Table of contents 1.Introduction 2.Background to the intervention 3.Implementation / state of Play 4.Method 5.Analysis and answers to the evaluation questions 5.1 Effectiveness 5.2 Efficiency 5.3 Relevance 5.4 Coherence 5.5 EU added value 6.Conclusions ANNEX 1: PROCEDURAL INFORMATION 109 ANNEX 2: STAKEHOLDER CONSULTATION 112 ANNEX 3: METHODS AND ANALYTICAL MODELS 127 ANNEX 4: COSTS AND BENEFITS 225 ANNEX 5: AGENCY’S COMMITTEES 243 ANNEX 6: IMPLEMENTATION OF THE VARIOUS INCENTIVES 246

ANNEX 7: INTERNATIONAL CONTEXT 254 Glossary Term or acronym Meaning or definition Accessibility A medicine becomes accessible to patients once it has been authorised, is being marketed, and can be reimbursed in a Member State. Affordability Relates to payments to be made by patients (out of pocket on healthcare or through co-payments) which can be described as affordability at micro level and to the sustainability of public funding of the healthcare sector raised through social security contributions or taxes (affordability at macro level). ATMPs Advanced therapy medicinal products Availability A medicine becomes available once it has been authorised in a Member State or centrally in the EU. Biological medicine A medicine whose active substance is made by or derived from a living organism. Biological medicines contain active substances from a biological source, such as living cells or organisms (human, animals and microorganisms such as bacteria or yeast). Biomarker Biological molecule found in blood, other body fluids, or tissues that can be used to follow body processes and diseases in humans and animals. Biosimilar A biosimilar is a biological medicine that is very similar to another biological medicine which has already been approved. Biosimilars are approved if they meet the same standards of pharmaceutical quality, safety and efficacy that apply to all biological medicines. Cash benefits Cash benefits are monetary savings associated with reduced hospitalisation and outpatient encounters as a result of reduced avoidable adverse drug reactions. CAT The Committee for Advanced Therapies is the European Medicines Agency's committee responsible for assessing quality, safety and efficacy of advanced therapy medicinal products (ATMPs) and following scientific developments in the field. CBA Cost-benefit assessment CHMP The Committee for Medicinal Products for Human Use is the Agency's committee responsible for human medicines. Class waiver Class waivers provide an exemption from the obligation to submit a paediatric investigation plan for a class of medicines, such as medicines for diseases that only affect adults. CMA Conditional marketing authorisation is the approval to market a medicine that addresses patients’ unmet medical needs on the basis of data that is less comprehensive than that normally required. The available data must indicate that the medicine’s benefits outweigh its risks and the applicant should be in a position to provide comprehensive clinical data in the future. COMP The Committee for Orphan Medicinal Products is the Agency’s committee responsible for recommending orphan designation of medicines for rare diseases. Data protection Period of protection during which pre-clinical and clinical data and data from clinical trials handed in to the authorities by one company cannot be referenced by another company in their regulatory filings. EMA The European Medicines Agency (‘the Agency’) is an EU agency founded in 1995 which is responsible for the scientific evaluation, supervision and safety monitoring of medicines, both human and veterinary, across Europe. ( https://www.ema.europa.eu/en ). ERN European reference networks (ERNs) are virtual networks involving healthcare providers across Europe. Directive 2011/24/EU on patients’ rights in cross-border healthcare provides for the setting up of ERNs, 24 of which were established in 2017. The purpose of these networks is to facilitate discussion of complex or rare diseases and conditions that require highly specialised treatment, and concentrated knowledge and resources. Extension of marketing authorisation A change to a marketing authorisation which fundamentally alters its terms. Such changes may have to do with modifications of the active substance, the strength, the pharmaceutical form and/or the route of administration. Generic medicine A generic medicine contains the same active substance(s) as the reference medicine, and it is used at the same dose(s) to treat the same disease(s). The generic can only be marketed after expiry of the data and market protection. HTA A health technology assessment (HTA) is the systematic evaluation of the added value of a new health technology compared to existing ones. It is a multidisciplinary process to evaluate the social, economic, organisational and ethical issues associated with a health intervention or health technology. The main purpose of conducting an assessment is to inform policy decision-making. ICER An incremental cost-effectiveness ratio (ICER) is a summary measure representing the economic value of an intervention, compared with an alternative (the comparator). An ICER is calculated by dividing the difference in total costs (incremental cost) by the difference in the chosen measure of health outcome or effect (incremental effect) to provide a ratio of ‘extra cost per extra unit of health effect’ for the more expensive therapy versus the alternative. Impact assessment An impact assessment must identify and describe the problem to be tackled, establish objectives, formulate policy options, assess the impacts of these options and describe how the expected results will be monitored. The Commission's impact assessment system follows an integrated approach that assesses the environmental, social and economic impacts of a range of policy options, thereby ensuring that sustainability is an integral component of Union policymaking. Magistral/officinal formula A medicinal product prepared in a pharmacy in accordance with a medical prescription or according to the prescriptions of pharmacopoeia and intended to be supplied directly to patients served by the pharmacy. Medical condition Any deviation(s) from the normal structure or function of the body, as manifested by a characteristic set of signs and symptoms (typically a recognised distinct disease or a syndrome). Marketing authorisation The approval to market a medicine in one, several or all European Union Member States. Marketing authorisation application An application made to a European regulatory authority for approval to market a medicine within the European Union. Marketing authorisation grant A decision granting the marketing authorisation issued by the relevant authority. Market protection Period of protection during which generics cannot be placed on the market. Neonatology A subspeciality of paediatrics consisting of medical care for newborn infants, especially the ill and premature. Non-cash benefits Non-cash or intangible benefits are benefits expected from improved actual treatment, resulting in reduced mortality, improved quality of life and time saved by informal carers. Oncology A branch of medicine that specialises in the prevention, diagnosis and treatment of cancer. Orphan condition A medical condition, as defined above, that meets the criteria defined in Article 3 of Regulation (EC) No 141/2000; a life-threatening or chronically debilitating condition affecting no more than five in 10 thousand persons in the EU. Orphan designation A status assigned to a medicine intended for use against a rare condition. The medicine must fulfil certain criteria for designation so that it can benefit from incentives such as market exclusivity. Orphan indication The proposed therapeutic indication for the purpose of orphan designation. This specifies if the medicinal product subject to the designation application is intended for diagnosis, prevention or treatment of the orphan condition. Orphan-likes Orphan-like medicinal products which entered the EU market from the United States before 2000, when there was no special legislation in place. Payer An entity responsible for financing or reimbursing healthcare. PDCO The Paediatric Committee (PDCO) is the Agency's scientific committee responsible for activities associated with medicines for children. It supports the development of such medicines in the European Union by providing scientific expertise and defining paediatric need. PIP A paediatric investigation plan (PIP) is a development plan designed to ensure that the data required to support the authorisation of a paediatric medicine are obtained through studies of its effect on children. PUMA The paediatric-use marketing authorisation (PUMA) is a dedicated marketing authorisation covering the indication(s) and appropriate formulation(s) for medicines developed exclusively for use on the paediatric population. QALYs Quality-adjusted life years (QALYs) refers to a measure of the state of health of a person or group in which the benefits, in terms of length of life, are adjusted to reflect the quality of life. One QALY is equal to one year of life in perfect health. QALYs are calculated by estimating the years of life remaining for a patient following a particular treatment or intervention and weighting each year with a quality-of-life score (on a 0 to 1 scale). It is often measured in terms of the person’s ability to carry out the activities of daily life and freedom from pain and mental disturbance. Rare disease Rare diseases are diseases with a particularly low prevalence; the European Union considers diseases to be rare when they affect no more than 5 per 10,000 people in the European Union. Repurposed medicines Existing medicines investigated for new therapeutic indications. RSB The Regulatory Scrutiny Board is an independent body of the Commission that offers advice to the College of Commissioners. It provides a central quality control and support function for the Commission’s impact assessment and evaluation work. The Board examines and issues opinions and recommendations on all the Commission's draft impact assessments and its major evaluations and fitness checks of existing legislation. SA Scientific advice: the provision of advice by the Agency on the appropriate tests and studies required in developing a medicine, or on the quality of a medicine. SmPC A summary of product characteristics (SmPC) describes the properties and the officially approved conditions of use of a medicine. SMEs Micro, small and medium-sized enterprises SPC The supplementary protection certificate (SPC) is an intellectual property right that serves as an extension to a patent right. The patent right extension applies to specific pharmaceutical and plant protection products that have been authorised by regulatory authorities. Sponsor Legal entity responsible for submitting an application for orphan designation to the EU. SWD Staff working documents (SWDs) are required to present the results of all impact assessments and evaluations/fitness checks. Therapeutic indication The proposed indication for the marketing authorisation. A medical condition that a medicine is used for. This can include the treatment, prevention and diagnosis of a disease. The therapeutic indication granted at the time of marketing authorisation will be the result of the assessment of quality, safety and efficacy data submitted with the marketing application. Well-established use When an active ingredient of a medicine has been used for more than 10 years and its efficacy and safety have been well established. In such cases, application for marketing authorisation may be based on results from the scientific literature. 1.Introduction The therapeutic landscape for patients in the EU has undergone major changes. Still, considerable unmet needs remain. About 30 million European Union citizens are affected by one of the over 6000 rare diseases currently recognised. The European Union considers diseases to be rare when they affect no more than 5 per 10,000 people in the EU. 80% of these diseases are of genetic origin, and they are often chronic and life-threatening; almost 90% can begin in childhood. For these patients, and for more than 100 million European children, treatment was either limited or non-existent before the introduction of EU legislation on rare diseases and on medicines for children (in 2000 and 2006 respectively). That situation represented a huge unmet medical need and a significant public health challenge. There were often no medicines at all available for doctors treating patients with rare diseases. Children were regularly prescribed medicines indicated for adults, which had not been tested or adapted specifically for use in young patients. This ‘off-label’ use of adult medicines comes with the risk of inefficacy and/or adverse reactions in children, who cannot simply be regarded as ‘small adults’ from the developmental and physiological points of view. When these policy challenges were identified, the EU already had a well-established legislative framework for medicinal products that had developed considerably since its inception in 1965. It covered the whole life-cycle of medicines, from clinical research to post-marketing surveillance (pharmacovigilance). Its main aim was, and still is, to ensure that all medicines in the Union are authorised by demonstrating their safety, quality and efficacy before they reach patients. However, this framework was general in nature. It contained no incentives for development in particular areas of medical need. Decisions on product development were generally left to the market and were subject to commercial decisions driven by considerations of return on investment. Public research funding was often the only means available to support neglected fields. Both the areas of rare diseases and medicines for children were economically unattractive. This was because the market size was generally small and the research and development of products, including the conduct of clinical trials, was more complex. From the 1990s onwards, this led to a policy discussion about how best to correct this market failure and ensure the development of more medicines to treat patients suffering from rare diseases and/or appropriate for use in children. This discussion was influenced by the apparent success of legislative intervention in the US, where orphan and paediatric legislation was introduced in 1983 and 1997 respectively, and was based on the same rationale of imbalance in risk and reward. In 2000, Regulation (EC) No 141/2000 (hereinafter ‘the Orphan Regulation’) and in 2006 Regulation (EC) No 1901/2006 (hereinafter ‘the Paediatric Regulation’) were adopted by the European Commission. Although the two Regulations are designed to address the same problem, the tools they use differ substantially. The purpose of the Orphan Regulation is to reward research and development through incentives and, ultimately, to place medicines for rare diseases on the market, where there was previously no commercial interest. The Paediatric Regulation, however, works mainly with obligations. It compels companies already developing products for adults to screen them for possible use in children, and only provides rewards once this obligation has been fulfilled, to compensate for the additional costs incurred. Purpose and scope of the evaluation The two Regulations are subject to the ex-post evaluation presented in this document. The purpose of the evaluation is twofold. Firstly, it assesses the strengths and weaknesses of the two legal instruments, both separately and in combination with each other. It focuses on how they have catered for products for unmet medical needs, taking into account how pharmaceuticals are developed, science advances, and business models change. Secondly, it provides insights into how the various incentives and rewards for which the Regulations provide have been used, along with an analysis of the related financial consequences, both in general and by stakeholder group. There are several reasons why the two Regulations are evaluated together. Firstly, they are both designed to tackle a market failure that results in a lack of medicines for the two groups of patients concerned. Secondly, they often address the same therapeutic areas, as the great majority of orphan diseases affect children and many paediatric diseases can be classified as rare. Thirdly, there are some conceptual overlaps, for instance as regards incentives provided to companies where market exclusivity for orphan medicines is extended through the Paediatric Regulation. For these reasons, the Commission Report on the Paediatric Regulation published in 2017 concluded that the two Regulations would need to be assessed together before any amendments could be made. However, undertaking a joint evaluation has its limitations. For example, as noted above, the two Regulations employ different tools to try to achieve their goals,, making it difficult to analyse and compare the results together. The evaluation also relies on two different studies and on different consultation activities. The evaluation covers 2000-2017 (Orphan Regulation) and 2007-2017 (Paediatric Regulation) and is based on sound evidence about how the two instruments operate from both a public health and a socioeconomic perspective. It covers five evaluation criteria: the effectiveness, efficiency, relevance, coherence and EU added value of the Regulations. The evaluation describes the impact of external factors on the Regulations’ expected outputs. Those factors include scientific and technological advances, developments in other jurisdictions, the functioning of national health systems, the commercial strategies employed by companies, and Member States’ pricing and reimbursement decisions. Such factors are mostly heterogeneous by their very nature. The EU and its legislation have limited influence on them, and they were not taken fully into account when the legislation was designed. Nonetheless, they affect its performance and relevance. The legislative intervention and its outputs therefore need to be viewed and analysed in the context of these influencing factors. The evaluation has been carried out at a time when issues of access to medicines, their availability and their affordability are very high on the EU political agenda. A roadmap for a new pharmaceutical strategy was published in June 2020. The purpose of this strategy is to improve and expedite patients’ access to safe and affordable medicines and to support innovation in the EU pharmaceutical industry. The orphan area is often seen as a micro-environment exemplifying many of the aspects tackled in the pharmaceutical strategy. Orphan medicines make up a growing share of new authorised products and account for an increasing proportion of Member States’ spending on pharmaceuticals. In 2018, almost one third of centrally-authorised medicines (excluding generics and biosimilars) were orphan medicines.

At the same time, access to these products varies widely between Member States. In 2016, the Council called on the Commission to examine the impact of pharmaceutical incentives on the availability and accessibility of orphan medicinal products. The European Parliament also debated the issue of access to medicines , including medicines for children. In its 2016 Resolution , Parliament recognised that the Paediatric Regulation has been beneficial to children overall, but less effective in certain therapeutic areas (e.g. paediatric oncology and neonatology). It therefore called on the Commission to consider revising the Regulation. The results of this evaluation will guide reflection on any future changes to the legislative framework. 2.Background to the intervention Description of the intervention and its objectives The last half-century has witnessed significant progress in the field of medicines, benefiting patients and society in general. However, substantial gaps remain in the therapies available. This is especially true both for patients suffering from a rare disease, and for children in general. Although rare diseases affect a limited number of people per disease, collectively they affect one person in every 17 people within Europe. Obtaining the correct diagnosis is a long and difficult journey in itself. It takes an average of five years to diagnose a child with a rare disease. However, even if a disease has been identified, very few medicines are available, and for many rare diseases there is no pharmaceutical remedy at all. At the time of the EU’s intervention via the Orphan Regulation, companies generally had limited interest in developing medicines for rare diseases. They considered it unlikely that the cost of development would be recovered by selling the product to small numbers of patients at the ‘normal’ prices envisaged. Similar problems existed with medicines for children. Many products used for children were prescribed and administered on the basis of the doctor’s own experience rather than on the results of clinical research. Moreover, medicines were not available in a pharmaceutical form suitable for children. Paediatricians had to use medicines authorised for adults by adapting the dosage, for example by simply crushing adult-size tablets. With some notable exemptions, such as childhood vaccines – one of the success stories of modern medicines – companies were often uninterested in investing in paediatric medicines. This often meant conducting research and development for a small number of patients, given that children are not a uniform sub-group of patients; different growth and maturation rates require multi-national trials. Furthermore, as recently as the 1980s, paediatric clinical trials were stigmatised, it being thought that children should be protected from participating in medical research. At the end of the 1990s, the pharmaceutical market was dominated by big companies, which were often interested in developing ‘blockbusters’ that could be sold in large volumes to tackle common diseases. By contrast, the costs of research and development meant that industry was often disinclined to invest in developing remedies for diseases with small numbers of patients. The ‘standard’ incentives provided by the general legislative framework for pharmaceuticals (8 years of data protection, 10 years of market protection and 20 years of patent protection) were failing in these areas. They were not considered enticing enough. In other words, they did not ensure a large enough return on investment to make it worthwhile for companies to develop orphan medicines or to research medicines suitable for paediatric use. It would be wrong to assume that there were no medicines in these areas before the relevant legislation was adopted, as some such products did reach the European market. However, without a specific framework, there was no certainty that such medicines would be developed for and placed on the EU market. The number of medicines available was considered insufficient, both in absolute terms and in comparison with other regions. Member States tried to boost the development and commercialisation of orphan and paediatric medicines through various national measures, which were not coordinated, and by funding programmes of research into rare diseases. However, these activities had almost no success and raised concerns that such scattered attempts could lead to distortions of the EU internal market. Other regions were more successful. Starting in the 1980s, the US and Japan introduced specific legislative frameworks to foster the development of medicines to treat rare diseases or for use in children. The explanatory memorandum of the orphan legislative proposal prominently refers to the success of US legislation, where, over 13 years (1983-1996), 837 products were awarded the status of orphan drug, 323 were aided by grant programmes, and 152 obtained marketing approval. Unsurprisingly, therefore, EU orphan legislation shares parts of its design with the US model. The prospect of obtaining market exclusivity for a given period, during which companies would recover their investment, seemed at the time to be the best way of copying the success of the US system. It was also recognised that market exclusivity would not be the only major incentive. It would be up to the Community and the Member States, within their respective spheres of competence, to provide other incentives for developing medicines for rare diseases. It was thought that the Community would support research, while Member States would provide tax incentives. As regards remedies for common diseases, it is quite usual for products developed in another region to find their way to Europe eventually. However, the increase in orphan and paediatric products in the US did not automatically lead to a similar increase in the EU. Only some such products were placed on the EU market at the same time. For orphan medicinal products, this might have been due to the administrative and logistic costs (authorisation fees, costs of legal representatives and staff responsible for conducting batch releases, maintenance costs) associated with a marketing authorisation for low-volume products. Another possible reason was the lack of specific measures to protect such products from generic competitors in the EU. These factors meant that the business case for placing such products on the market was not particularly strong. In a survey conducted for this evaluation, respondents referred to a combination of scientific, financial and regulatory hurdles as the biggest entry barriers facing developers. As regards medicines for children, even where companies had collected data on their use in children to obtain a marketing authorisation in the US, they had nothing specific to gain by providing such data to the EU on their own initiative. In many cases, the increase in sales volume of adult medicines achieved by extending use to children was not very sizeable, and it had to be balanced against the additional costs of maintaining more complex marketing authorisations serving different populations. The objectives and main design features of the two regulations Orphan Regulation The specific objectives of the Orphan Regulation are to: ·Ensure research and development and the placing on the market of designated orphan medicinal products (availability) (specific objectives 1 and 2);

·Ensure that patients suffering from rare conditions have the same quality of treatment as any other patient (accessibility) (specific objective 3). Products fall under the scope of the Orphan Regulation if they either fulfil the ‘prevalence criterion’ of no more than 5 in 10,000 people affected by the disease in the EEA or the ‘insufficient return upon investment criterion’, meaning that, without incentives, it is unlikely that the marketing of the medicinal product in the EU would generate sufficient return to justify the necessary investment. Furthermore, the condition in question has to be life-threatening or chronically debilitating. No satisfactory treatment should exist in the EU, or, if it exists, the product in question should provide a significant benefit to patients affected by that condition in comparison with the existing treatment. The Regulation establishes a two-step EU procedure: ·First, a company may request that a product be granted an ‘orphan designation’ by the European Commission, based on a positive opinion adopted by the European Medicines Agency (hereinafter ‘the Agency’) at any stage of development. An early orphan designation may allow developers (researchers, SMEs or big pharma companies) to secure R&D financing, either through the EU research framework or through a national funding mechanism, and may help attract investors more easily. In addition, an orphan designation may enable a product to receive dedicated support from the Agency, such as scientific advice (known as protocol assistance for orphan medicines), before the Agency grants marketing authorisation. ·Once the development is completed, the product can, as a second step, benefit from an EU-wide marketing authorisation. If, at the time of granting the marketing authorisation, continued compliance with the designation criteria is confirmed, the product will enjoy a monopoly period of 10 years (‘market exclusivity’) , which can be extended to 12 years if a paediatric research and development programme is completed (see Figure X). If the designation is not confirmed, the company will receive a standard marketing authorisation. (It is noteworthy that US legislation does not include a check on continued compliance with the designation criteria at the time of granting a marketing authorisation.) Once the Agency has granted market exclusivity at the request of a Member State, the monopoly period may be shortened to six years if it is established after five years that the product no longer meets the orphan designation criteria. It was expected that the provisions and the various incentives created by the legislation would help boost research and development and increase the number of orphan medicines available to patients in the EU. It was anticipated that between 5 and 12 applications for orphan designation and for marketing authorisation would be submitted annually between 2000 and 2002. In the long term, the Regulation would improve the survival rates, life expectancy, therapeutic possibilities and/or the quality of life of patients with rare diseases. Given the generally long development cycles of pharmaceuticals (up to 10-15 years) the legislation was not expected to have an immediate impact. Rather, the intention was to change the therapeutic landscape gradually over time. Figure 1: Graphic showing the various incentives for developing pharmaceuticals Paediatric Regulation The Paediatric Regulation, designed to tackle the lack of appropriate medicines for children in Europe, has three specific objectives: ·Enable high-quality clinical research in children (specific objective 1); ·Ensure, over time, that most medicines used by children are specifically authorised for such use with age-appropriate forms and formulations and are made available (specific objectives 2 and 3); ·Increase the availability of high-quality information about medicines for use in children (specific objective 4). To achieve these objectives, the Regulation has established a system of obligations compensated by rewards. Companies are obliged to screen every new product they develop for its potential use in children, thereby gradually increasing the number of products with paediatric indications and paediatric information. The possibility of obtaining certain rewards compensates for the burden thus created. In practice, at an early stage in the development of any new medicinal product, companies have to agree with the Agency on a paediatric research and development programme (a ‘paediatric investigation plan’ (PIP)) , or to obtain, under certain conditions, a derogation (waiver) from this obligation. As a general rule, paediatric clinical studies must be conducted in parallel with adult studies, unless it has been agreed that some or all of the paediatric studies can be deferred. Such ‘deferrals’ are granted if conducting the paediatric studies concurrently would delay the marketing authorisation for adults. Compliance with the obligation is checked when the company files a marketing authorisation application for the (adult) product. In the event of non-compliance, the application is rejected for use on either children or adults. If the PIP is completed and all the agreed studies have been conducted, the company may benefit from one of two mutually exclusive rewards:

·A six-month extension of the supplementary protection certificate (SPC, an intellectual property right that serves as an extension to a patent) (see Figure 1). The SPC extension covers the entire product, not only the paediatric part. Extension of the SPC is not automatic; an application must be submitted to the national patent office and filed two years before the SPC expires, or ·A two-year extension of the orphan market exclusivity for orphan medicines. The reward is granted even if the studies show that the product is unsuitable for paediatric use. Independently, a specific paediatric-use marketing authorisation (PUMA) has been put in place to drive the development of paediatric indications for existing authorised products (no longer covered by a patent or an SPC), by offering the same protection. This is an 8-year period of data protection in parallel with the 10-year market protection period, as applies to any newly authorised medicinal product. These protections are intended to make investment into existing molecules viable, as new paediatric indications would be protected from immediate competition with generic medicines already present on the market. The PUMA scheme is complemented by EU research funding provided for studies of possible paediatric use of old medicinal products no longer covered by patents or SPCs. Finally, to make use of existing data to update product information on existing authorised medicines, companies are required to provide the Agency or the national competent authorities with any data they have from completed paediatric studies. Both Regulations established dedicated committees within the Agency to deal with scientific assessment: the Orphan Committee (COMP) and the Paediatric Committee (PDCO). It was expected that the obligation to agree on and conduct a PIP for any new product developed would boost clinical research in children. The rewards would compensate for the costs incurred in meeting that obligation. This would result in an increase in the number of medicines with paediatric indications. Moreover, gathering information on clinical studies involving children that have already been conducted or are ongoing, together with greater transparency of paediatric clinical trials, would give doctors a wider view of the treatments available. The expected impacts were to have scientifically validated therapeutic options and to improve child patients’ quality of life. Given the generally long development cycles for pharmaceuticals (10-15 years), the legislation was not expected to have an immediate impact. Rather, it was expected that it would change the therapeutic landscape gradually over time. Other important factors influencing the field of application of the legislation Any legislative intervention in a sector such as pharmaceuticals navigates in a complex environment, where external factors influence the performance of legislation. Figure 1 outlines the basic steps in the process of medicine development, showing the long development time from the research discovery to the clinical development of a medicine. Medicine development is influenced by advances in science. Even the best designed intervention may not succeed if it is not supported by sufficient progress in basic research and solid scientific leads for product development. The complexity of clinical trials for paediatric and rare diseases also plays a significant role for the development of these products. Legislation may act as enabler, but cannot substitute the inherent research challenges that affect product development. Considerable support for orphan and paediatric research, both at EU and national levels, including ‘national rare disease plans’, complement the Regulations. Such support helps pharmaceutical companies to secure R&D financing once the product is designated as orphan. Some Member States have also introduced reduced fees for registration and academic clinical trials, tax reductions or waivers, public funding for research, and free scientific advice. However, neither the Regulations nor research programmes provide for any specific monitoring arrangements to gather data on the relationship between research funding and developments in new orphan or paediatric medicines. This makes it difficult to estimate their impact. Figure 2: Basic steps in the medicine development process (adapted from scientific literature , no specific references to the development timelines of orphans or paediatrics) The availability, accessibility and affordability of medicines for patients across the EU, including orphan and paediatric medicines, are strongly influenced by factors that go beyond the Regulations and/or the remit of the EU.

Pharmaceutical companies’ strategic decisions on whether (and where) to launch innovative medicines are often influenced by national pricing and reimbursement considerations falling outside the remit of the pharmaceutical legislation, or by the areas where they focus developments. For example, external reference pricing, used by many countries to determine the price paid for a medicinal product, is one of the reasons why companies often decide to launch their products first in the wealthiest Member States. The size of the population, as well as the organisation of health systems and national administrative procedures, are also reported as factors that influence such decisions. Another important factor is how medical professionals decide what medicine to prescribe. For example, when a paediatric product is launched, it can take a while before doctors switch to prescribing it in preference to a more familiar ‘off-label’ product for adult patients. These external factors are not new; they existed before the Regulations were adopted. However, they have increased in importance and influence over time, particularly where orphan medicines are concerned. Chapter 5 analyses the impact of external factors in more detail.



Figure 3: Intervention logic underpinning legislation on orphans and paediatrics Baseline and points of comparison The baseline used for this evaluation is the situation in the EU prior to the adoption of the two Regulations. No impact assessment was carried out for the Orphan Regulation. The baseline has therefore been reconstructed as far as possible on the basis of available data. To this end, desk research in the context of the orphan study identified the number of products which, by 2000, had been authorised by the Commission for the treatment of a rare disease. 15 medicinal products were authorised at EU level for the treatment of rare diseases of the immune, blood or genito-urinary systems. These products were brought to the market by 12 individual pharmaceutical companies. In addition, 70 medicinal products authorised as orphans in the US were available in at least one Member State. The majority of these 70 products were substances acting on the immune system. These products are referred to throughout this document as ‘orphan-likes’, indicating that they were not formally labelled as orphan products, but were likely to serve the rare disease population in the EU. It took up to three years after the US marketing authorisation for the medicines to become available in the first Member State. After three years, they had reached three to four Member States. However, we should stress that even without any legislative intervention between 2000 and 2017, some additional orphan medicines would have been placed on the market in the EU anyway. Accordingly, not all the products authorised during this period can necessarily be attributed to the legislation. This issue will be dealt with in further detail in Chapter 5.1. The baseline for paediatric medicines is derived from the impact assessment conducted before the adoption of the Paediatrics Regulation, and it is complemented by data from a report provided by the Agency in 2012. The impact assessment analysed several options: (1) no action; (2) self-regulation by industry; (3) Member State initiatives only; (4) introducing obligations for companies decoupled from rewards and incentives without obligations; (5) data protection or (6) market exclusivity for new paediatric products; (7) market exclusivity for development of paediatric developments from ‘old’ products. It concluded that if no action were taken, the existing situation (absence of medicines tested and authorised for children) would persist. No positive changes had been observed in the EU, even after the introduction of paediatric legislation in the US. And without obligations, the pharmaceutical industry would continue to avoid developing paediatric products. Depending on the therapeutic area concerned, between 50% and 90% (for example, cancer treatments and HIV treatments) of authorised medicines in the EU were used off-label in children, i.e. without their effects on children having been studied. In addition, information on the outcome of studies conducted on children was not systematically available. It was thus often unclear for doctors treating children whether paediatric use of a particular product was authorised, whether there were insufficient data, or whether existing data showed that the medicine had negative effects when used in children. Looking, for example, at the 317 centrally authorised medicines available at the time, around 78% were relevant to children, but only 34% were authorised with a paediatric indication. The selected option in the impact assessment combined some of the individual options mentioned above in a manner that would lead to a legislative framework very similar to the one already in place in the US. It was expected that a growing proportion of the available medicines would be tested on children and that the supply of products licensed for use on children would increase. The ‘best case scenario’ was described as follows: ·After 10-15 years, all patent-protected medicines (unless specifically exempted) would be studied in children, but it could take up to 20 years before the majority of tested products would be authorised for use in children. ·The PUMA system, together with accompanying measures such as EU research funding, would help to foster paediatric research on off-patent products. However, it was recognised that as the associated incentives were weak, the scheme would be unlikely to result in the authorisation of a sizeable number of new products. ·The increased availability of paediatric medicines would change over time with prescription practices. While this would gradually reduce off-label use in children, such use was not expected to disappear completely.

·European R&D would be boosted directly or indirectly, improving the competitiveness of EU companies in comparison with their US competitors. However, it was noted that the way the legislation was framed, and in particular the incentives selected, might push paediatric research towards the most profitable areas, rather than towards providing for patients’ unmet needs. ·The testing of medicines in children would cut costs for national health systems, as adverse effects would be reduced, for instance, as would hospitalisations associated with the off-label use of medicines not tested in children. Though this cost reduction could not be quantified, it was thought to be sufficient to offset the costs that health systems would incur through the delay in the marketing of generics arising from the reward of SPC extension. To assess how the legislation has been performing, it may also be helpful to consider the baseline in terms of research funding. Before the introduction of the two Regulations, not only was the pharmaceutical industry not interested, but the research community also showed limited interest. This meant that for the vast majority of rare diseases, understanding of the natural history of the condition and the underlying causes of a disease was limited or even non-existent. Research funding only started to pick up in the years preceding the adoption of the legislation, but still in relatively small amounts and without coordination. The fourth EU Framework Programme for Research and Technological Development (1994-1998), for example, sought to improve knowledge of rare diseases through relatively low funding (€7.5 million). At national level, some Member States had adopted specific measures to increase their knowledge of rare diseases and improve detection, diagnosis, prevention or treatment. France, Italy and Spain started to introduce specific national policies to boost the development of orphan medicines. This will be described in more detail in Chapter 5.4. As regards research on children, the major problem in Europe was the limited number of clinical trials involving children. Some paediatric therapeutic areas, such as neonatology, were particularly neglected. Conducting clinical trials on small populations, such as children affected by a specific disease, would have required multinational trials to be started in most cases, which was complex and costly. One should also bear in mind that it was common as recently as the 1980s to assume that children should be protected from clinical trials. Only later was it recognised that clinical research in children was necessary, but that it should be conducted within a framework which ensured that ethical principles were respected and minors protected from abuse. These aspects were subsequently reflected in the EU Directive on clinical trials, adopted in 2001. Other points of comparison In addition to comparing the situations in the EU before and after the entry into force of the Orphan and Paediatric Regulations, this evaluation refers to other regulatory systems (mainly the US for orphan and paediatric medicines and Japan for orphan medicines). A benchmark with the US will complement Chapter 5.



3.Implementation / state of Play Description of the current situation The development of a new medicine is generally a long process, taking 10 to 15 years. The full effects of legislative intervention are therefore not immediately visible, emerging only gradually. 3.1. Orphan Regulation The Orphan Regulation has been implemented in full, including the setting up of the Committee for Orphan Medicinal Products (COMP). The provisions of the main act were complemented by additional provisions needed to implement the criteria for designation of a medicinal product as an orphan medicine (definitions of ‘similar medicinal product’ and ‘clinical superiority’). Several guidance documents were adopted, some of which are regularly updated: ·Guidance on Article 3 (criteria for designation), Article 5 (procedure for designation and removal) and Article 7 (Union marketing authorisation - updated in 2016); ·Guidance on Article 8(1) and (3) on the assessment of similarity of medicinal products versus authorised orphan medicines benefiting from market exclusivity; ·Guidance on Article 8(2) for reviewing the period of market exclusivity. In addition, to reduce the barriers to innovation in medicinal products facing SMEs, Commission Regulation (EC) No 2049/2005 determined in 2005 that the Agency should provide scientific advice on designated orphan medicines free of charge to SMEs. Under the Paediatric Regulation, it became possible for orphan paediatric medicines to be granted two additional years of market exclusivity. There have been several court cases concerning the correct interpretation of Articles 3, 5, 7 and 8 of the Orphan Regulation. A Commission staff working document, published in 2006, stated that the EU’s orphan legislation had exceeded initial expectations. In the first five years, 22 orphan medicines were authorised for the treatment of 20 different life-threatening or chronically debilitating rare diseases. It was possible that over one million patients suffering from these orphan diseases in the EU had benefited from the availability of these new treatments. By 2017, 142 unique orphan medicines had received an EU marketing authorisation for 107 orphan indications. In a best case scenario, they were estimated to address the needs of 6.3 million EU patients (out of 35 million people suffering from rare diseases in the EU). Of these medicines, 13 were authorised for more than one orphan disease, and a separate period of market exclusivity was granted.

Figure 4: Therapeutic areas covered by authorised orphan medicinal products in 2017 Source: European Commission Among both designations and authorised products, the largest share (Figure 4) is for anti-cancer treatments, followed by treatments for conditions of the alimentary tract and metabolic disorders. Overall, designations have covered a broad spectrum of therapeutic indications. For the treatment of acute myeloid leukaemia alone there are 74 designations. Other diseases that have received attention are: glioma (56 designations), cystic fibrosis (51 designations), pancreatic cancer (47 designations), ovarian cancer (40 designations), multiple myeloma (32 designations) and Duchenne muscular dystrophy (31 designations). The US Food and Drug Administration approved 351 orphan drugs for marketing between 2008 and 2017. 53% of these approvals were in one of two therapeutic areas that were also common for granted designations: oncology (42%) and haematology (11%). The distribution by prevalence is very similar among designated and authorised products (Figure 5). Around a third of products are for treatments with a prevalence of less than 0.5 in 10,000. These are mainly products for the treatment of diseases affecting the musculoskeletal system. Figure 5: Share of designations and authorised orphan medicines by prevalence Source: The Agency data, 2018. Whereas in the past the vast majority of medicines were small chemical molecules, nowadays many new treatments are based on more complex biological products, such as proteins, antibodies or other large molecules, produced by means of biotechnology. They account for around one fifth of all 107 orphan designations. Moreover, the share of advanced therapy medicinal products (ATMP) had shot up to around 18-20% of all new designations by 2016 (with a small decline of 14% in 2017). Another general market development worth noting is the trend for larger pharmaceutical companies to purchase promising medicines at a late stage of R&D from smaller companies, instead of doing the research (or the basic part of it) themselves. 3.2. Paediatric Regulation All but one of the provisions established by the Paediatric Regulation have been implemented, including the setting up of the Paediatric Committee (PDCO). The provisions of the main act were complemented by the specific guidance document: ·Guidance on format and content (updated in 2014) The provision mandating the creation of a distinctive symbol to be placed on products authorised specifically for paediatric indications was not implemented, as it was found that it could have been confusing for parents. More clinical trials for children The number of agreed paediatric investigation plans (PIPs) exceeded 1000 in 2018, of which 450 were completed by June 2018. The agreed PIPs covered a wide range of therapeutic areas, with infectious diseases (12%), oncology (10%) and endocrinology/metabolic diseases (9%) at the forefront. However, no particular area was dominant (Table 1). There has been a clear upward trend in the number of completed PIPs, with over 60% finalised in the last three years. Currently, the conditions with most completed PIPs are immunology/rheumatology (14%), infectious diseases (14%), cardiovascular diseases and vaccines (10% each), with oncology and endocrinology/metabolic diseases accounting for only 7% of the completed PIPs. In parallel, until 2018, EMA waived the obligation to conduct paediatric studies for over 600 products.

Table 1. Agreed, completed PIPs, authorised paediatric medicines by area Therapeutic area Number of agreed PIPs Number of completed PIPs Completed/ agreed PIPs Number of authorisations of paediatric indications Anaesthesiology 3 0 0% 0 Cardiovascular diseases 48 9 19% 6 Dermatology 33 5 15% 5 Diagnostics 13 2 15.4% 1 Gynaecology 12 3 25% 1 Endocrinology/metabolic diseases 70 7 10% 6 Gastroenterology/hepatology 33 5 15% 4 Haematology 46 3 6.5% 1 Transplantation 10 2 20% 1 Immunology/rheumatology 46 14 30.4% 8 Ophthalmology 17 2 12% 2 Vaccines 37 9 24.3% 9 Psychiatry 17 2 12% 2 Neurology 45 3 7% 2 Infectious diseases 96 14 15% 14 Neonatology/paediatric intensive care 16 1 6% 1 Oncology 83 7 10% 2 Pain 9 11 1% 0 Pneumonology/allergy 35* 7 20% 6 Uro-nephrology 16 1 6% 0 Orthopaedic diseases 9 1 11% 0 Allergens* 114 0 0% 0 Total 808 98 12% 71 Note: *Allergens PIPs assessed in 2010-2011 due to a change in regulation in Germany are listed separately here. Source: EMA database (PedRA) Nearly all PIPs for new medicines that are linked to an adult development include a delay in the implementation of one or more measures of the PIP (deferrals) until sufficient data on safety and efficacy are available in adults or in older age-groups. To verify companies’ compliance with the agreed deferrals, marketing authorisation holders are required to submit annual reports to the Agency. The list of companies that have not submitted one or more annual report(s) is published annually by the Commission on the basis of an EMA report (3 in 2018 and 2017, 8 in 2016, 11 in 2015). The agreed PIPs have had a direct effect on clinical research in the EU. They have resulted in more clinical trials in Europe. For instance, 12.4% of all clinical trials included children in 2016. The Agency provides scientific advice (SA) on paediatric matters free of charge , and in 2018 it reached 25% of the total of 634 pieces of advice provided by EMA. More medicines for children By 2018 there were over 200 new centrally authorised medicines authorised for use in children , and 6 PUMA authorisations had been granted by that time. In addition, before the Regulation was introduced, the competent authorities completed assessments of more than 19 000 reports on paediatric studies (concerning 1000 active substances). This resulted in 45 central and 2219 national reassessments, leading to about 140 updates of the product information and 16 new paediatric indications. In response to a survey that provided input into the Commission’s 10-year report, the majority of respondents estimated that the increase in the number of medicines available was in the 5-10% range. As regards prescription habits, 58% of respondents said that as a result of the Regulation practitioners were increasingly prescribing approved medicines according to their licensed indication for children. Rewards By 2016, more than 40 medicinal products had been granted an SPC extension by the national patent offices in one or more Member States, resulting in over 500 national extensions; eight products had obtained the orphan reward of two additional years of market exclusivity until the end of 2018. Monitoring obligations Reports under the Orphan Regulation Article 10 of the Orphan Regulation required the Commission to publish a general report on the experience acquired from applying this Regulation, to include an account of the public health benefits. Article 9 of the Orphan Regulation obliges the Commission to publish a regular detailed inventory of all incentives provided by the EU and its Member States to support research, development and availability of orphan medicines. Since 2000, the Commission has published three such reports. They have highlighted the steady increase in the number of requests for orphan designations over the years, showing the growing interest in this field. The orphan designation has been a requirement for Framework Programme funding since 2009. Both the number of orphan medicines applications submitted and the number of designations granted by the Commission rose by over 50% over 2009-2015, in comparison with 2000-2008. In line with Article 5(10), the sponsors of orphan designations are obliged to submit to the Agency an annual report on the state of development of the designated medicinal products. However, despite receiving this information, the Agency’s Committee for Orphan Medicinal Products is not formally obliged to evaluate these reports. Reports under the Paediatric Regulation Article 50 of the Paediatric Regulation states that the Commission must report to the European Parliament and to the Council, 5 and 10 years respectively after the application of the legislation, on the experience acquired with that legislation. These reports have been accompanied by extensive reports from the Agency to the Commission.

The same article also requires the Commission, on the basis of information received from the Agency, to make public a list of the companies and products that have benefited from any of the rewards and incentives set out in this Regulation. This list includes the companies that have failed to comply with any of the obligations laid down in this Regulation. Companies discontinuing the placing on the market of a paediatric product/a paediatric indication must inform the Agency, which then makes this information public (Article 35). Further reporting obligations in the event of infringement of the Regulations’ provisions are set out in Article 49 of the Paediatric Regulation. 4.Method For the purpose of this evaluation, a Roadmap was published on 11 December 2017 for a four-week period. Feedback was received from 23 stakeholders from business associations, companies, public authorities, NGOs, academic/research institutions, 5 from EU citizens and 2 from non-EU citizens. 4.1 Data gathering, methodology and analysis A wide range of data sources have been used to collect evidence to answer the evaluation questions. Stakeholders’ views were gathered through open public consultations and targeted consultation activities, including several workshops. All stakeholder groups were reached, and the risk of receiving incomplete or biased information was mitigated by triangulating different sources of information, including multiple stakeholders, juxtaposing divergent viewpoints, and by providing the relevant factual information where possible. Two independent studies were commissioned to support this evaluation, referred to in what follows as the ‘orphan study’ and the ‘paediatric study’. In addition, the outcomes of an independent study on the impact of the pharmaceutical incentives were also used. The methodologies used in the orphan study included a systematic review of the peer-reviewed and grey literature, a portfolio analysis of the data on all designated and authorised orphan medicines (provided by the Agency ), as well as sales data (provided by IQVIA and MPA Business Services ) and a high-level cost-benefit analysis. The study included targeted consultations, conducted by means of surveys and interviews, involving five distinct groups of stakeholders: 1) national public authorities in EU Member States, 2) developers of innovative medicinal products, 3) developers of generic medicines, 4) patient and consumer organisations, and 5) Academic researchers and experts. The paediatric study focused on the Regulation’s economic impact. An analysis of the regulatory costs and the indirect and direct economic and social benefits was performed. It included a systematic review of peer-reviewed and grey literature, a consultation of interested parties and a Delphi analysis. A study on the economic impact of the supplementary protection certificates, pharmaceutical incentives and rewards in Europe provided additional findings which fed into the evaluation. A synopsis report summarising all activities carried out as part of stakeholder consultations, and their results, is provided in Annex 2. Overall, the Commission agreed with the conclusions of these studies, despite the methodological limitations described below. The only exception was the result of the cost-benefit analysis for the pharmaceutical industry. The Commission did not agree with the calculations performed by the contractor, and refined the cost-benefit analysis further by adding a competitive profit margin of 10% of the ‘net’ turnover (i.e. turnover minus the orphan exclusivity share). For more details of the methodological aspects of the studies, please refer to Annex 3 of this report. In addition to the above-mentioned studies, use was made of: ·the reports from the Commission to the European Parliament and the Council on the 5 and 10 years of implementation of the Paediatric Regulation , ·technical reports from the Agency to the Commission on the experience acquired as a result of the application of the Paediatric Regulation after 5 and 10 years of its application , and ·yearly reports from the Agency on how the legislation’s various provisions had performed.

4.2. Limitations and robustness of the findings As regards the orphan study, the shortcomings and challenges listed below should be taken into account. ·Since there was no impact assessment for the Orphan Regulation, the baseline for the intervention had to be constructed retroactively. ·For this baseline, the concept of ‘orphan-likes’ was established, referring to products authorised before the Orphan Regulation for the treatment of rare diseases took effect. The concept is based on the following process. A list of US orphan medicinal products was obtained from the FDA’s website. Their trade names were then matched with product names listed in the IQVIA database. If the trade name was a single word, an exact match with the first word of the product name was counted. If the trade name consisted of two words, a match with the first two words of the product name was counted, and so on, depending on the number of words in the trade name of a US orphan medicinal product. All identified products are assumed to be ‘orphan-like products’. Branded products were identified on the basis of a trade name, but they may also have been marketed under different trade names in different countries. This means that the volumes of such products may have been underestimated, which would have affected sales data. ·Overall, the assessment has probably: ooverestimated costs (per quality-adjusted life year, QALY), as some orphans can be assumed to see generic/biosimilar entry in the longer run; ounderestimated the increased availability, as more mature markets will see products available in more national jurisdictions, associated with product launch sequencing and possible generic/biosimilar entry over time; ofailed to analyse generic competition in its entirety. This is because the estimate of the orphan reward (calculated based on price drops following generic/biosimilar entry) is tentative, given the timing of the evaluation; so far, only a limited set of orphans have lost market exclusivity. ·R&D costs of orphan medicines for developers had to be estimated on the basis of information in relevant literature, as sponsors of orphan medicines were unwilling or unable to provide these costs. Most R&D funding through EU programmes in basic and translational research, including research to develop orphan medicines, came from the sixth and seventh EU Framework Programmes for Research, Technological Development and Innovation (2002–2006 and 2007–2013), and Horizon 2020 (2014-2020). In addition to these EU programmes and initiatives, it is worth noting that over 90% of EU public funding for health research comes from the Member States. Although the available data provide some insight into the level of activity and funding, it has not been possible to produce accurate estimates of overall research funding for rare diseases in the EU; in this respect, the situation of rare diseases is similar to that of almost all other types of diseases. This is partly because, while some research programmes or projects are very clearly designed to improve understanding of rare diseases or develop treatments for them, others may be much more fundamental in nature. The CORDIS database contains information on EU-funded research projects, but there is no single database containing information from national funders. Rare diseases differ in this respect from several other research areas. As regards the use of the IQVIA database to assess the Regulation’s effectiveness and efficiency, the following limitations applied: ·The research team only had access to revenue and volume data for 2008 (first quarter) to 2017 (third quarter) for EEA countries, excluding Cyprus, Malta, Denmark, Iceland and Liechtenstein. The dataset provides only partial information (retail turnover) for the Netherlands, Latvia, Greece, Luxembourg and Estonia. Finally, the dataset presents combined data (no distinction between hospital and retail data) in the case of Slovenia. ·Revenues are based on list prices. In reality, the actual prices may be different, owing to price negotiations between companies and payers, which are usually confidential. ·The supply of orphan medicines may have been underestimated, given the specific sampling issues applicable to low-volume products (e.g. when a sample of pharmacies is used to estimate retail sales) or the possible use of direct import schemes (‘named patient basis’), which are not captured through nationally operating wholesalers. These limitations affected the calculations to establish availability and companies’ sales revenues and thus the findings presented in the effectiveness and efficiency sections of the staff working document (SWD). The paediatric study had the following limitations: ·Since it often takes over 10 years to develop a medicine, some of the provisions introduced by the legislation are only just starting to yield the expected results (such as the number of finalised paediatric investigation plans, PIPs). This means it was not possible to collect representative data for all provisions. ·For effectiveness in particular, it has not always been possible to provide data before 2017 because publically available data were not up to date. Data were updated when made available from a publicly accessible source, such as the yearly Agency reports to the Commission. ·For efficiency, the costs incurred in drawing up a PIP were estimated, as they are based on voluntary self-reporting by organisations. Furthermore, as many clinical trials are mixed trials, respondents may have had difficulties in correctly reporting the costs of the paediatric part only. The data provided may therefore have been over- or underestimated, affecting the representativeness of the sample. ·For efficiency, several assumptions were made in determining the value of the basket of medicinal products. These are linked to:

(1) the variability of the year in which the rewards for the products selected were granted;

(2) the variability of the Member States in which the rewards were granted;

(3) the impossibility of determining the impact of generic entry in some Member States; and

(4) the different dosages and presentations of the same product available in various Member States.

Triangulations of information and extrapolations were used in the analysis to ensure the robustness of the findings. ·For efficiency, the costs incurred by regulatory authorities could not be estimated in detail.

5.Analysis and answers to the evaluation questions 5.1 Effectiveness Main findings Orphan Regulation The various incentives provided by the Orphan Regulation have spurred on the development of new treatments for rare diseases. However, not all orphan products authorised under the Regulation are the direct results of such incentives. Of the 131 orphan medicines authorised in the EU since 2000, the Orphan Regulation is estimated to be responsible for at least 8-24 new ones. The remaining 107-113 products were made available more quickly, and reached more people across the EU, than before the Regulation took effect. SMEs, in particular, benefited from protocol assistance and fee reduction. However, in many cases charitable foundations and academic institutions are not eligible for fee reduction because of difficulties in meeting the ‘SME criteria’. The development of new orphan medicines addressed some of the rarest diseases. However, the tools provided by the Orphan Regulation have not done enough to direct the development in areas of greatest ‘unmet medical need’. The Regulation has not been sufficiently effective to catalyse the clinical development to areas where there are no treatments yet. At the same time, the number of treatment options is expanding in specific areas, such as oncology. Here, the market is starting to look more and more like that of the non-orphans. Stakeholders have questioned whether the currently used prevalence threshold of 5 in 10,000 is an appropriate criterion. The criterion of ‘insufficient return on investment’ has only been used once, as companies seem to fear the possible shortening of the market exclusivity period to six years for economically successful products, when reassessed after five years. Marketing authorisation of orphan medicines at EU level (availability) has not translated into accessibility of the authorised medicines for patients in all Member States. Access to orphan medicines varies considerably across Member States, mainly owing to factors beyond the Regulation’s ambit, such as different national pricing and reimbursement systems, companies’ strategic decisions on market launch, and the role of healthcare providers. Paediatric Regulation The Paediatric Regulation has led to an increase in clinical research involving children and in medicinal products specifically authorised for them, as well as to improvements in the level of information available on such products. However, these advances have been more substantial in cases where a parallel adult medicine development was ongoing. The Regulation has no effective instruments to direct research and development toward specific therapeutic areas and it works better in areas where the needs of adult and paediatric patients overlap. The SPC extension is of particular relevance, economically speaking, to products with high sales in adults (blockbusters). Accordingly, it may not be successful in incentivising the development of medicines in line with children's most pressing needs. Neither regulation has proven effective in boosting the development of innovative medicines for children with rare diseases. Little use has been made of the other rewards provided by the Paediatric Regulation, the orphan reward, or the PUMA (paediatric use marketing authorisation) scheme. The analysis showed that the Regulation has had a positive effect overall in gradually helping to reduce off-label use of adult medicines in children. This result is however impacted by external factors, such as companies’ launch decisions, the reimbursement and pricing decisions taken by national competent authorities, and doctors’ patterns of prescription. How effective the two Regulations have been can be assessed from the relation between the effects observed and the stated objectives. To this end, this chapter assesses the extent to which the two Regulations have helped boost research, development and authorisation of remedies for rare diseases and medicines for children. It also examines whether the products developed under the Regulations serve patients’ needs effectively, in terms both of addressing unmet needs and of timely availability across the EU. Finally, it examines the Regulations’ impact on R&D and competitiveness. 5.1.1 – The impact on research and development for orphan medicines The Regulation has had a substantial impact on R&D in the field of orphan medicines in the EU. Between 2000 and 2017, 1956 designations were granted and 142 orphan medicines were authorised (11 were subsequently withdrawn, thus leaving 131 on the market). The increasing number of orphan designations reflect the industry’s growing interest in developing orphan medicines. In the first three years following the adoption of the Orphan Regulation, between 72 and 80 applications for designations were submitted annually (see Figure 6), instead of 5-12, as was initially estimated for that period. In recent years, the number has exceeded 200 applications per year. The 1956 designations covered 698 different indications. They included 637 treatments (91%), 53 products used for prevention (8%), and 8 products used for diagnosis (1%). However, only about 5% of orphan products under development (designations) went on to be authorised as orphan medicinal products. By the end of the first five years, 22 orphan medicines had been authorised for the treatment of 20 different life-threatening or chronically debilitating rare diseases. An upward trend can be seen from the average numbers of orphan marketing authorisations in three six-year periods: 3.7 per year in 2000-2005, 7.8 per year in 2006-2011 and 12.2 per year in 2012-2017. At the same time, the US saw an even more impressive increase (from 17 in 2008 to 77 in 2017).

Figure 6: Number of applications submitted, designations granted and authorised orphan medicines (2000 – 2017) Source: Agency (2018) To estimate what proportion of the orphan medicines authorised in the EU can be attributed to the EU Orphan Regulation, the trend in marketing authorisations for orphan medicines from 2000 to 2017 was compared with the general market trend in pharmaceutical product development. This analysis shows that since 2011, the number of marketing authorisations for orphan medicines has not only grown over time, but has grown substantially faster than those for non-orphan medicines. Using these data, it was estimated that of the 131 orphan medicines authorised in the EU, between 18 and 24 (almost 20%) were developed as a result of the legislation. If orphan medicines had followed the same market trend as non-orphan medicines, then only about 107 to 113 would have been authorised. Having said that, we have to acknowledge that there is no best available statistical methodology to assess how the legislations impact directly the development of medicines due to the lack of sufficient data. Therefore, the above mentioned figures are indicative and may be under representative. Table 2 Average number of new marketing authorisations per year Year Orphan medical products Increase (%) Non-orphan medical products Increase (%) 2000-2005 3.7 28.8 2006-2011 7.8 111 63.8 122 2012-2017 12.2 56 68.3 7 Source: Orphan Study Report Compared to the EU, the US has higher annual figures for both designations and marketing authorisations for orphan medicines. Differences in the eligibility criteria for obtaining an orphan designation in the EU, US and Japan also result in different percentages of designated orphans finally authorised in these regions (8% of successful marketing authorisations from orphan designations were identified in the EU, compared to 15% in the US, and 65% in Japan). In the EU, rare diseases are defined as affecting smaller numbers of people than in the US. Some medicines not eligible for orphan designation in the EU are thus considered orphan medicines in the US. Under Japanese legislation, only medicines with a strong chance of approval are designated as orphan drugs. This may account for Japan’s high approval to designation ratio. In 2017, the FDA took several steps to improve the consistency and efficiency of its evaluations to verify the accuracy of manufacturers’ claims in their orphan designation applications. These steps included introducing a standard review template and providing guidance on completing it. No comparable analysis of the consistency of the EMA assessments was performed in connection with this report. Role of incentives under the Orphan Regulation The average additional protection offered by the market exclusivity reward was calculated at 3.4 years. The economic value of this reward, calculated for a limited sample of products, averaged 30% of total turnover. For around half of the analysed sample, market exclusivity was the last protection to expiry. Developers pointed out that companies’ decisions to launch new products in the EU were influenced by the possibility of market exclusivity laid down by the Regulation and the legal certainty it provides. They considered market exclusivity to be the main incentive , which, together with orphan designation, would enable fledgling companies to attract venture capital. A comparison with the US nuanced these statements. In this context, developers underlined ‘non-incentive’ drivers of growth in orphan medicines, such as the ability to demand high prices. The same report noted that marketing exclusivity was having a declining impact on protecting orphan medicinal products from competition in the US. Market exclusivity is not the only major incentive. The EU and its Member States, within their respective spheres of competence, provide other incentives for developing medicines for rare diseases. While the EU supports research, some Member States provide tax incentives, for instance. Although developers considered the two-year paediatric extension to the market exclusivity to be very important, only a few medicinal products had actually benefited from this reward. The specific form of scientific advice offered by the Agency under the Regulation, known as protocol assistance, has significantly increased over time: from 4 in 2000 to over 125 requests per year in 2017. While the information available does not allow any firm conclusions to be drawn as regards the role of protocol assistance, several studies show a strong association between compliance with protocol assistance recommendations and marketing authorisation success for orphan medicines. Targeted surveys have indicated that protocol assistance is very important for industry, especially for relatively inexperienced developers. The growing share of small and medium-sized enterprises (SMEs) among applications for protocol assistance (50% in 2017) tallies with the observation that SMEs now account for around half of all designations annually. The fee reduction is considered important by developers, especially SMEs, as fees are waived completely for this group. It was noted, though, that for some sponsors, such as charitable foundations and academic institutions, it can be difficult to meet the requirements for SME status and for them the Agency fees can still be significant. There were no data to determine whether these fee reductions, compared to the overall costs of R&D, have made an appreciable impact on the number of products under development. It is not known either how often these fees do represent a real barrier to potential sponsors. The effectiveness of the incentives also depends on many other contextual factors that influence the outcomes of clinical development of orphan medicines, such as the experience of the developer, market and product characteristics, and the stage of development of the product. Even the best designed intervention may not succeed if it is not supported by progress in basic research or new scientific leads for product development. It was clear from the beginning that market exclusivity would not be the only main incentive, and that it would be up to the EU and the Member States to provide other incentives for developing orphan medicines, such as support for research.

Moreover, the effects of individual incentives cannot be isolated from each other, nor can the effectiveness of incentives offered by the EU Orphan Regulation be seen as separate from that of incentives offered by similar regulations in other jurisdictions such as the US. In the international comparison of incentives, the duration of market exclusivity (10 years in the EU 10, vs. 7 years in the US) is the most striking difference. However, other jurisdictions (US, Japan) also provide tax incentives, whereas the EU does not. In this respect, the US market may be regarded as quite attractive; most of the revenues from orphan medicines are earned in the US alone. 5.1.2 – The impact on unmet needs and timely availability for orphan medicines The Orphan and the Paediatric Regulation were designed to address the unmet medical needs of patients suffering from rare diseases and of children. However, the concept of unmet medical need has not so far been standardised among patients, industry, regulators, HTA bodies and payers. For the purpose of this analysis, the concept of unmet medical need was therefore operationalised. It was assessed whether, and to what extent, the Regulations have contributed to the development and availability of orphan drugs and paediatric medicines, and what therapeutic areas are covered by these medicines. The extent to which new orphan medicines target conditions for which no alternative treatments exist and the rarity of conditions for which designations were granted were also considered. Finally, it was assessed whether EU patients have access to such medicines. After all, there is no point in developing treatments if patients have no access to them. Product development in different therapeutic areas and indications Since 2000, almost all therapeutic areas have been covered by authorised orphan medicines. Only in the categories of genito-urinary tract conditions and sex hormones and anti-parasitic products have no medicines yet been authorised. Despite this development, 95% of rare diseases still have no treatment option; the situation in the US is very similar. Furthermore, of the 142 authorised orphan medicines, only 28% target diseases for which there were no alternative treatments. To compare this to the situation before the Orphan Regulation came into force, 70 medicinal products already authorised as orphans in the US were available in at least one Member State in 2000. Most of these 70 products were substances acting on the immune system. In the years immediately after the Regulation’s introduction, the annual number of new orphan indications declined rapidly. While in 2001 78% of orphan designations were for new indications (i.e. indications for which no products had been authorised), in recent years the figure fell to less than one in five (<20%) designations. For those indications where products have already been authorised, a product needs to demonstrate significant benefit over existing treatment options to be maintained as an orphan product and to receive market exclusivity. Owing to the increasing number of orphan medicines authorised, more and more products need to demonstrate significant benefit. An analysis performed in 2018 on products authorised between 2000 and 2015 showed that demonstration of significant benefit was required in 64% of designations and for 73% of products at the time of marketing authorisation. This indicates that the EU Orphan Regulation is becoming less effective in directing research to areas where there are no treatments yet, and product development tends to cluster around certain (more profitable) therapeutic areas. Consequently, the number of treatment options is expanding for some conditions, and the market is starting to look more like the one for ‘standard’ medicines. An area which has attracted considerable attention, for instance, is anti-cancer treatments, accounting for around a third of all designations and authorised products so far. As treatments for rare cancers often have broader applicability across a range of other cancers - some of which may not be considered rare - these products may have a higher profit potential. A similar degree of concentration has been observed in the US, where a large share of orphan drug marketing approvals (42%) were in oncology between 2008 and 2017. Stakeholder consultations indicate that the accelerated development of new treatments in oncology can be explained by a better understanding of the natural history of disease and of the molecular pathways it involves. The lack of development in certain therapeutic areas, according to the developers surveyed, may be attributable to the fact that companies tend to focus on certain areas of disease, on a lack of scientific expertise, and on a lack of basic research in certain fields. Other possible reasons are insufficient knowledge of disease mechanisms and poor understanding of the underlying biology. On top of this, for ultra-rare diseases (affecting less than one patient in 10,000) the study of patients’ clinical symptoms and the conduct of effective clinical trials is constrained by the small number of patients available for robust statistical analyses. The same barriers to developing orphan medicines have also been identified in the US. The Regulation has therefore not met its aim of addressing unmet medical needs in all therapeutic areas. Development of follow-on products Granting orphan market exclusivity to a given product could potentially constitute a barrier to developing follow-on products of an orphan indication covered by the first authorised product. If that were the case, patients unable to benefit sufficiently from the first medicine could potentially be deprived of additional treatment options. In theory, the EU Orphan Regulation contains provisions to mitigate the impact of market exclusivity on the development of follow-on products. First, the market exclusivity for orphan medicines only extends market protection against competition by ‘similar medicines with similar indications’. A similar medicine is understood to contain ‘an identical active substance, or an active substance with the same principal molecular structural features and which acts via the same mechanism’. A product that contains a different active substance, or that acts on a different molecular pathway is therefore not prevented from entering the market alongside the original product, even if the latter is still under market exclusivity. In the case of biological medicines including advanced therapy medicinal products (ATMPs), whose principle molecular structural features cannot be identified, the similarity between two active substances is assessed on the basis of their biological and functional characteristics. However, to be eligible for an orphan designation itself, that product would need to demonstrate significant benefit over the treatment already authorised. It could therefore be argued that the fact that a competing product has obtained a marketing authorisation influences decisions on whether to continue the development of a product. For 82% of orphan indications where there is at least one authorised orphan medicine, there is no other authorised orphan medicine (yet). Also, in a market that is inherently small, developers may question whether there is sufficient willingness among patients and prescribers to switch to another product. However, most developers surveyed reported that competition with another organisation, whether likely or already existing, does not lead to the suspension, termination, refocusing or delay of new or ongoing R&D. Another study showed that the likelihood of a rare disorder with an approved orphan medicine obtaining at least one follow-on orphan medicine was strongly associated with the number of people affected by this disease, turnover of the first orphan product, specific disease class, the extent of scientific knowledge about the disease, and whether it starts during childhood or later on. In areas where there are no follow-on orphan medicines, the main reasons seemed to be the time needed to develop follow-on products and market size, rather than any ‘monopolies’ created by market exclusivity.

Rarity of conditions and ‘insufficient return on investment’ Around a third of authorised orphan products are for treatments with a prevalence of less than 0.5 in 10,000. These are mainly products for the treatment of diseases affecting the musculoskeletal system, but also some rare forms of cancer. A recent study shows that 84.5% of analysed rare diseases have a very low prevalence (less than 1 in 1,000,000). However, most of the population burden of rare diseases is attributable to the 4.2% diseases in the most common prevalence range (1–5 per 10,000). Although the Orphan Regulation helped promote the development of products tackling some of the rarest diseases, where the market potential is limited, according to some stakeholders (patients’ organisations, national authorities, and researchers), it also stimulated development in areas where sufficient market stimuli already exist. Stakeholders questioned whether the prevalence threshold currently used of 5 in 10,000 is appropriate as a criterion. In this regard, it was argued that the expected use of a product in an underlying condition (once, repeated, life-long) has a decisive role and may also need to be taken into account during the assessment if the development of truly financially-unattractive areas is to be fostered (such as paediatric oncology). Hence, the question is raised whether a different method for calculating prevalence is needed or even a different criterion (the US and Japan, for instance, also use criteria based on absolute numbers of patients in these countries). Moreover, a graduation/differentiation of the incentives to the magnitude of rarity or the scale of investment needed may enable incentives to be focused better on therapeutic areas that are neglected or where a bigger investment is necessary. It has been also suggested that using the rare disease registries project supported by the European Reference Networks could help the Committee for Orphan Medicinal Products (COMP) access the best available data. By the end of 2017, only one application had been received under the ‘insufficient return on investment criterion’, and that was subsequently withdrawn. According to the industry, the criterion’s lack of success is due to the difficulty of estimating future investments and returns on that investment a priori, before the therapeutic indications for which the product may be used or the price at which it will be sold are clear. However, other stakeholders suggested that applications on the grounds of expectation of insufficient return on investment are absent for another reason, too; such an application could make sponsors of economically successful products vulnerable to reassessment. Reassessment could lead to the market exclusivity period being reduced to six years if the product were found to be sufficiently profitable. Antimicrobials, on the other hand, could have benefited from the incentives of the Orphan Regulation under the provision of ‘insufficient return on investment’. The development of new medicines to replace ineffective antimicrobials seems to be inadequate to meet patients’ needs. Yet no novel antimicrobials have been developed to date. Arguably, the insufficient return on investment criterion in the Orphan Regulation could have been used, but developers have not had recourse to it. This lack of development was also recognised in a recent special report by the Court of Auditors in November 2019. The question of how to address market failures affecting the provision of new antimicrobials should be further examined, in consultation with the Member States and other stakeholders. In the US, a legal act in 2012 created incentives for sponsors to bring to market antibacterial and antifungal drugs intended to treat serious or life-threatening infections. It allows the FDA to designate certain antimicrobial drugs as qualified infectious disease products. Through this designation, sponsors can profit from incentives to bring antibacterial and antifungal drugs for serious or life-threatening infections to market more rapidly and be granted a five-year extension of any exclusivity that the application qualifies for upon approval. Availability of and access to orphan medicines An analysis of IQVIA data indicated that the Orphan Regulation has not only stimulated new development of orphan medicines, but has also helped make them available faster in the EU. It was estimated that orphan medicines became available on average nine months earlier than would have been the case without the Regulation. In addition, the Orphan Regulation has also helped to made orphan medicines more widely available. The 142 orphan medicines authorised between 2000 and 2017 have helped up to 6.3 million patients in the EU, out of roughly 35 million European patients suffering from rare diseases. Before these medicines were authorised, there were no satisfactory treatment options authorised in the EU for 8 out of 20 rare conditions (40%). More than one million patients suffering from these orphan diseases in the EU were already benefiting from the availability of these new treatments by 2005. Since 2005, all orphan medicines have had to be authorised through the centralised marketing authorisation procedure. However, this has not ensured that all EU patients suffering from the same orphan disease automatically have the same choice of treatment. Not all centrally-authorised medicines are launched in all Member States: in some, access to orphan drugs is very limited. Countries such as Germany, the UK, France, Austria, Sweden and Italy have a high market uptake of orphan medicines, with more than 100 orphan drugs available (Figure 7). This suggests that the market conditions in these countries may be favourable. In particular, measures taken by Member States in areas of national competence, such as reimbursement and pricing, corporate taxation, and healthcare provision, significantly affect the current availability of orphan medicines on the market. Figure 7: Number of orphan medicines for which sales were observed in 2016 (IQVIA) by Member State Several external factors influence availability and access to orphan medicines. Although these factors already existed in 2000, their role seems to be more prominent now in influencing availability and access to orphan medicines. The Orphan Regulation does not impose any obligation on marketing authorisation holders to market an authorised orphan medicine in all EU Member States. Indeed, a marketing authorisation holder may decide not to place a product on a particular market (‘launch decision’), because it does not see it as commercially attractive; possible reasons are a small treatment population, existing competition, or treatment alternatives. Stakeholders have also pointed to concerns of parallel export. National pricing and reimbursement practices and policies also influence patients’ access to orphan medicines. An example is the system of ‘external reference pricing’ by which a country determines the official ‘price list’ based on the prices averaged over a set of fixed reference countries. This system causes marketing authorisation holders to engage in strategic decision-making to maximise overall prices and results in ‘cascaded’ market entry, whereby some countries are more likely to see a rapid placement on the market than others. This is also linked to how much a country can pay, or is willing to pay, for a medicinal product. Findings show that companies tend to launch more medicinal products faster in wealthier countries with a higher GDP than in countries with lower GDP. The trend is stronger in countries with a larger population of potential patients. This suggests that launch decisions are guided to some extent by market attractiveness. Moreover, the frequently high prices of many orphan medicines, in particular, often mean that whether a patient can access a treatment also depends largely on whether it is fully reimbursed by the health system, or whether personal payments or co-payments are required. ‘Payers’ also decide which products will be provided and paid for by the public healthcare system or health insurance funds, on the basis of national pricing and reimbursement policies often supported by health technology assessment (HTA). A survey of NCAs indicated that in most Member States there are no major differences in reimbursements between orphans and other medicines. In addition to or apart from the special regulations or policies on orphans, there are separate budgets, more relaxed assumptions or accepted levels of uncertainty in the HTA process, or managed entry agreements in some Member States. However, even once a decision has been taken to reimburse an orphan medicine, entirely or partially, differences in financing and reimbursement systems between Member States can influence whether and when patients are able to access a treatment. Indeed, in many countries decision-making on reimbursement is often informed by the work of HTA agencies to establish cost-effectiveness. Moreover, several countries have brought in ‘managed entry agreements’. These agreements are used in the context of reimbursement for medicines whose evidence base is immature. They are designed to balance the need for speedy access to the health system for treatments addressing an important unmet medical need with the principle of maximising value for money and affordability.

The methods used for HTA may vary and outcomes are dependent on national factors, such as the characteristics of the healthcare system and how the product is to be used in treatment. The draft Commission proposal on HTA may provide a higher level of convergence in HTA methodologies and greater coherence between EU procedures for marketing authorisation and national procedures for the reimbursement of medicines. Finally, access to orphan medicines can be influenced by health professionals’ prescribing practices and habits. In fact, even when products are placed on a market by a marketing authorisation holder and the medicine is largely reimbursed, there is no guarantee that all patients will receive it. Reasons may include unfamiliarity with the disease/product and/or a lack of diagnostic capacity. Unequal access to medicines, and particularly to orphan drugs, remains an issue today. The Regulation has only succeeded in part in providing the right tools to ensure that patients suffering from rare conditions have the same quality of treatment as any other patient, thanks to the development of more orphan medicines and their increased availability. 5.1.3 – The impact on research and development of paediatric medicines More clinical research, more products and more information on paediatric medicines The Paediatric Regulation has helped boost paediatric clinical research, increase availability of products with paediatric indications in the EU market and improve the information available about these medicines. The vast majority of stakeholders who responded to a public consultation thought the Paediatric Regulation had had a positive impact in addressing the lack of medicines studied and developed appropriately for children. Figure 7: Proportion of clinical trials that include children Source: 10 years of the EU Paediatric Regulation report, European Commission Over 1000 PIPs had been agreed on by the end of 2018. An agreement on a paediatric investigation plan means that companies need to invest in additional paediatric research. On average, every PIP includes around three clinical studies. These studies have led to an increase in paediatric trials as a percentage of all trials conducted in the EU, from around 8.3% (188 exclusively paediatric trials) in 2007 to 12.4% (473 exclusively paediatric trials) in 2016 (Figure 7). They have also led to an increased use of scientific advice from 7.6% of the total items of advice provided by the Agency in 2007 to 24.4% of the total in 2016. Importantly, clinical trials involving neonates (a particularly neglected paediatric subpopulation) were included in over a quarter of all the PIPs agreed on, often at the Agency’s request. By June 2018, about 18% of the PIPs agreed on had been completed, with a clear upward trend in recent years. Over 60% were completed in 2013-2016. By 2016, 101 paediatric medicines and 99 new paediatric indications had been authorised centrally. For nationally-authorised products in the same period, 10 new paediatric medicine