe to produce exciting new orphan drugs without sending the bill through the roof.
A Small Margin Is Better Than Nothing
All the other factors notwithstanding, pharmaceutical companies are like any other in that they have to pay attention to the bottom line. So the question may boil down to this: is a small margin better than nothing at all? Is it better to earn 10% on a new orphan drug than ignore it and let another company take the profit?
That is a tough question to answer. It’s also one usually left to executive boards and shareholders. And as we all know, the decisions they make affect everything from retail prices to pharmaceutical jobs.
The one thing that cannot be denied is that the orphan drug market continues to grow. Given that the top ten orphan drugs are expected to generate $65 billion in revenue by 2026, it is clear that someone is making money here. It may be time for the entire pharmaceutical industry to invest more in orphan drugs.
