Rare disease therapeutic development facing challenges

Industry experts point to a combination of factors negatively impacting the space, including IRA, funding, and market access concerns.

2024 heralded many investment deals, as well as FDA approvals, in the rare disease space. For example, 26 of CDER’s 50 novel drug approvals (52%) were approved to treat rare or “orphan” diseases.

In the areas of dealmaking, the following were just a sample of the highlights:

• AstraZeneca’s $1.05 billion March acquisition of Amolyt Pharma and its eneboparatide (AZP-3601), a Phase III investigational therapeutic peptide for hypoparathyroidism. The data is anticipated in the first half of this year.
• Vertex Pharmaceuticals’ $4.9 billion purchase of Alpine Immune Sciences and its dual B-cell cytokine agonist for IgA nephropathy, a rare chronic kidney disease, in April. In Phase II at the time, the study began recruiting Phase III in August, with a completion target date of September 2028.
• Novartis’ December global in-licensing agreement with PTC Therapeutics’ PTC518 small molecule in Phase II trials for Huntington’s disease was announced with a $1 billion upfront payment. After the study is completed, Novartis will advance PTC518 through development, manufacturing, regulatory, and commercial for an anticipated $1.9 billion in milestones.

Taken together, these developments are signs that the rare disease therapeutic space is thriving; however, recent regulatory and policy shifts are signaling potential rocky roads ahead.

Matthew Winton, COO for Inozyme Pharma, outlined some of these changes to Access Insider: “The IRA [Inflation Reduction Act] has introduced pricing controls and indication controls ... We saw the orphan drug credit reduced ... the accelerated pathway is a good thing, but it’s under constant scrutiny ... and then at the end of last year, the expiration of the priority review voucher (PRV).”

For a company like Inozyme, a clinical-stage biopharmaceutical company developing innovative therapeutics for rare diseases that affect bone health and blood vessel function, the actions affect decisions that impact current and future development. Matthew Winton, chief operating officer for Inozyme Pharma

Priority review vouchers

For example, Winton explained the PRV impact on the smaller biotech companies.

“It is a great policy that allows drugs to be reviewed quicker but also for small and mid-sized biotechs, which is the predominant type of company developing rare disease drugs now. It can also be a strong source of non-diluted capital,” Winton said. “A recent PRV sold for about $150 million. For a small company, that kind of non-diluted capital could be life or death for a specific program or other programs.”

The expiration of the pediatric rare disease provision of the PRV on December 20 is explained in detail here. And its implications are far-reaching given that 50% to 70% of rare diseases are in the pediatric population.

The potential demise of the PRV, means serious decisions made about a company’s pipeline. Considering potential approvals, potential funding for other programs, or conducting more research are all top of mind.

Winton said: “It’s part of the rare disease model. The types of companies we are, we invest significantly more resources than non-rare disease companies because fully understanding the nature of a rare disease, in parallel with advancing a potential therapy, is critical and costly. The movement away from a robust system of advantageous policies and regulatory support has put more pressure on rare disease investment and creates challenges for companies seeking that investment.”

The PRV expiration is not going out to pasture without a fight. The Rare Disease Company Coalition, of which Winton is on the leadership team as member-at-large, clinical/pre-clinical, recently released its position statement to Congress, with support aligning from the rare disease ecosystem.

The IRA

In and of itself, the IRA didn’t set out to thwart innovation in rare diseases; however, it is an unintended consequence. Again, it doesn’t consider the fact that innovative companies make decisions about their R&D based on the amount of funding that can be realized. Simply stated, biopharma companies don’t realize income until after a drug is approved. The R&D is not a part and parcel of post-approval dollars. If income is realized post-approval, then funds can’t be reinvested into R&D innovation and potential other treatments for rare disease.

The IRA has demonstrated a chilling effect on the small molecule market—the “pill penalty” addresses therapies in pill form—where they are selected for price setting long before the end of their effective patent life. Now, this could imply a benefit for investment of large molecule therapies, of which are found predominantly in rare diseases. But that potential silver lining might be mitigated by market access concerns.

Reimbursement concerns

Jeff Myers, head, payor partnerships, at CuraFi, a drug utilization solutions provider, noted on a panel at Biotech Showcase that payers are not quite open to the injectable drug delivery landscape. He said: “Injectables or anything infused or injected or needing a healthcare professional to administer, is not economically feasible to send out into the community channel. Biotechs now run closed specialty distribution networks because they don’t want their drugs out there hither and yon.”

Jeff Myers, head, payor partnerships, CuraFi

Myers said the need to have controlled access in centers of excellence where a rebate is paid and data is collected for long-term FDA follow-up or results for a value-based contract or reimbursement is crucial. Myers stressed, “It’s a financial disincentive for physician-administered drugs, particularly the newer ones, to go through the distribution chain whether by company design or payer design or the inability of the system to get these drugs distributed in a more rational way.”

In 2024, 33 of the 50 novel drug approvals by FDA used one or more expedited programs, specifically fast track designation, breakthrough therapy designation, priority review designation, or accelerated approval. Myers said, “As [biotechs] use different mechanisms for accelerated approval, the payer says: ‘How can I pay for things where the data is suspect at best?’ It doesn’t mean it doesn’t work, but the data doesn’t actually prove that it does.” He said that payers want to know that the data will be available so the financial relationship with the manufacturer is complete.

Thomas Tan, venture capital investor and COO for Vectiopep, told Access Insider, that payer skepticism is a fair point. “Obviously, we are all consumers and even when we are in the supermarket, we want to know that we will get what we pay for.”

Thomas Tan, VC investor and chief operating officer for Vectiopep

Turning toward the smaller companies developing in this space means understanding when they will have the data to share with the payers when they receive the accelerated approval.

“It really highlights how important price and market access aspects are, in particular, with rare diseases. How early you need to begin, quite seriously, to think about price and market access arguments,” Tan said.

Winton concurred. “When I first started in this industry, especially in specialty and rare disease, people said market access was not that important [early on]. Today, it’s critical and it has to be part of day one discussions,” he said.

As for value-based contracts, Tan suggested that performance-based payment systems, or any type of novel payment system, has great support both from the sponsor side and the payer side. However, he noted that quite often the problem comes down to practicalities, such as how parties get the data.

Winton explained that with the small populations of rare diseases, insurers don’t know a lot about these diseases, or the time spent to develop a new therapy, but they do see the high cost of the medications.

He said for biotechs working with these populations it’s key to understand the patient journey, their symptoms, and understand what’s important to them around their symptoms. “From there, you can develop a compelling value proposition for payers and then support it with real world evidence,” Winton said.

To get to the true clinical benefit piece, Winton advised collecting patient reported outcomes; natural history studies or registry studies … any type of real-world evidence that can help educate the payers.

Myers cautioned the audience moving into 2025 of growing trends for insurers that are “lasering out high-cost drugs” and dumping them into the reinsurance market. He said, “This trend will accelerate, and it won’t mean anything good for beneficiaries that need rare disease drugs, unfortunately.”

Patient advocacy and science

Those “beneficiaries” are also known as rare disease patients who need access to these medications. Patient advocacy groups and organizations are against anything that harms the rare disease science and therapeutic pathway. Specifically, they have been vocal regarding the lapse of PRV, as well as affordability under the IRA, regulatory barriers, and clinical trials.

“Patient participation in all aspects of rare disease drug development is critical,” Winton said. “They help us understand the burden of disease better. They help us understand what's the greatest need for them and their families. And ultimately, they help spread education and awareness of the diseases which help recruit for clinical trials.”

At Inozyme, that means having a patient advisory group that comments on the structure and design of the clinical trials such as on endpoints or trial duration, placebo or non-placebo trials, and more. The company has a registry structured as a 50/50 partnership with the advocacy group because, as Winton said, it’s important for them to be involved, and the data shouldn’t be owned solely by a pharma company.

Winton added: “At the end of the day, it makes for a better partnership and, hopefully, a better path to approval. We also bring patients with us to the FDA because having that voice puts a perspective on those hard-to-understand diseases.”

Reciprocally, Winton hopes that regulatory understanding by the patients helps them see the hurdles that manufacturers must jump to get to approval. “They sometimes don’t understand why the whole process takes so long. And I understand because their kids are waiting for medical treatment. It’s not always clear how complicated drug development is … With all that needs to be done, across multiple teams, including the science and clinical needing to go right, it can be the equivalent of putting a man on the moon.”

Tan noted his road to the commercial side was paved with patient intentions. A researcher for over 10 years, he became frustrated with a lot of the science not being leveraged for patients. “It appeared there was a lot of miscommunications between the scientists and the industry,” Tan explained.

However, Tan noted that the investment community must weigh a lot of decisions in the rare disease space, including the ones mentioned above: reimbursement, market access, regulatory concerns, and pricing. Balancing that with the fact that large pharma won’t purchase a drug that is forecasted lower than $500 million USD in peak sales for one year does indicate a need for alternative funding schemes for rare or ultra-rare disease R&D.

But staying with the current model of innovation, Tan believes renewed interest in rare diseases is based on the rapid advancement of technology, which can lead to lower development costs. “We are beginning to see a huge upswing of promising startups applying this RNA technology,” Tan observed. “The beauty of RNA technology is that the price can come down quite a lot. And the CMC [chemistry, manufacturing and controls] processes are much faster than if you’re looking at, for instance, cell therapy or other advanced therapy medicinal products [ATMPs].”

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