Crowdfunding an Orphan Drug

By Roman Hossain

An Orphan disease is any disorder of structure or function in a human being which occur so infrequently in the population that the cost of developing a pharmaceutical product to treat the condition would not be recovered by the expected sales of that product. Yet hundreds of thousands of humans suffer from specific signs or symptoms of an orphan disease. As a society, is there an alternative method of financing that can produce a relief?

• Language: English
• Publisher: BookBaby
• Release date: Dec 12, 2016
• ISBN: 9781483588155

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V.     CONCLUSION

I.    INTRODUCTION

Today’s pharmaceutical industry, like most industries, is driven by profits above anything else. Before investing in any new drug, pharmaceutical companies first take a long and hard look at the market for the drug in question, and then predict what the potential payoff will be nationally here in the United States and in the global marketplace as well. Even if a drug has a market and potential for huge payoff, unique to the drug industry are three distinct barriers to entry that must be overcome; a) cost of research and development, b) time-consuming process of pre-market drug approval, and limitation of patent protections after the drug is brought to market.

The United States Congress was aware of this profit-driven, obstacle ridden business model imposed upon drug companies and sought to implement relief to a segment of the industry when it passed the Orphan Drug Act of 1983. However, the results of the legislation are something of a mixed result. While the legislation was certainly successful in spurring the development of orphan drugs, a perhaps less economically healthy side effect were the enormous profits that pharmaceutical companies reaped from the use of the incentive structure. Two of the largest biotechnology companies in the world, Amgen, Inc and Genentech Inc., are each a testament to this unintended consequence as both companies not only profited from orphan drug development, but were built entirely on the development and sale of orphan drugs¹. Perhaps in recognition of these various unforeseen consequences, the Orphan Drug Act has been amended many times, yet problems still persist with respect to perceived abuses by larger pharmaceutical companies as well as its failure to provide proper incentives to smaller firms looking to develop orphan drugs.

With the passage of the Jumpstart Our Business Startups Act, can crowdfunding provide incentives to small firms who are looking to be sponsors of new orphan drugs?

This report provides an overview of the existing regulatory framework for drug development under the FDA drug approval process, the modified processes for orphan drugs, and some of the challenges and opportunities raised by those processes with regard to raising capital. Next, the report provides an overview of crowdfunding options under existing law, and new modifications that will soon be implemented under the 2012 Jumpstart Our Business Startups Act. Finally, this report provides some suggested strategies for utilizing crowdfunding as a tool for raising capital for orphan drug development.

II.    DRUG DEVELOPMENT PROCESSES UNDER THE FDA

A.    Standard drug approval process

In 1962, the Federal Drug Administration’s (FDA) drug approval process underwent a change whereby drug developers would be required to show not only the safety of a proposed drug, but its efficacy as well, in order to gain marketing approval.² This requirement increased both the complexity of the clinical trial process and the resulting expense associated with conducting such trials.

Today, drug development under the current FDA regime remains a costly and lengthy process. It begins with the submission of an Investigational New Drug (IND) application to the FDA’s Center for Drug Evaluation and Research (CDER).³ The filing of an IND allows an applicant to seek an exemption from the requirement under federal law that a drug be approved for marketing prior to transportation or distribution across state lines in order to begin clinical trials.⁴ Assuming the FDA does not issue any clinical holds within thirty (30) days of the filing of the IND application, the applicant can begin clinical trials to test