A look at how rare disease research is getting funded

The world's best-selling drugs lower cholesterol, reduce heartburn and treat depression. Pharmaceutical companies rake in tens of billions of dollars a year (Lipitor alone brought in $13.6 billion in global sales in 2006) by reaching millions of patients in the and others abroad. Meanwhile, patients with rare diseases and lesser known conditions wait on better treatments as companies find ways to make a profit on their drugs. A few local biopharmaceutical companies are reluctant to admit it, but most say investing in treatments for rare diseases – ones that affect tens of thousands of people – does not make for good business sense. On average, they will spend about 10 years and $1 billion bringing a new treatment to the market. A drug to treat high cholesterol or depression has the potential to reach more patients than a drug for cystic fibrosis, for instance. The fatal lung condition affects about 30,000 Americans. Enter the venture philanthropists, mostly patient advocacy groups such as the Cystic Fibrosis Foundation and Juvenile Diabetes Research Foundation that act much like venture capitalists by investing in a variety of companies with treatments aimed at a single disease.


Methodically, sometimes slurring her words, Sharon Shaffer of Chula Vista describes the disease that eventually took her grandfather’s life.

Eight years ago, a genetic test revealed that she, too, had inherited the mutant gene that causes Huntington’s disease. These days, trips to the beach require an extra hand to steady her, bicycle rides have been limited to stationary exercises and she leaves the laundry basket at the foot of the stairs.

Shaffer, 42, is one of just 30,000 people in the nation living with the disease, an inherited and progressive disorder that results in the loss of both mental faculties and physical control. Symptoms generally turn up between the ages of 30 and 50.

There are no effective treatments for the disease and, ultimately, those who are affected succumb to pneumonia, heart failure and other complications.

Many, like Shaffer, hold out hope for a new drug that will stop the disease from progressing and, eventually, lead to a cure.

It’s an uphill struggle made even more difficult by the fact that little incentives exist for drug makers to spend a significant amount of time and money in developing a drug capable of only reaching a small number of patients.

“At the end of the day, the companies still have to reap a return on their overall investment,” said Terri Cooper, a principal in the New York office of Deloitte Consulting LLP.

Unlike cholesterol drugs or antidepressants, which can reach blockbuster status because of their potential to treat millions of patients, investment returns on drugs that treat rare diseases are minimal considering their small patient reach, often less than 200,000 people in the United States.

Rare Disease Research

By definition, a rare — or “orphan” — disease refers to a disease which has not been adopted by the pharmaceutical industry because it offers little financial incentive to make and market drugs to treat or prevent it.

In 1983, the Orphan Drug Act paved the way for biopharmaceutical companies interested in tackling research on rare diseases by offering tax incentives on clinical trials and seven years of market exclusivity for drugs developed as a result.

Now in its 25th year, more than 200 orphan drugs have been approved by the FDA and are on the market. Other countries, such as Australia and Japan, have adopted similar legislation. The European Union provides drug makers 10 years of market exclusivity but no tax incentives.

Not all drug developers, however, applaud the act. Advocates of a free market system argue that without the act, which involves considerable government intervention, drug development costs would be lower.

Despite the arguments, most biotechnology companies agree that incentives should be made available to them for coming up with less lucrative drugs to treat rare diseases. The Orphan Drug tax credit, which provides breaks of up to 50 percent for clinical testing, has benefited some, but the fact remains that drug makers must first secure enough financial support to justify submitting an application to the FDA for orphan drug status.

“Many of your disease groups, like cystic fibrosis and multiple myeloma and Parkinson’s, are getting impatient,” said Robert Beall, president and chief executive of the Cystic Fibrosis Foundation. “They traditionally have relied on academic environments to push things forward and they’re saying, ‘Maybe we can’t do it the old way.’ ”

Current estimates suggest that it costs more than $800 million to move a drug from concept to marketplace. Once a drug reaches the point of human studies, it still has only a one in five chance of making it to the market.

San Diego biotech companies have been discovering ways to fund rare disease research through nonprofit foundations such as the Cystic Fibrosis Foundation, which operates a drug discovery and development arm that acts much like a venture capital firm.

Companies undergo an application process that determines grant eligibility and, if they qualify, they can often use the funds to conduct costly human studies on investigational products.

“It’s much like collaborating with a pharmaceutical company,” said Bob Marsella, senior vice president of business development and marketing for San Diego-based Hollis-Eden Pharmaceuticals Inc. “The only difference is, the Cystic Fibrosis Foundation lets you commercialize the drug.”

Foundation Funding

Hollis-Eden said it has received $1.2 million so far from the foundation’s venture philanthropy arm, dubbed the Cystic Fibrosis Foundation Therapeutics Inc., to fund early stage studies on a drug to treat lung inflammation associated with the disease, which affects just 30,000 people a year. Hollis-Eden is also in negotiations with the foundation to help it fund later stage human studies.

Many of the cystic fibrosis drugs in development today treat only the disease symptoms, although a drug in the works at Vertex Pharmaceuticals’ San Diego research hub was shown for the first time to target the basic genetic defect, which improved salt levels in people with the disease.

The Cystic Fibrosis Foundation has helped support Vertex, formerly called Aurora Biosciences Corp., with $79 million.

Isis Pharmaceuticals Inc. of Carlsbad found financial support to advance an investigational drug to treat Huntington’s disease from the Cure Huntington’s Disease Initiative Inc., a nonprofit group turned Los Angeles-based biotech, in 2004. CHDI said it would provide up to $9.9 million for the research.

Isis also has collaborations with the ALS Association and the Muscular Dystrophy Association to develop a treatment for an inherited form of amyotrophic lateral sclerosis (ALS), commonly referred to as Lou Gehrig’s disease. The progressive neurodegenerative disease, which results in the loss of muscle control, affects approximately 30,000 Americans.

The drug, known as ISIS 333611, prolonged the life of rats engineered to carry the disease by about two weeks, according to a study published in the Journal of Clinical Investigation in July 2006.

“It’s a very high hurdle that we set,” said Frank Bennett, senior vice president of research at Isis.

The drug is administered directly into the central nervous system by a small pump that infuses the drug into the cerebral spinal fluid.

Costly Treatments

Initially, Bennett said the company considered researching and developing drugs to treat rare diseases on its own.

“(The foundations) made the decision much easier for us because they contributed some of the cost,” he said.

But challenges exist for patients who are unable to afford the costly drugs that result, even when they do make it to the market.

Beall said the Cystic Fibrosis Foundation was asked to participate in a program aimed at hampering high costs, but he said that the drug companies would have been deterred by the requirements.

“You hope that an educated partner will certainly keep it in a range that’s feasible,” he said.

Cooper, the Deloitte consultant, said there has been some discussion about a “pay-for-performance” approach. Payers would only shell out money for the drug if it demonstrated the effects that it claimed.

“You need to demonstrate, first of all, if you’re going to pay $100,000 a year for treatment, that the compound actually has the effects it claims to have,” she said.

In March, Shaffer’s oldest daughter, Alexa, turns 18, making her eligible for a genetic test to determine whether she has the mutant gene. Children have a 50-50 chance of inheriting the gene from a parent. Shaffer’s other daughter, Taylor, has another five years before she can find out.

“The goal is just to be engaged in their lives as long as I can,” Shaffer said.