Memorandum of Disapproval for the Orphan Drug Amendments of 1990

I am withholding my approval of H.R. 4638, the "Orphan Drug Amendments of 1990." This legislation would make substantive changes to the orphan drug provisions of the Federal Food, Drug, and Cosmetic Act and the Orphan Drug Act.

Enacted in 1983, the Orphan Drug Act created economic incentives for drug companies to develop drugs for rare diseases and conditions -- so-called "orphan drugs." Typically, these drugs would not be profitable to develop because of their small patient populations.

By any measure, the Orphan Drug Act has been a tremendous success. A total of 49 new drugs for rare diseases have been approved under this program, and 370 others are in the development stage. These drugs have provided lifesaving treatments for such terrible diseases as enzyme deficiency, which affects adversely the immune system of about 40 children nationwide. Until the orphan drug was developed to treat these children, they had to spend their entire lives in the protection of an isolation bubble. One of the first orphan drugs is another example of a triumph. The most difficult form of leprosy affects only 4,000 people. A drug known for over 14 years to be effective in treating this condition was not being marketed by any drug company, because it was considered unprofitable -- until the Orphan Drug Act provided the marketing incentive. In a similar manner, orphan drugs provide treatment for terrible diseases for which there is usually no alternative therapy.

I have serious concerns about the effect that H.R. 4638 would have upon the incentive of drug companies to develop orphan drugs. I believe we must not endanger the success of this program, which is due in large measure to the existence of the "market exclusivity" provision in the Orphan Drug Act that allows companies to have exclusive marketing rights to an orphan drug for 7 years. Weakening the current 7-year exclusivity provision would certainly discourage development of desperately needed new orphan drugs.

Under current law, firms may apply to develop the same orphan drug, but only the first firm to have its drug approved receives market exclusivity. The certainty of this 7-year period is the basis of the economic incentive to attract drug firms to invest in orphan drugs.

The bill would make two major changes to the market exclusivity provisions of the Orphan Drug Act. First, the bill provides for "shared exclusivity." Firms that can demonstrate that they have developed the orphan drug simultaneously would be allowed to share the market with the firm initially awarded the market exclusivity. Second, the bill requires the Food and Drug Administration to withdraw the marketing exclusivity as soon as the patient population exceeds a 200,000 patient limit. Both of these changes have the effect of weakening the marketing incentives provided by the Act. Under this bill, the length of the market exclusivity period will depend on how quickly the patient population grows and whether other firms file claims for simultaneous development.

In addition, as currently constructed, the 200,000 patient population limit would be applied to orphan drugs approved prior to the enactment of the bill as well as to those approved in the future. This retroactive rule change would send a troublesome signal to all those who might wish to develop orphan drugs that the Federal Government may change unilaterally the rules for firms that made investment decisions based on the expectation of 7 years of market exclusivity.

I am aware that this bill was passed after a number of compromises among Members of Congress. I am extremely concerned, however, that individuals with rare diseases may suffer because of changes that this bill would make in the incentives to develop new drug treatments. Accordingly, I am withholding my approval of H.R. 4638.

George Bush

The White House,

November 8, 1990.