Can big Pharma thrive with orphans strategy?

By guest blogger Daniel Hoffman:

The past week or so there has been a lot of chatter around the blogosphere and elsewhere in pharma related to efforts by Sanofi-Aventis to buy Genzyme. Genzyme is headquartered in Boston and Sanofi's CEO, Chris Viehbacher, used to be president of GlaxoSmithKline's US operations when he was based in Philadelphia. If Sanofi-Aventis does acquire Genzyme, at a likely price near $20 billion, it would represent a major commitment by a big pharma company to the peculiar arena of "orphan drugs."

A few decades ago the federal government sought to encourage research and new product development for conditions and diseases that afflict only small numbers of people. The government provided various tax and other advantages to companies that develop such products.

In the years since, a wider application of whatever-the-market-will-bear to pharma has allowed companies that successfully develop orphan drugs to charge exorbitant prices for such products. Genzyme's core brands, for example, are Cerezyme and Fabrazyme that treat, respectively, Gaucher's disease and Fabry's disease, each of which strikes only a few thousand people in the US. As few, if any, alternative medications for these diseases are available, Genzyme charges each patient in the vicinity of $200,000 per year to remain alive.

In the past, Big Pharma devoted little effort to orphan activity, preferring instead to focus on conditions affecting millions. Having recently reached an impasse at achieving substantive advances in new drugs for the masses, the major players in the industry are now closely eyeing orphan opportunities as a way to diversify within the strict realm of prescription pharmaceuticals.

Doubtless these huge corporations can bring various efficiencies and business prowess to the orphan business that Genzyme and other, smaller companies lack. Big pharma's success, however, is based upon an economy of scale. In this case that means applying an orphan drug or some derivative of one to a condition common among a much larger patient population. It's there that the marketing, production and distribution capabilities of Big Pharma can come into play. It also represents where such an orphan strategy hits a brick wall.

Imagine if some orphan drug (developed for a rare condition) or a chemical derivative of one can bring terrific results in one of the four, major tumor types of cancer. Say, for instance, breast cancer. Now in November and December of 2005, the Wall Street Journal's Geeta Anand published articles about the high price of Cerezyme. She explained that while insurance carriers pick up most of the $200,000 annual cost, they make patients fork over a 20% co-pay.

That means if a Big Pharma wants to use this approach for an effective breast cancer drug, they would have to tell a politically well mobilized constituency, "Ladies, if you can pay forty-grand a year, you live. Otherwise, you die."

If there's a faster way of mobilizing the government to break patents, I'd like to hear about it.

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