Source: EURLEX
Language: en
Format: md

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](https://www.ema.europa.eu/en/glossary/advanced-therapy-medicinal-product) |
| 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](https://www.ema.europa.eu/en/glossary/efficacy)  of  [advanced therapy medicinal products](https://www.ema.europa.eu/en/glossary/advanced-therapy-medicinal-product)  (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. 
[1](#footnote2)

Purpose and scope of the evaluation

The two Regulations are subject to the ex-post evaluation presented in this document.
[2](#footnote3)
 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
[3](#footnote4)
 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
[4](#footnote5)
 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.
[5](#footnote6)
 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
[6](#footnote7)
 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.
[7](#footnote8)
 The European Parliament also debated the issue of access to medicines
[8](#footnote9)
, including medicines for children. In its 2016 Resolution
[9](#footnote10)
, 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
[10](#footnote11)
 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.
[11](#footnote12)
 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.
[12](#footnote13)
 

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.
[13](#footnote14)

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
[14](#footnote15)
 to patients affected by that condition in comparison with the existing treatment.
[15](#footnote16)

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.
[16](#footnote17)
 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)
[17](#footnote18)
, 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.
[18](#footnote19)
 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’)
[19](#footnote20)
, which can be extended to 12 years if a paediatric research and development programme is completed (see Figure X).
[20](#footnote21)
 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.
[21](#footnote22)
 

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)
[22](#footnote23)
 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
[23](#footnote24)

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_02002.jpg)

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))
[24](#footnote25)
, or to obtain, under certain conditions, a derogation (waiver) from this obligation.
[25](#footnote26)
 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.
[26](#footnote27)
 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
[27](#footnote28)
 extension
[28](#footnote29)
 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,
[29](#footnote30)
 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)
[30](#footnote31)
 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
[31](#footnote32)
, no specific references to the development timelines of orphans or paediatrics)

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_02003.jpg)

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

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_02005.jpg)

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.
[32](#footnote33)
 

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
[33](#footnote34)
 were authorised at EU level for the treatment of rare diseases of the immune, blood or genito-urinary systems.
[34](#footnote35)
 These products were brought to the market by 12 individual pharmaceutical companies.
[35](#footnote36)
 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.
[36](#footnote37)
 
[37](#footnote38)
 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.
[38](#footnote39)

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.
[39](#footnote40)

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.
[40](#footnote41)
 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.
[41](#footnote42)

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).
[42](#footnote43)
 At national level, some Member States
[43](#footnote44)
 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.
[44](#footnote45)

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).
[45](#footnote46)
 A benchmark with the US will complement Chapter 5.
[46](#footnote47)

  

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.
[47](#footnote48)
 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);
[48](#footnote49)

·Guidance on Article 8(1) and (3) on the assessment of similarity of medicinal products versus authorised orphan medicines benefiting from market exclusivity;
[49](#footnote50)

·Guidance on Article 8(2) for reviewing the period of market exclusivity.
[50](#footnote51)

In addition, to reduce the barriers to innovation in medicinal products facing SMEs, Commission Regulation (EC) No 2049/2005
[51](#footnote52)
 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.
[52](#footnote53)

A Commission staff working document, published in 2006,
[53](#footnote54)
 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).
[54](#footnote55)
 Of these medicines, 13 were authorised for more than one orphan disease, and a separate period of market exclusivity was granted.
[55](#footnote56)

Figure 4: Therapeutic areas covered by authorised orphan medicinal products in 2017

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_02006.jpg)
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%).
[56](#footnote57)
 

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

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_02007.jpg)
 

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.
[57](#footnote58)
 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.
[58](#footnote59)

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).
[59](#footnote60)

The provisions of the main act were complemented by the specific guidance document:

·Guidance on format and content (updated in 2014)
[60](#footnote61)

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.
[61](#footnote62)

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.
[62](#footnote63)
 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.
[63](#footnote64)
 
[64](#footnote65)

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.
[65](#footnote66)
 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).
[66](#footnote67)

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
[67](#footnote68)
, and in 2018 it reached 25% of the total of 634 pieces of advice provided by EMA.
[68](#footnote69)

More medicines for children

By 2018 there were over 200 new centrally authorised medicines authorised for use in children
[69](#footnote70)
, and 6 PUMA authorisations had been granted by that time.
[70](#footnote71)
 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).
[71](#footnote72)
 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;
[72](#footnote73)
 eight products had obtained the orphan reward of two additional years of market exclusivity until the end of 2018.
[73](#footnote74)
 

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.
[74](#footnote75)
 

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.
[75](#footnote76)
 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.
[76](#footnote77)
 These reports have been accompanied by extensive reports from the Agency to the Commission.
[77](#footnote78)

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
[78](#footnote79)
 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.
[79](#footnote80)
 
[80](#footnote81)
 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’
[81](#footnote82)
 and the ‘paediatric study’.
[82](#footnote83)
 In addition, the outcomes of an independent study on the impact of the pharmaceutical incentives were also used.
[83](#footnote84)
 

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
[84](#footnote85)
), as well as sales data (provided by IQVIA and MPA Business Services
[85](#footnote86)
) 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.
[86](#footnote87)

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.
[87](#footnote88)

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.
[88](#footnote89)
 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).
[89](#footnote90)
 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
[90](#footnote91)
,

·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
[91](#footnote92)
, and

·yearly reports from the Agency
[92](#footnote93)
 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).
[93](#footnote94)

Figure 6: Number of applications submitted, designations granted and authorised orphan medicines (2000 – 2017)

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_02008.jpg)

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
[94](#footnote95)
 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.
[95](#footnote96)
 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).
[96](#footnote97)
 
[97](#footnote98)

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.
[98](#footnote99)
 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.
[99](#footnote100)
 

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.
[100](#footnote101)
 They considered market exclusivity to be the main incentive
[101](#footnote102)
, 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.
[102](#footnote103)

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.
[103](#footnote104)

Although developers considered the two-year paediatric extension to the market exclusivity to be very important,
[104](#footnote105)
 only a few medicinal products had actually benefited from this reward.
[105](#footnote106)
 

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
[106](#footnote107)
 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.
[107](#footnote108)
 

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
[108](#footnote109)
 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.
[109](#footnote110)
 

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.
[110](#footnote111)
 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.
[111](#footnote112)
 

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.
[112](#footnote113)
 
[113](#footnote114)
 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.
[114](#footnote115)
 Despite this development, 95% of rare diseases still have no treatment option; the situation in the US is very similar.
[115](#footnote116)
 
[116](#footnote117)
 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.
[117](#footnote118)
 Most of these 70 products were substances acting on the immune system.
[118](#footnote119)
 

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.
[119](#footnote120)
 

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.
[120](#footnote121)

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’.
[121](#footnote122)

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.
[122](#footnote123)
 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
[123](#footnote124)
 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).
[124](#footnote125)

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.
[125](#footnote126)
 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
[126](#footnote127)
 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
[127](#footnote128)
 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.
[128](#footnote129)
 

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.
[129](#footnote130)
 

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).
[130](#footnote131)
 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: [131](#footnote132)  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.
[132](#footnote133)
 

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.
[133](#footnote134)
 This is also linked to how much a country can pay, or is willing to pay, for a medicinal product.

Findings show
[134](#footnote135)
 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.
[135](#footnote136)
 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’
[136](#footnote137)
 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
[137](#footnote138)
 (HTA). A survey of NCAs indicated
[138](#footnote139)
 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.
[139](#footnote140)
 
[140](#footnote141)
 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.
[141](#footnote142)
 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.
[142](#footnote143)

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
[143](#footnote144)
 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.
[144](#footnote145)
 
[145](#footnote146)

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
[146](#footnote147)
 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

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_02010.jpg)

Source: 10 years of the EU Paediatric Regulation report, European Commission

Over 1000 PIPs had been agreed on by the end of 2018.
[147](#footnote148)
 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).
[148](#footnote149)
 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.
[149](#footnote150)
 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.
[150](#footnote151)
 Over 60% were completed in 2013-2016.
[151](#footnote152)
 

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 medicines were authorised and 57 new paediatric indications approved.
[152](#footnote153)
 The contribution made by the Regulation to these results can be estimated by comparing data collected from the three years preceding its application (2004-2006) with later periods when the Regulation was fully operational and authorisation of all paediatric medicines was preceded by a PIP. From 2004 to 2006, 30 new medicines and indications were authorised for paediatric use. In 2012-2014 and 2014-2016, the figure rose to 63 and 74 respectively; in other words, the output had more than doubled.  

Furthermore, the Agency and the national competent authorities had received around 19,000 reports on paediatric studies involving 1000 active substances that had been completed before the entry into force of the Paediatric Regulation.
[153](#footnote154)
 These reports resulted in 45 central and 2219 national reassessments, leading to about 140 updates of product information and 16 new paediatric indications for products already authorised.
[154](#footnote155)
 

The figures above concerning both clinical research in children and the authorisation of medicines for children match expectations and the best-case scenario described in the impact assessment, which predicted that within 10-15 years all patent-protected medicines would be studied in children (unless exempted from this obligation). However, given the long development time for medicines, particularly with complex and rare diseases, as is often the case with paediatric diseases, it could take up to 20 years before most products could be authorised for use in children.

While the main aim of the Paediatric Regulation is to ensure that every new adult medicine has been researched for its potential paediatric use, it should be borne in mind that by the end of 2017 the Agency had approved almost 500 waivers from the obligation to conduct a PIP (against the 1000 PIPs it had agreed on).
[155](#footnote156)
 
[156](#footnote157)
 

It is generally appropriate to waive paediatric studies if the target disease does not exist in children.
[157](#footnote158)
 However, one cannot rule out the possibility that a compound, given its mechanism of action, may in some cases be beneficial to children, albeit for a different medical condition. This is particularly relevant in the field of oncology. While many paediatric cancers share biological similarities with adult cancers, they occur in different organs and are therefore usually classed as different conditions. The way the legislation is designed thus means that certain compounds which might be useful for children are not tested on them. The US, which had a similar problem, has recently introduced changes to its legislation.
[158](#footnote159)

The Agency has tried to mitigate this issue through a review of its class waiver decision in 2015, revoking some automatic waivers for carcinomas.
[159](#footnote160)
 Some advances have been observed since then. However, the progress made is not solely attributable to the review of the class waiver list. As paediatric development is global, the revision of the legislation in the US
[160](#footnote161)
 may also have played a role. Moreover, the change in the class waiver list does not seem to have encouraged companies to submit voluntary PIPs for all the medicines concerned.
[161](#footnote162)

The Regulation also delivers slowly because nearly all paediatric studies for new medicines that are linked to an adult development are deferred in some aspects.
[162](#footnote163)
 While deferrals are, in principle, an appropriate instrument, they could in practice imply delaying patients’ access to a potentially promising paediatric medicine. In particular, neonatal studies are very often deferred until experience has been gained with other age groups and this may lead to continuing off-label use for this vulnerable group of patients. The Agency is reviewing internal practices to ensure consistency in its decisions and to avoid lengthy deferrals.

It is also relevant to mention that the Regulation has made it compulsory to publish protocols
[163](#footnote164)
 (which provide details of how a clinical trial is conducted) and the results of paediatric clinical trials.
[164](#footnote165)
 As a result, searchable information is now available about ongoing and completed trials registered in the EU and interventional clinical trials which are included in an agreed PIP. This tool provides crucial information for patients, parents and clinicians on research data and experimental therapies.

The role of rewards

The quantitative impact described above is directly linked to the obligation laid down in the Paediatric Regulation for companies to invest in paediatric research. The reward in this case does not drive paediatric research directly; it is designed as compensation for that obligation, not as an incentive. It is worth noting that the US system does not compensate companies for mandatory paediatric research under the Paediatric Research Equity Act. Financial incentives are provided for voluntary research only on the basis of a priority list which represents a balanced portfolio of therapeutic areas and paediatric needs, without replicating research funded elsewhere.

The Regulation specifies that rewards can be claimed only once a PIP has been completed. By 2016, over 40 medicinal products had been granted an SPC extension by national patent offices in one or more Member States. This indicates that the reward system is working. However, the SPC extension is a valuable reward only if it is the last protection to expire, which is very often not the case.
[165](#footnote166)
 Not all companies complying with the obligation introduced by the Paediatric Regulation have been able to receive the reward. In the first 10 years, only about 55% of the products for which a PIP was completed were granted an SPC extension.
[166](#footnote167)
 There are several reasons for this. Not all products covered by the obligation are eligible for an SPC. Moreover, the SPC extension must be requested two years before the certificate expires. Given the length and complexity of the clinical studies to be conducted (most PIPs have a duration of 10 years or more), some companies fail to complete the PIP on time.

However, this deadline is an incentive for companies to speed up the completion of paediatric research, and it ensures that generic competition learns sufficiently in advance about any extension of the protection period that may affect the market launch of generics.

Since the economic value of this reward is directly coupled with the volume of sales within the adult population, however, (the extension of the SPC applies to the whole product, not just to the paediatric indication), the SPC extension is more attractive to pharmaceutical companies with a larger share of the patient group overall. This may encourage companies to prioritise PIPs for products which bring the highest return on investment, not for those with greatest paediatric need. The analysis conducted
[167](#footnote168)
 has shown that the SPC paediatric extension was obtained for all the blockbuster products
[168](#footnote169)
 analysed but one.

While it is not a specific driver, the particular character of the reward system thus affects the Regulation’s effectiveness.

The other main reward provided by the Paediatric Regulation, the two-year extension of the market exclusivity period
[169](#footnote170)
 for paediatric orphan products, has been granted in only a few cases. By the end of 2018, eight medicinal products had obtained the two-year additional extension of market exclusivity.

This low number can be explained by the fact that when the paediatric legislation was developed, about 60% of orphan-designated products were off-patent (2003-2004) and were thus ineligible for an SPC extension. However, over time this has changed substantially, and in 2013-2016, 95% of the orphan-designated products which had obtained a marketing authorisation were covered by a patent.
[170](#footnote171)
 

It should also be borne in mind that the orphan market exclusivity reward is incompatible with the six-month paediatric extension of the SPC.
[171](#footnote172)
 When an orphan product is still covered by a patent and there is a possibility of requesting an extension of its SPC, this reward may be more financially worthwhile to developers, as it extends protection for all the indications of a product, while the orphan rewards are valid only for indications covered by the orphan designation. This is probably why some companies waived the orphan designation in order to make the product eligible for the SPC extension (there is an example in Chapter 5.2.3. of this SWD).
[172](#footnote173)

The Regulation included one instrument to encourage paediatric-specific research for existing products, the PUMA scheme. The impact assessment recognised that the incentives the scheme provides would be weak, despite being considered the best and the most practical. It was considered that only the combination of the PUMA with support for off-label research and an inventory of paediatric needs could make the scheme attractive.

However, despite paediatric research on non-patent-protected substances being financed via the various EU research framework programmes and the inventory of paediatric needs being established, experience with this scheme has been disappointing. By 2018, only six medicines had been authorised. Although the Agency approved more than 20 PIPs with a view to submitting a PUMA, it remains uncertain how many will ever be completed and result in a new product appearing on the market.

Several reasons have influenced the relatively low success of the PUMA scheme. First, trials linked to a PUMA are more difficult to perform: the medicinal products concerned are already available on the market and are often widely used off-label. Consequently, health professionals and patients may not be motivated to engage in studies with older medicines.
[173](#footnote174)
 According to industry representatives,
[174](#footnote175)
 another reason for the limited success may be found in the price agreed by Member States for medicines authorised under the PUMA scheme. Member States seem to recognise little added value in older medicines, even if they include a new age-appropriate formulation or new paediatric indications. This means they may not agree on the higher prices – compared with the price of the existing product – necessary to cover the costs incurred through the novel clinical research.

This shows that the commercial success of a PUMA is influenced by complex factors beyond the scope of EU law, which can be hardly addressed at EU level. To some extent, the output is consistent with the impact assessment, which indicated that the scheme might be unlikely to result in sizeable numbers of authorised products.

Nevertheless, surveyed stakeholders (in particular from industry, public authorities and academia) suggest that this tool should be maintained anyway, as it has proven successful in bringing certain products onto the market.
[175](#footnote176)

5.1.4 – Impact on unmet needs and the timely availability of products for paediatric medicines

Unmet needs

Thanks to the Regulation, the last 10 years have seen considerable progress in the development of medicines for children in certain therapeutic fields. Rheumatic or infectious diseases are often referred to as prime examples. The significant surge of new treatments for children with rheumatic disorders following the completion of PIPs has transformed a sector that was previously neglected.

At the same time, those positive developments do not follow a strategic plan, but are often linked to developments in adult markets. The starting point for most PIPs is a research and development programme for adults. Progress in a paediatric field is dependent on companies’ adult product pipeline. Where the adult needs or market expectations overlap with paediatric needs, children will benefit directly. In contrast, there are many diseases that are biologically different in adults and children, where the disease burden differs, or that only exist in children. With these diseases, the mechanism introduced by the Regulation sometimes struggles to produce results.
[176](#footnote177)

This is confirmed by the fact that the therapeutic areas covered by the agreed PIPs do not necessarily correspond to the actual paediatric disease burden, although they cover a wide range of therapeutic areas.
[177](#footnote178)
 WHO data indicate that the disease burden for children from birth to less than 15 years of age is highest for mental and behavioural disorders, neonatal conditions, congenital anomalies, and respiratory diseases. Together, these account for almost 60% of the total disease burden. If we compare the disease burden affecting this group of children in the EU with agreed PIPs/paediatric indications, however, we find that only 3% of PIPs were agreed for mental and behavioural disorders, while the figure for neonatal conditions is just 2%. Instead, the highest proportion of PIPs were agreed for infectious diseases (21%) and malignant diseases (13%), which rank 9th and 10th respectively in the disease burden index (DALYs).
[178](#footnote179)
 

This may result in most developments taking place in areas with limited paediatric unmet needs. For example, many companies have concentrated their research activities on type II diabetes, leading to several new products for adults. This has also resulted in an increase in the number of paediatric products of this type in the pipeline, although type II diabetes is relatively rare in children.
[179](#footnote180)

As the legislation was designed to increase the number of medicines studied for children in general, it contained no provisions specifically designed to boost development in particular therapeutic areas. Consequently, the Paediatric Regulation, taken on its own, has limited potential for steering activities towards particular therapeutic areas.
[180](#footnote181)
 Its positive impact and the change in culture it has encouraged are thus most visible in the integration of paediatric development into the overall development of new medicines. It has been less successful with projects aiming to develop remedies for diseases found only in children. The impact assessment had already anticipated the possibility that the Regulation might push development toward the most profitable areas, not towards those with greater unmet needs as far as children are concerned.

A particular area of unmet needs is that of rare diseases in children, bearing in mind that 90% of all rare diseases manifest in childhood.
[181](#footnote182)
 

Looking at the impact of the Orphan Regulation, only about half the 111 orphan products authorised for diseases that start in childhood (56 products) have actually been authorised for use in children. As regards the various therapeutic areas covered by these products, oncological orphan products are somewhat less likely overall to have a paediatric use indication than non-oncological products (34% vs 48% respectively) (Figure 8).
[182](#footnote183)

One would expect paediatric indications to be added later, after the completion of a PIP under the Paediatric Regulation. However, by the end of 2016, although 150 PIPs had been agreed for medicinal products which had also received an orphan designation, this resulted in only nine paediatric indications being authorised as orphan medicinal products.
[183](#footnote184)
 

Figure 8: Authorised orphan medicines with a paediatric use indication for conditions affecting adults and children, by therapeutic area

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_02011.jpg)

Source: Orphan study report (2019).

These figures show that while both the Paediatric and the Orphan Regulations have had a positive impact, they have not been able to solve the problem of the shortage of treatments available for children with rare diseases. This is also confirmed by the concerns raised by ‘non-industry’ stakeholders.
[184](#footnote185)
 

Furthermore, the SPC extension is incompatible with the orphan market exclusivity. The SPC extension is more attractive to pharmaceutical companies, as it covers a larger patient group overall. This may encourage companies to prioritise products offering the highest potential return on investment, not children suffering from rare diseases.

The focus on conditions that affect adults only, or that affect adults as well as children (as opposed to primarily paediatric conditions), seems to indicate that the two Regulations lack sufficient capacity to incentivise development of specific paediatric medicines. Neither the Orphan Regulation nor the Paediatric Regulation offers specific incentives to promote the successful development of innovative medicines for use exclusively in children.

Availability of and access to paediatric medicines

Issuing a marketing authorisation or adding paediatric information to existing marketing authorisations does not automatically translate into making a product immediately available to paediatric patients in the EU. This may be because of pending reimbursement decisions at national level or doctors’ prescription habits. Sometimes, even when a paediatric product is available, off-label use continues for a while, which shows there is some inertia in the system. The majority of respondents taking part in a 
[survey](https://ec.europa.eu/health/human-use/paediatric-medicines/developments/2016_pc_report_2017_en)
 conducted by the Commission in 2017 said the Regulation had led to an increase in the paediatric medicines available at the bedside, and that practitioners were increasingly prescribing approved medicines in accordance with the licensed indication for children. In line with the expectations set out in the impact assessment, while off-label use in children is decreasing, it is likely to continue to some extent. This is determined by factors independent of the Regulation, such as health professionals’ prescription and the reimbursement decisions taken by national health systems.

The launch of a paediatric indication or product on a national market is often linked to the launch of the corresponding adult product. It has been observed that companies often rely on a staggered roll-out of any new products, resulting in delays until the product is finally available throughout the EU. This also indirectly affects the availability of paediatric medicines
[185](#footnote186)
 on the various markets.

This cannot be prevented altogether, even though the Regulation includes some instruments tailored specifically to ensure that paediatric medicines are placed on the market once a PIP is completed and the product has been authorised. First, the reward of a supplementary protection certificate will only be granted once the product has been authorised in all Member States. 
[186](#footnote187)
 Second, when a new paediatric indication is authorised for an existing product, the new indication must be placed on the market within two years of the moment of authorisation
[187](#footnote188)
; and third, if an authorisation holder intends to discontinue the marketing of a paediatric product, they have an obligation to transfer the authorisation to another company or provide access to the relevant data.
[188](#footnote189)
 However, the legal obligations are not sufficiently stringent enough to force companies to place the product on all Member State markets.

5.1.5 – Impact on competitiveness and the research landscape

Neither Regulation was specifically designed to improve the competitiveness of European industry. However, at the time of the proposal for the Orphan Regulation it was thought that companies, especially SMEs, would benefit in terms of job creation and highly qualified jobs.
[189](#footnote190)
 Generally speaking, this would have been a positive secondary effect that could have gone hand in hand with increased research.  The impact assessment of the Paediatric Regulation
[190](#footnote191)
 also predicted that it would boost European R&D either directly or indirectly, thereby improving the competitiveness of EU companies vis-à-vis their US competitors.

Although it is not possible to assess the direct impact of the Orphan Regulation on the research environment, or vice versa, it is feasible to assess how the research environment has changed since 2000. Before the Regulation’s introduction, research into orphan drugs was limited, very little expertise was available, and what little there was did not lead to significant progress in research. Since 2000, over €1.4 billion has been made available
[191](#footnote192)
 through the EU’s framework programmes for research, technological development and innovation. EU support has improved understanding of the underlying causes of rare diseases, enabled more accurate diagnostics and helped develop new therapies and integrate patient registries and research data.

This ecosystem supports the competiveness of EU industry. In addition, extension of the SPC under the Paediatric Regulation indirectly boosts the competiveness of pharmaceutical companies and provides some guarantee that profits will be redistributed, thus enabling the development of sound R&D infrastructure.
[192](#footnote193)
 

However, it is important to note that decisions on the location of pharmaceutical research and development are driven primarily by factors other than a period of protection (such as those granted to incentivise the development of pharmaceuticals) provided in a particular country. Possible relevant factors are the quality of the labour force, tax levels, infrastructure, and research and development subsidies.
[193](#footnote194)
 

5.2 Efficiency

Main findings

The Orphan Regulation has added 210,000-440,000 quality-adjusted life years to the lives of EU patients. This represents a substantial improvement in the quality of life of patients with rare diseases. At the same time, the costs to health systems, mostly paid for by governments, rose by €23 billion between 2000 and 2017. This comes in addition to EU and national public funding invested in research.

The average additional protection offered by the market exclusivity reward was calculated at 3.4 years; 30% of revenues from sales of orphan medicines can be regarded as the value of this reward. The cost-benefit analysis for the pharmaceutical industry associated with the Regulation has been positive.

For the 73% of orphan medicines with an annual turnover below €50 million in the EEA, the market exclusivity reward has helped to increase profitability, without giving the sponsor an unbalanced compensation. However, for the 14% of orphan medicines with an annual turnover above €100 million in the EEA, the 10-year market exclusivity may have led to overcompensation, and the incentives may not have been indispensable. The tool to limit market exclusivity in highly profitable cases has proven ineffective.

The Regulation is not entirely efficient. Findings have shown that there are currently 22 orphan medicines on the EU market and that they are authorised for two or more orphan indications. Limited generic competition was shown after expiry of the market exclusivity and/or the protection provided by other pharmaceutical incentives, with a slower price fall for orphans compared to other medicines. Medicines in well-established use and repurposed medicines account for only a small share of the orphan drugs that have reached the EU market.

Taking into account both the direct and the indirect induced effects, the cost-efficiency of the Paediatric Regulation has had a positive cost-benefit ratio for both pharmaceuticals companies and society in general. However, not all companies have reaped direct rewards from their investment in research, and costs to society have been created that are linked to monopoly rents.

Nevertheless, developers still perceive this legislation as burdensome and the main reward provided and the extension of the SPC is reported to be inefficient and complex.

5.2.1
   How costs and benefits of the Orphan Regulation have been distributed

The changes brought about by the Orphan Regulation (in terms of the development of new orphan medicines, a faster introduction to the EU market and a wider accessibility to such products
[194](#footnote195)
) have resulted in both extra costs and benefits for the following stakeholder groups: the pharmaceutical industry, the health sector, public authorities and patients, and society in general.

Figure 9: Overview cost (red) and benefits (green) for various stakeholders

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_02012.jpg)

Source: Orphan study report (2019) (Note: the schematic reflects only causal relations but not the actual size of the costs/benefits; the orange stars refer to the four ‘rewards’ the Orphan Regulation introduced (i.e. market exclusivity, protocol assistance, fee waivers and aid for research).

-Pharmaceutical industry
[195](#footnote196)

With few exceptions, companies were unwilling to share an estimate of the average total R&D costs per product.
[196](#footnote197)
 The costs of developing an orphan medicinal product have been estimated to range from €479 million to €725 million, the average being €602 million. This estimate does not take account of well-established use and repurposed medicines (for which R&D costs are much lower). The estimated R&D costs for an orphan medicine appear to be lower than those for a non-orphan (around 27%).
[197](#footnote198)
 

The analysis took account of the fact that R&D costs can potentially be spread over worldwide sales; not all of the R&D investments made by the companies concerned can be assigned to the EU market. In the absence of clear data on the share of sales in the EU compared to worldwide sales of medicines for rare diseases, several assumptions were made. They led to the conclusion that the Orphan Regulation has resulted in an increase of €11 billion in R&D expenditure on orphan medicines over 2000-2017.
[198](#footnote199)

To assess the costs of manufacturing, marketing and distribution of orphan medicines, the results of the analysis of the economic value of the market protections were taken into account. Analysis based on a sample of four orphan medicines where generic entry was observed
[199](#footnote200)
 shows that 30% of revenues from sales of orphan medicines can be regarded as the value of the market exclusivity reward, while, on average, 70% of revenues
[200](#footnote201)
 reflect the turnover level that would apply under competitive market conditions (i.e. following generic entry or in cases where generics could potentially enter the market).

Based on the extra sales of €19.1 billion, the extra cost of selling medicines in 2000-2017 was calculated at €12.04 billion (after correction for a ‘competitive profit margin’). This margin was assumed to be 10%
[201](#footnote202)
 (and added to the cost-benefit as a benefit) of the ‘net’ turnover (i.e. turnover minus the orphan exclusivity share).
[202](#footnote203)
 

The most obvious ‘benefit’ from the Orphan Regulation to developers of orphan medicines is that, should they successfully bring a product to market, they will be able to generate additional sales in the EU/EEA. Thanks to the Orphan Regulation, orphan medicines enter the EU/EEA market faster and are more widely available (higher volumes) within the EU/EEA. All effects taken together have resulted in increased sales of orphan medicines in the EU market of an estimated value of €19.11 billion
[203](#footnote204)
 between 2000 and 2017. 

The additional 3.4 years of protection period resulting from the market exclusivity are estimated to bring an extra R&D compensation (margin of 30% for an additional number of years) of €4.59 billion. In addition, the fee waiver and protocol assistance rewards under the Orphan Regulation during 2000-2017 are estimated to have a value of €0.16 billion.

Table 3: Industry costs and benefits (originators) that can be ascribed to the Orphan Regulation, 2000-2017 (discounted value 2018, prices 2018, in billions of euros)
[204](#footnote205)

|  |  |  |
| --- | --- | --- |
| Effect | Costs | Benefits |
| R&D costs associated with the additional orphan medicines developed (EU part)a | -/- €11.0b |  |
| Sales revenues of additional orphan medicines in EU |  | €19.11b |
| Costs of manufacturing, marketing, distribution and applicable taxes relating to additional sales of orphan medicines in EU | -/- €12,04b |  |
| Extra R&D compensation due to market exclusivity reward |  | €4.59b |
| Cost saving due to protocol assistance and fee waivers |  | €0.16b |
| Total | -/- €23,04b | €23.86b |
| NET BENEFIT | +€0,82b |  |
| Range Net Benefits (minimum – maximum) | -/- €11b to +€11b | |

Source: DG SANTE, on the basis of the Orphan Study (2019)

It is hard to assess the total net benefit to industry in the overall calculation of costs and benefits, given a lack of data on R&D costs, the costs of manufacturing, marketing and distribution, and profit margins. Applying some assumptions enables us to establish the net benefit at about €0.82 billion (over 2000-2017). However, there is a margin of uncertainty around this estimate of net benefit.

First, the costs of research and development are based on figures found in the literature. They may thus be underestimates or overestimates. The full costs of developing the 21 orphan medicines in this analysis have only been compared to revenues generated in the reference period (2000-2017). Many of these products have only been on the market for a relatively short time, and they can reasonably be expected to continue generating revenues and profits for the industry long after 2017. Moreover, revenues from other jurisdictions (such as the US and Japan) were not taken into account when attributing R&D costs to the Regulation, although the global market for orphan medicines is very much dependent on the US.
[205](#footnote206)
 It may thus be assumed that the balance for industry is more positive than a benefit of €0.82 billion over 2000-2017.

-Health sector

The health sector, comprising all medical services needed to treat patients suffering from rare diseases
[206](#footnote207)
, bears the costs of treatment with orphan medicines. These costs consist of the extra use of orphan medicines resulting from the Orphan Regulation and the additional healthcare costs (additional costs of treatment with orphan medicines, minus savings on costs of alternative treatments). As it was not possible to assess the additional healthcare costs, given the limited information provided in the available HTA reports, the extra costs to the healthcare system have been assumed to be equal to the extra revenues realised by industry (sales revenues of €19.1 billion and additional R&D compensation due to the market exclusivity reward of €4.6 billion), making a total of €23.7 billion.

These costs are financed from a combination of public sources (taxation or compulsory health insurance premiums) and private ones (patients’ own contributions in the form of out-of-pocket expenses and voluntary health insurance premiums). For the purpose of this cost-benefit analysis, it has been assumed that 97% (€23.0 billion) of healthcare costs were covered by public funding, while 3% (€0.7 billion) were privately financed.
[207](#footnote208)

Table 4: Costs and benefits due to the EU Orphan Regulation for the health sector, 2000-2017 (discounted value 2018, prices 2018, billions of euros)
[208](#footnote209)

|  |  |  |
| --- | --- | --- |
| Effect | Costs | Benefits |
| Extra costs due to treatment with orphan medicines | -/- €23.7b |  |
| Additional extra costs due to new treatments (e.g. clinical costs) | NDA [209](#footnote210) |  |
| Savings in costs of alternative treatment |  | NDA |
| Public and private financing |  | €23.7b |
| TOTAL | -/-€23.7b | €23.7b |
| NET BENEFIT |  | €0.0b |

Source: Orphan Study (2019)

-Public authorities

In addition to financing public healthcare, public authorities incur additional administrative costs associated with implementing the Orphan Regulation. These additional costs are related to:

·the functioning of the Agency and committees, such as COMP (estimated at €0.02 billion);

·research subsidies provided by the EU and various national governments (estimated at €1.1 billion);

·fee waiver and protocol assistance
[210](#footnote211)
 (estimated at €0.2 billion) as an integral part of the support provided by the Agency.
[211](#footnote212)
 

A large proportion of the additional healthcare costs is reimbursed from collective sources (government budgets, collective health insurance systems, or other sources).

Although healthcare systems across the Member States are organised and funded in different ways, orphan medicines are generally financed from public sources. Survey respondents from national public authorities indicated that, in most Member States (17 out of 20, 85%), the reimbursement mechanism for orphan medicines is the same as for non-orphan products. Orphan medicines are financed by a national health service in the majority of cases (15 out of 20, 75%). In a minority of cases (6 out of 20, 30%), orphan medicines are also partly financed by a health insurance system. For six reporting Member States (30%), out-of-pocket payments are reported.
[212](#footnote213)
 

Table 5: Costs (attributable to the Orphan Regulation) to national governments and the EU, 2000-2017 (discounted value 2018, prices 2018, billions of euros)
[213](#footnote214)

|  |  |  |
| --- | --- | --- |
| Effect | Costs | Benefits |
| Administrative costs to the EMA and national authorities | -/- €0.02b |  |
| Aid for research | -/- €1.1b |  |
| Fee waivers, protocol assistance | -/- €0.2b |  |
| Healthcare financing | -/- €23.0b |  |
| TOTAL | -/- €24.3b | €0.0b |

Source: Orphan Study (2019)

Costs to public authorities attributable to the Orphan Regulation have been estimated at €24.3 billion. They included the estimated costs to healthcare financing of orphan medicines and the additional administrative costs set out in Table 4 (putative benefits to public authorities have not been identified and included).
[214](#footnote215)
  

-Patients and society

This stakeholder group is affected by rare diseases either directly, as patients, or indirectly (e.g. as carers or relatives).

It was assumed in the analysis that in the EU, 97% of all healthcare costs arising from orphan medicines and associated treatments are financed from public sources. At €0.7 billion, the private contribution to healthcare costs was limited.
[215](#footnote216)
 

The societal costs of a disease are considered to be wider than those borne by healthcare systems. The non-healthcare costs of a disease are the use of social services; the costs of involvement of carers, whether professional or informal, outside the healthcare system; and productivity losses resulting from unplanned absences from work or early retirement by patients (or carers). However, any wider societal impact could not be established at the level of the Orphan Regulation.
[216](#footnote217)
 

In fact, the societal cost perspective adopted in the present analysis does not take account of productivity losses in society avoided thanks to the Orphan Regulation. Moreover, the costs and benefits are based on an assessment of the 2000-2017 period, which was the Regulation’s start-up phase. In the longer run, it is to be expected that more generics and biosimilars will enter the market as products’ orphan status expires, resulting in lower costs and/or greater availability of treatment for patients. All this means that the calculated societal cost-effectiveness of the Orphan Regulation presented here is based on a comparatively conservative assessment; it takes account of extra costs, but not of the long-term savings that may be expected in future.

Health benefits reflect the improvement in patients’ quality of life attributable to treatment with orphan medicines. They can be expressed and measured in the number of QALYs
[217](#footnote218)
 that patients gain per incremental cost.
[218](#footnote219)
 The level of health benefits was assessed using information on the incremental cost-effectiveness ratio (ICER)
[219](#footnote220)
 from HTA reports.
[220](#footnote221)
 The Orphan Regulation’s cost-effectiveness for society can be considered acceptable when compared to ICER thresholds in use internationally.
[221](#footnote222)

Based on a multiplication of the calculated ICERs (range €54,000 to €110,000) and the estimated extra healthcare costs presented in Table 4 (Costs and benefits due to the EU Orphan Regulation for the healthcare sector, 2000-2017), an estimated 210,000 to 440,000 QALYs were gained thanks to the Regulation (2000-2017).
[222](#footnote223)
 The wider economic benefits could not be established at the level of the EU Orphan Regulation. However, they are likely to be a positive value, given that rare diseases are often very disabling and represent a heavy burden on society.

Table 6: Costs and benefits to patients arising from the Orphan Regulation, 2000-2017 (discounted value in 2018; prices 2018, billions of euros)
[223](#footnote224)

|  |  |  |
| --- | --- | --- |
| Effect | Costs | Benefits |
| Private contribution to healthcare costs | -/- €0.7b |  |
| Change in non-health costs of disease | NDA |  |
| Health benefits |  | 210,000 – 440,000 QALYs |
| TOTAL | -/- €0.7b |  |

Source: Orphan Study (2019)

To conclude, while the above estimates of costs and benefits to different groups of stakeholders are informative, they cannot directly answer the question of whether the balance of costs and benefits is proportionate or ‘fair’. Most costs ‘trickled down’ to national governments, which has caused frictions, political and otherwise, in recent years. Although no firm conclusions can be drawn as to whether the extra revenues resulting from the Orphan Regulation outweigh the additional R&D investments, it is likely that a more positive value for industry would have been obtained if revenues from non-EU jurisdictions and post-2017 profits had been taken into account in the analysis.
[224](#footnote225)

Affordability

The Regulation’s efficiency is certainly influenced by pricing and reimbursement considerations, which are linked to affordability. However, these lie beyond the EU’s remit.
[225](#footnote226)

The final judgement on the fairness of the balance of costs and benefits is a qualitative assessment based on the value placed on health gains and a reasonable profit margin. Member states applying cost-effectiveness analysis to inform reimbursement decisions for new medicinal products often will do so using QALY. For orphan products specifically an average cost of €54,000 per QALY can be observed based on available cost-effectiveness analyses and market shares (weights for the average).

Nonetheless, even medicines that are assessed as exceeding such threshold values are sometimes reimbursed under pressure by advocacy groups and public opinion. This indicates that within societies there is substantial willingness to pay for medicines to treat rare diseases, sometimes at a very high cost. At the same time, public debate is increasingly focused on medicine prices. Although the discussion is not restricted to orphan medicines, such products have received particular scrutiny, given the market exclusivity offered.

The important question, then, is whether the prices charged for medicines to which additional exclusivity rights are granted are reasonable in relation to the developer’s investments, especially in cases where development was supported by public research funding.

5.2.2. Level of compensation for orphan medicinal products

The main purpose of market exclusivity was to extend the time during which the marketing authorisation holder could charge a ‘monopoly rent’ to recover the investment made.
[226](#footnote227)
 The analysis evaluated whether market exclusivity offers sufficient compensation to encourage investment in developing orphan medicines. This assessment includes a comparison of the market characteristics of orphan and non-orphan medicines, a calculation of the economic value of market exclusivity, and the impact of competition on the compensation provided.

The analysis of turnover of non-orphan, orphan and ‘orphan-like’ medicines in the EU/EEA
[227](#footnote228)
 showed that in 86% of cases turnover levels for orphan medicines were below €100 million per year, with most having a turnover below €50 million. Similar turnover levels could be observed for orphan medicines introduced before the legislation came in (the ‘orphan-likes’). Only for a subset of orphan products (14%) or orphan-likes (17%) was the annual turnover estimated to exceed €100 million. By contrast, the average turnover of non-orphan products introduced after 2000 was estimated to be almost 50% higher than that of orphans.
[228](#footnote229)
 

Table 7: Distribution of average annual turnover (2008-2016) for various types of products in the EU, by turnover class (millions of euros per year)

|  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  | <€10 m | €10-50 m | €50-100 m | >€100 m | Average turnover |
| Orphan-likes (N=82) | 60% | 18% | 4% | 17% | € 79 m |
| Orphan medicines (N=105) | 48% | 25% | 13% | 14% | € 56 m |
| Newly introduced non-orphan medicines (branded products) (N=1,071) | 50% | 20% | 10% | 20% | € 83 m |

Source: Orphan Study (2019)

On average, evidence suggested that market exclusivity extends by 3.4 years the period for which authorised orphan medicines are protected from generic competition. Furthermore, with a sample of 16 orphan medicines it was possible to determine a new equilibrium price for four products,
[229](#footnote230)
 based on the price realised by generic competitors. The economic value of market exclusivity reward for this limited sample of products averaged 30% of total turnover.
[230](#footnote231)

For most orphan products, in particular those with an annual turnover below €50 million and average R&D costs, it was estimated that the market exclusivity reward helped to increase profitability, without giving the sponsor an unbalanced or unfair compensation. However, 14% of orphans had high sales turnovers in the EU (above €100 million) and would not need a 10-year market exclusivity reward to be commercially viable, unless R&D costs were much higher than the average estimates (see Chapter 5.2.1).

However, low turnovers do not necessarily mean that the return on investment in orphan medicines is ‘insufficient’, as this depends on the specific situation. It is important to take into account development costs (which are mostly unknown) and the issue of whether there is generic competition after expiry of any protection for a given product.
[231](#footnote232)
 

5.2.3. Cost reduction and inefficiencies associated with the Orphan Regulation

The following possibilities for cost reduction have been identified.

First, cost savings could be made if the market was able to switch rapidly to generic medicinal products after the expiry of market exclusivity and/or protection of other pharmaceutical incentives. In the analysis of 16 orphan medicines
[232](#footnote233)
, generic competition was observed only for three orphan products; the price decrease at individual level was not known.

Possible reasons could be that other protections are still in effect, either in the EU (patents, SPCs, data exclusivity and market protection) or in the US. Another reason could be the prospect of too small a return on investment.

Also, a substantial share of authorised orphan medicines are biological molecules, so competition depends on developing biosimilars. All surveyed developers of biosimilars indicated
[233](#footnote234)
 that the complexity of development and/or manufacturing influences decisions on whether and when to develop a biosimilar version of an orphan medicine. In addition, matching the quality of the reference orphan medicine can be challenging, as manufacturers control the release of commercial supplies.

As market exclusivity and/or the protection of other pharmaceutical incentives of more authorised orphan medicinal products are set to expire in the next few years, we are likely to see increased generic entry in the near future. Recent data shows that the overall price fall after generic uptake is 50% for medicinal products in general.
[234](#footnote235)
 For orphan medicines, the literature suggests that prices have so far tended to fall more slowly on generic entry.
[235](#footnote236)
 Potential cost reductions could also be achieved by reconsidering those of the Orphan Regulation’s provisions that are designed to limit excessive profits and allow faster entry of similar medicines onto the market, by reducing market exclusivity after five years. Under the existing rules, orphan status cannot be challenged on the grounds of product profitability if such status was not sought on the basis of the ‘insufficient return on investment’ criterion. As applications for orphan designations have so far, in all cases but one, been based on the ‘prevalence’ criterion, it has been practically impossible to trigger a reduction of the market exclusivity period for any orphan product.

Potential inefficiencies and undesirable consequences may also arise from ‘indication stacking’, well-established use, and repurposing, as further explained below.

‘Indication stacking’

There are currently 22 orphan products authorised for two or more orphan indications on the EU market. These indications refer to distinct orphan conditions, and each entitles the product in question to a period of market exclusivity. These periods may run in parallel, with their own start and finish dates. Similar trends can be observed in the US: of 251 orphan medicinal products authorised between 2008 and 2017, 15.9% had two orphan indications, while 7% were approved to treat three or more orphan indications.
[236](#footnote237)

While these products have served patients in need and public health, thanks to the extension of the areas in which they can be used, there are also negative aspects. If a product receives an authorisation for an additional indication or indications, it is assigned a new period of exclusivity for that specific indication. However, it is often unclear whether such a period is really necessary to recover the additional costs of R&D.

While overlapping or consecutive periods of market exclusivity can delay generic entry and may block the development of generic orphan medicines, they cannot prevent generic entry altogether, as each exclusivity period is tied to a specific orphan indication. A manufacturer willing to produce and market a generic version of an orphan medicine once the first market exclusivity period has expired is entitled to do so.

The discussion on whether and how to reward the development of these ‘follow-on’ products, after the orphan medicine is authorised for the first indication, often goes hand-in-hand with concerns about a practice known as ‘salami slicing’. This phenomenon refers to splitting certain common diseases into many ‘artificial’ subsets. Each of these subsets could then be considered a rare disease (such as certain forms of cancer).
[237](#footnote238)
 Under the EU Regulation it is possible to obtain orphan designations for subsets of common diseases (although only subject to stringent conditions). At the same time, advances in personalised medicine, may add another layer of complexity to the current regulatory framework. Such developments may hold great potential for optimal tailoring of treatments to diseases and patients. However they should not lead to unnecessary multiplications of rare diseases out of common diseases, to gain market exclusivity periods.

The number of products authorised for multiple orphan indications in the EU is relatively small, and, in most of those cases the periods of market exclusivity for each indication overlap to a very significant extent. Various stakeholders
[238](#footnote239)
 suggest that reducing the 10-year market exclusivity period for each subsequent indication is a possible way to limit inefficiencies and potential overcompensation. When considering eligibility for orphan designation, it might thus be preferable to consider cumulative prevalence for all the indications covered by the product, rather than the prevalence of each individual indication.

Figure 10: Example of a product with multiple therapeutic indications benefiting from a number of pharmaceutical incentives (including orphan and paediatric incentives)

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_02013.jpg)

This figure illustrates how different pharmaceutical incentives are granted at different stages of a pharmaceutical product’s life cycle. The case study of Glivec,
[239](#footnote240)
 an anti-cancer medicine authorised for a range of orphan indications, may be instructive here. 

A PIP was also conducted, and the company subsequently deregistered Glivec as an orphan medicinal product, which provided the opening to file for an SPC extension and thus to benefit from six months of additional protection under the SPC system. At the same time, the same company still had a similar product (Tasigna) with therapeutic applications that overlapped with those of Glivec. (The company had maintained orphan market exclusivity for this product, which enabled it to benefit from both the orphan and the paediatric system.)
[240](#footnote241)
 

There are currently four generic versions of Glivec on the market. All were granted a marketing authorisation in 2013.

Well-established use and repurposing

19% of orphan medicinal products
[241](#footnote242)
 have reached the EU market under these criteria. By way of a comparison, about 38% of orphan medicinal products newly authorised in the US between 2008 and 2017 were authorised for a new indication of a medicinal product previously approved to treat a rare or non-rare disease.
[242](#footnote243)

Products authorised through this ‘route’ have attracted substantial scrutiny because of recent cases in which producers substantially increased the price of a newly-authorised medicine that was already available to patients, at a far lower price, as a magistral formula or in the form of hospital preparations.

Chenodeoxycholic acid (CDCA) for the treatment of a rare genetic disease, Cerebrotendinous Xanthomatosis (CTX). CDCA was originally developed in 1976 as a treatment for gallstones. However, it had already been used since the late 1970s as an off-label treatment for CTX, most recently as Xenbilox, marketed by Sigma Tau. Since the medicine had not previously been authorised for the treatment of CTX, and as it met the designation criteria, an orphan designation was granted to Leadiant (Sigma Tau’s new name). Not long after this, the company raised the price of the medicine around 500-fold, causing a public outcry, since the investment the company had to make to ‘develop’ the product as an orphan medicine had been minimal: CDCA had already been shown to be safe and effective and it was registered on the basis of a literature review and two retrospective cohort studies.

These price increases often bear no relation to actual R&D costs. Market exclusivity is the main factor enabling them to engage in monopolistic price setting.

The fact that the current regulatory framework for the Orphan Regulation contains no provisions to safeguard the affordability and accessibility of orphan medicines, even when no significant R&D investments have been made, may be regarded as a significant inefficiency. However, the absence of data on the costs of development for such products makes it difficult to objectively estimate what would constitute an appropriate reward.

In 2016, a Commission notice
[243](#footnote244)
 was issued with the aim of limiting inappropriate use of the Orphan Regulation, such as may occur when sponsors apply for orphan designations on products that have long been in use in the medical community. However, it has proven problematic to apply, as the information available in scientific literature on the use of hospital preparations is often very limited. Although sponsors are expected to do due diligence and provide all available evidence from their own studies and literature, the COMP has limited means at its disposal to verify whether the information is complete. A similar trend was observed in the US, where it was noted that the FDA does not always ensure that all information is consistently recorded in its review templates and evaluated when making designation determinations.
[244](#footnote245)

5.2.4.
   How the costs and benefits of the Paediatric Regulation have been distributed

The costs and benefits of the Paediatric Regulation have been quantified for the relevant stakeholder groups and a cost-benefit analysis has been undertaken.

-Pharmaceutical industry

The 2016 economic study estimated the total annual costs incurred by industry in connection with the Paediatric Regulation at €2,106 million, of which €82 million are administrative costs, while the rest is associated with paediatric R&D (mostly concerning clinical trials agreed in PIPs).
[245](#footnote246)
 

Average costs incurred per PIP are estimated at €19.6 million. Of these, 4% (€728,000) are administrative costs arising from the application for a PIP and possible modifications, while 96% (€18.9 million) are R&D costs.
[246](#footnote247)
 These estimated costs are normally incurred over several years, as the average duration of a PIP is between 5 and 10 years (though some are expected to last over 20 years).
[247](#footnote248)
 However, the costs incurred for an individual PIP vary significantly. They depend on such matters as the number of clinical studies included in the PIP, the number of subjects involved in the trials, the duration of a PIP, the therapeutic area, the scale of cooperation with clinical and research networks, and the number of modifications of the PIP that are required. Table 7 shows the estimated average costs of each stage of a PIP, as well as the percentage of PIPs that incur such costs.
[248](#footnote249)
 Details of the calculations concerning the cost of compliance with the Paediatric Regulation are given in Annex 3, in section 1 of the paediatric part.

Table 7: Estimated costs of a PIP, broken down into stages, and the percentage of PIPs that incur such costs (based on data for completed phases only, 2008-2015), in millions of euros)

|  |  |  |  |
| --- | --- | --- | --- |
| Stage | Average | % of PIPs incurring costs | % of PIPs incurring costs if PIP is discontinued |
| Preparation of the initial PIP application | €0.4 | 100 | 100 |
| Annual reporting and further PIP modifications | €0.1 | 55 | 29 |
| Other administrative costs | €0.2 | 42 | 21 |
| In-vitro studies and animal studies | €0.8 | 40 | 36 |
| Development of a paediatric formulation | €1.6 | 47 | 29 |
| Phase II paediatric clinical trials | €7.3 | 48 | 21 |
| Phase III paediatric clinical trials | €15.7 | 72 | 36 |
| Other R&D costs [249](#footnote250) | €14.4 | 44 | 21 |

Source: Study on the economic impact of the Paediatric Regulation (2016)

The system underpinning the Regulation is built on the assumption that products covered by the PIP requirement should be eligible for a reward, once paediatric development is completed, to balance the investments made by industry. However, this is not always the case. In fact, when an adult development programme stops, the PIP is often discontinued as well. The administrative and R&D costs of discontinued PIPs are estimated at €144 million per year.

To calculate the economic value of the SPC reward, the analysis focused on eight products which (1) received an SPC extension between 2007 and 2012, and (2) lost their exclusivity before the third quarter of 2014. The results were then extrapolated to four further products. The sample size was quite small, as only a fraction of products with completed PIPs have lost protection so far, so the data on how this affects revenues are limited. Moreover, the figures for those products may need to be interpreted with some caution, as companies may, in the early years, have prioritised products predicted to earn the highest return on investment through the SPC extension.

There are significant differences between products and countries, most likely linked to the competitiveness of the particular therapeutic market and/or national policies to encourage generic substitution. Consequently the economic value of the SPC extension varies considerably as a percentage of total revenue (between 10% and 93%, averaging 56.6%). Overall, the adjusted economic value of the SPC reward for the eight products concerned amounts to €926 million, with revenues especially geared towards some blockbuster products included in the sample size.
[250](#footnote251)
 Details of the calculations underpinning the analysis of the economic value of rewards and/or incentives are provided in Annex 3 (section 2 of the paediatric part).

The impact assessment conducted on the proposal for a Paediatric Regulation estimated that the value of a six-month extension of the SPC would offset the costs incurred by companies through mandatory paediatric testing. In certain cases, companies would make profits as a result. If an SPC extension is granted, it usually covers the costs incurred through the PIP (€926 million in revenue for 12 products, against average costs of €19.6 million per PIP).

However, it is important to note that up to 2016 only 55% of completed PIPs benefited from a reward. While it is expected that over time the proportion of products that benefit from this reward will increase, as companies start to plan their paediatric research better and earlier, it is unlikely that the success rate will ever reach 100%. This eventuality was not considered in the impact assessment.

In turn, it was not possible to estimate the economic value of the orphan reward and the PUMA. As regards the orphan reward, this was because only a limited number of products have benefited from it, most of which are still under protection. As for the PUMA, the 2016 economic study concluded that, in line with one of the possible scenarios laid down in the impact assessment, this reward does not seem to offer meaningful market exclusivity because the product can, in any case, be subject to off-label use of generics.
[251](#footnote252)
 Furthermore, the fact that the new indication needs to be developed exclusively for children in order to be eligible for the PUMA often makes it too costly and complex, especially for SMEs. All of these points make projections of the commercial value of the product and the possible return on investment less predictable for companies.

Nevertheless, the risk-benefit analysis, detailed in Annex 3 (paediatric part, section 4.7), shows how the economic spill-over effects resulting from private R&D investments, which would not have happened without the Regulation, lead to the creation of more jobs and the promotion of innovation across sectors. A €2 billion investment in R&D associated with PIPs produces a €3.2 billion return in both the pharmaceuticals sector and in other sectors of the economy over 10 years.
[252](#footnote253)

-Regulatory authorities

The Paediatric Regulation says that the EU budget’s contribution to the Agency covers the work of the Agency and its PDCO committee. It is also intended to support the Agency’s activities associated with the publication of paediatric clinical trials and the European network.
[253](#footnote254)
 

It should be noted that part of the costs associated with PIP procedures conducted by the Agency are borne by national competent authorities contributing to the Agency’s scientific work, which are not remunerated. On the basis of unpublished data on the costs of paediatric-related activities collected for the Commission report on the evaluation of the European Medicines Agency’s fee system
[254](#footnote255)
, the annual costs of NCAs for PIP assessment were estimated at €0.6 million, those of waiver assessments at €90,000 and those of compliance checks at about €50,000 per year.
[255](#footnote256)
 

The impact assessment for the Paediatric Regulation estimated increased annual costs to regulators at €5 million, and in particular for EMA. This estimate seems to be correct, as the calculated average cost-base fee for industry for paediatrics was estimated at €4.8 million/year in the fee study.
[256](#footnote257)

-Society and patients

The cost-benefit analysis under the Paediatric Regulation takes account of the benefits to society and children’s health resulting from the Regulation’s application. These benefits are: the switch from off-label to more on-label use of medicines, better treatment for children, fewer adverse drug reactions, shorter periods in hospital, better quality of life for children, increased school attendance, and less time spent by carers. The spill-over effects of industry’s research investments are also taken into account. Details of the cost-benefit model and related calculations are given in Annex 3, sections 3 and 4 of the paediatric part.

The costs to society arise from the extra monopoly rent accruing to the company through the reward system (in particular the six-month SPC extension), which delays the market entry of cheaper generics and pushes up total healthcare expenditure. These extra costs are borne by the healthcare system and individual patients (directly or through their contribution to healthcare-related taxes and health insurance).

The cost-benefit analysis
[257](#footnote258)
 looks at the benefit-cost ratio over 10 years for the eight medicinal products that received a PIP-related SPC extension and which were considered previously.
[258](#footnote259)
 Five of these are used on-label in children, while for the other three data indicate continued off-label use in children after negative PIP studies.

The cash and non-cash benefits for society and child health can be estimated at €199 million. The extra costs to society arising from companies’ monopoly rent, to which revenue received by other beneficiaries, like wholesalers, and taxes must be added, can be estimated at €590 million.
[259](#footnote260)
 Of these, €551 million are estimated to be costs incurred by national health services. This gives a negative ratio overall. Only two of the eight products considered had a strongly favourable benefit-cost ratio. The negative benefit-cost ratio was highest for products with negative PIP studies, as they do not provide any alternative treatment options for children.
[260](#footnote261)

A broader basket of products was also assessed by estimating the future benefits and costs of products that had passed the Agency compliance check and been authorised. This basket also included products which, though required to comply with the PIP obligation, would not receive a SPC extension. These PIPs would result in paediatric products that did not involve costs to society associated with additional monopoly rent.
[261](#footnote262)
 In such a simulation, the benefit-cost ratio for society remains negative, though less so (€500 million versus €590 million).

The impact assessment expected that direct benefits from the Regulation, such as the reduction of adverse effects or shorter hospitalisations, would offset costs incurred through delayed generic entry. However, indirect effects were not taken into account.

The economic spill-over effects resulting from the private R&D investments generated by the Paediatric Regulation are dealt with in the risk-benefit analysis detailed in Annex 3, section 4.7 of the paediatric part. On the basis of companies’ annual investments in PIP-linked R&D of about €2 billion, the total return on investment to society after 10 years was estimated at €6 billion. This figure is significantly higher than the estimated monopoly costs linked to the SPC extension (€590 million).
[262](#footnote263)

5.2.5.
   Inefficiencies of the Paediatric Regulation

The analysis above identifies several inefficiencies that could be addressed.

First, the SPC extension is awarded even if the outcome of the PIP is negative. This means that during the ‘protection period’ society cannot benefit from new paediatric treatments and the entry onto the market of cheaper generics for the adult medicine is delayed. This approach seems to have led to additional costs to society and patients, without any direct additional benefits. However, it is important to remember that a negative PIP still provides relevant data on the potential danger of the use of the product in children.

The reason for the second inefficiency is that paediatric medicines are developed worldwide, so companies often submit parallel requests for marketing authorisation in several countries. Lack of coordination between the requests made by various regulatory agencies in different parts of the world for the specific characteristics of studies to be conducted in children may lead to duplications of research.

To address this issue, the Agency created a ‘paediatric cluster’ in 2007, a monthly exchange between global regulators to discuss the coordination of their actions, first with the FDA and later joined by Japan, Canada and Australia. The objective is to enhance the science of paediatric trials and to avoid undue exposure of children to them. The benefits of this data sharing are a reduction in regulatory costs for companies and increased efficiency. The Agency-Commission joint paediatric action plan provides for further improvements in international cooperation.

Third, the Paediatric Regulation obliges companies to conduct paediatric research for each marketing authorisation application, unless a waiver is deemed appropriate. The small population size may often lead to competition between companies, if several target the same patient group for their respective research programme. This may lead to delays in completion and push up costs.

The 2016 economic study compared the costs of paediatric clinical trials in the EU and the US, both as enrolled study subjects, and as individual paediatric investigations (associated with developing a medicine) and clinical trials.
[263](#footnote264)
 For the EU, cost estimates were based on information on individual PIPs and data on both completed and incomplete R&D phases. US cost estimates were based on data from two prominent studies published in the US. The cost of a paediatric investigation averages €21 million in the US and €18 million in the EU. As regards individual paediatric studies, the estimated amounts were €7 million in the US and €6 million in the EU. The study acknowledged that there were large variations in the sample dataset underlying the cost estimates, so significant uncertainties remained in these estimates. However, it noted that the cost estimates match.
[264](#footnote265)
 
[265](#footnote266)

The new Regulation on clinical trials,
[266](#footnote267)
 which has not yet entered into force, is intended to streamline procedures for getting a clinical trial approved in Europe, particularly for multinational trials. It may help boost efficiency in conducting paediatric clinical trials.

5.2.6.
   Administrative burden

The administrative burden for developers associated with the Orphan Regulation has not been further substantiated, given the assumption that application of the Orphan Regulation is voluntary.
[267](#footnote268)
 

The Regulation is responsible for some administrative burden at Agency level. These costs are relatively small but are likely to increase as the number of applications continues to grow. The issue of increasing workload also affects the national competent authorities contributing to the work of the COMP. The burden associated with the work performed by COMP members falls largely on their home institutions, which currently receive no financial compensation for that work in the absence of fee revenues.
[268](#footnote269)
 

Lastly, some of the Agency’s procedures create additional administrative burden, the necessity and proportionality of which should be examined (e.g. the obligation for sponsors to submit an annual report on the orphan designation to EMA).

As regards the Paediatric Regulation, stakeholders say the PIP application and related administrative procedures consume significant resources,
[269](#footnote270)
 especially the frequent modification of an agreed PIP. Streamlining the PIP process is one of the measures considered in the joint Agency-Commission paediatric action plan.
[270](#footnote271)

The inefficiencies associated with the functioning of the SPC reward procedure are another aspect. The SPCs are granted at national level, meaning that paediatric SPC extensions must be requested independently from the national patent office in each Member State. Each patent office handles applications independently, which may result in divergent decisions.

Some patent offices receive specific training on the SPC procedure under the national regulatory system (e.g. in the Netherlands). This has improved the way these offices deal with SPC submissions.
[271](#footnote272)
 A separate evaluation of the SPC system is currently under way.

From the perspective of public authorities, one particular area that merits attention is the growing administrative burden imposed on the national competent authorities of PDCO members (absences, workload). Since the Regulation took effect, the number of procedures (especially PIPs, modifications, waivers, deferral) has increased, pushing up PDCO’s workload as a result. While there is no evidence that this has adversely affected the quality of assessments, the long-term impact on the proper functioning of the system is unknown.
[272](#footnote273)
 In the short term, the ongoing Agency-Commission paediatric action plan seeks to find ways to streamline some of these procedures, to reduce the burden on the committee.

  

5.3 Relevance

Main findings

The specific objectives of the Orphan and Paediatric Regulations have proven relevant to addressing the problems that existed when the legislation was adopted, and still exist today.

The narrow problem definition on which the orphan legislation is based was not well thought out and was thus inappropriate for addressing wider and more recent needs, such as treatments for infectious diseases. As a result, the current legislation is less relevant than it might be.

The objectives of both the Orphan Regulation and, to some extent, the Paediatric Regulation, have evolved over time. When the Orphan Regulation was designed, the priority was to bring products for patients with rare diseases to the EU market. Today, any legislative intervention in this policy area would also need to guarantee equal access to medicines across the EU. Moreover, the market for orphan medicines has become more financially attractive, as evidenced by the number of companies with orphan medicines in their portfolio. This changing context calls into question whether the system of rewards and incentives instituted by the Regulations remains relevant to current needs.

Finally, ongoing and future developments, both scientific and non-scientific, in the pharmaceutical sector, especially in the field of advanced therapies, personalised medicine and innovative trials design, will have significant implications for the Regulations' relevance in the future. These new products, which challenge the system of orphan designation, call for policy changes in defining orphan condition and deciding which subset(s) to take into consideration when applying for orphan designation.

To assess the relevance of these two Regulations, we need to analyse whether the objectives and tools they set out were and are appropriate to tackle the problems that existed, the issues that are being faced now, and challenges in the near future.
[273](#footnote274)

At the time of the intervention, the problems were identified as a lack of treatment for patients with rare diseases and of medicines specifically studied and developed for children. The legislation therefore focused on these two groups.

Looking at the objectives of each of the instruments, they can be seen as adequate responses to the problems identified at the time. Making medicines for rare diseases available by fostering research and development, and providing the same quality of treatment for patients with rare diseases, certainly addressed the needs of the patients concerned. Research on and testing of medicines for children and providing information about those medicines addressed the lack of targeted medicines for children.

Looking at the problem today, it becomes obvious that the lack of treatment is broader. Lack of treatment affects not only rare diseases, but also infectious diseases. On the one hand there are known diseases for which existing antibiotics no longer work, owing to the development of antimicrobial resistance. On the other hand, there are new diseases, in particular viral diseases, for which adequate medicines have yet to be developed. Since the 1970s, newly-emerging diseases have been identified at an unprecedented rate of one or more a year. There are now nearly 40 diseases that were unknown a generation ago.
[274](#footnote275)
 More research is needed to develop new medicinal products and alternative treatments, as well as innovative anti-infective approaches to tackle this emerging threat.
[275](#footnote276)
 The narrow problem definition used as the basis of the orphan legislation has proven inadequate to address those needs.

The tools of both legal instruments were designed to address the root cause identified at the time: market failure (in particular, the fact that the target group of patients was too small to generate a profit). They were designed to create financial incentives for industry to invest in research, development and clinical trials on medicines in both target groups.

The results in the effectiveness section have shown that the root cause, low expected return on investment, still exists. The comparative analysis shows that turnover levels for orphan medicines can be lower than those of non-orphans, sometimes significantly so. However, this does not necessarily apply to the whole target group as defined in the legislation. The orphan medicine market has become more financially attractive, as proven by the number of companies with orphan medicines in their portfolio and the interest that venture capitalists show in investing in this field.
[276](#footnote277)
 This has resulted in the development of medicines in some therapeutic areas where treatments already exist, while other areas have none. Rare diseases can thus no longer be viewed as a homogeneous group for which no treatments are available, and may need more differentiated tools to direct investments to the areas where they are most needed.

Although antibiotics were not included in the initial consideration of needs and problems, the root cause of low return of investment applies here as well. Pharmaceutical companies are unwilling to invest in developing new antimicrobials because of concerns about non-profitability. In fact, new antimicrobials would need to be developed and kept on the shelf for reasons of antimicrobial resistance.
[277](#footnote278)
 This means there is no market in practice, so companies have no interest in developing new antimicrobials which would bring them no return on investment. Based on this analysis, antibiotics could be assigned an orphan designation under the ‘low return on investment’ criterion in the legislation. However, that tool has not so far boosted investment in this field. This shows that the tools currently available are not fit for purpose. A more in-depth assessment of root causes, along with appropriate tools to tackle the lack of investment, is needed in the area of antimicrobials.

In paediatrics, findings on effectiveness show that rewarding companies for testing medicines for use in children boosted the development of paediatric medicines linked to medicines for adults. However, therapeutic areas involving diseases that affect only children have been left behind. More differentiated tools may thus be needed for paediatrics as well, to direct investments where they are needed most.

The objectives of the orphan and paediatric legislation also implied that an EU authorisation would translate into medicines being accessible to patients in all Member States. However, the tools for progressing beyond the authorisation stage were limited. The legislation relied on industry decisions to make medicines available in each Member State. The main influences on such decisions are companies’ strategic decisions on the one hand, and national pricing and reimbursement policies on the other. However, the legislation contains no provisions that could influence those stages. Although the legislation achieved the objective of making medicines available, it fell short of achieving affordable medicines that are accessible to patients in all Member States.

Progress in science and the changing context

Science has also moved on over the last 20 years, and the tools provided by the two Regulations may no longer be appropriate in the light of these advances.

New types of products and production techniques

While science evolves, the opportunities it provides also increase. The tools laid down in the legislation were designed in line with the approaches to developing and authorising medicines that prevailed at the time. For new types of medicines that do not follow conventional approaches, this may pose challenges.

Advanced therapy medicinal products (ATMPs) and biological medicines account for a growing proportion of all EU orphan designations.
[278](#footnote279)
 They offer many therapeutic advantages in the treatment of rare diseases, particularly those which have the potential to cure such disorders, but also pose challenges as regards applying the Orphan Regulation framework. This framework relies on criteria which must be met if a product is to receive an orphan designation. This designation should ensure that only products addressing a rare disease fall under the scheme. It should also reward development by granting exclusivity, unless a significant benefit can be demonstrated by the new product (or clinical superiority in the case of a similar medicine).

ATMPs may reach the market with limited clinical data via conditional marketing authorisations. The conditional marketing authorisation makes it difficult for COMP to assess at the time of initial authorisation whether the product offers any significant benefit over and above existing treatment options, and hence whether the orphan designation can be confirmed and the company can profit from market exclusivity. In addition, this form of authorisation also challenges the step after the conditional authorisation when Member States need to decide how to price the medicine and provide reimbursement. In targeted surveys, representatives of HTA institutions and Member States have indicated that the limited evidence at the time of granting the conditional marketing authorisations represents a real challenge for assessors who need to determine whether a product is cost-effective and should be admitted into reimbursement systems.
[279](#footnote280)

Over the last 20 years there have been numerous advances in genomic research, making it possible to better define diseases and understand the molecular causes of complex diseases. This change is not new per se but is in constant evolution. The fact that subtypes of new diseases are being identified that were previously thought to be part of a broader disease is beneficial to patients and researchers. In the context of rare diseases, personalised genomic approaches are particularly relevant, as an estimated 80% of rare diseases have a genetic component. With personalised medicine becoming increasingly developed, it could be at the forefront of clinical applications within the next 20 years.

The personalised medicine approach has already shown to be highly cost-effective, with new medicines now available that target, among others, rare diseases such as rare melanoma and cystic fibrosis in patients carrying specific mutations. As mentioned in the Council conclusions of 7 December 2015 on personalised medicine for patients
[280](#footnote281)
, personalised medicine is not only about medicines (pharmaceuticals/medicinal products) but rather about putting the person at the centre of healthcare by better understanding the genetics, the detailed biological mechanisms and interactions with the environment, therefore facilitating the discovery and development of effective treatments for rare and common diseases alike.

Personalised medicine does not change the definition of the disease, but targets better the patient population responding to a certain medicine. Therefore developments in personalised medicine should not lead to unnecessary multiplication of rare diseases out of common diseases and hence to multiplication of exclusivity periods.

The EU’s experience with applications for orphans defined by biomarkers
[281](#footnote282)
 shows that although they can define a valid sub-set of a condition acceptable for orphan designation, there is still a need to demonstrate medical plausibility and significant benefit in the defined condition. The fact that the medicine concerned does not work outside the sub-set it is being developed for must also be demonstrated. However, establishing the absence of efficacy is generally challenging and not a primary goal in the development of medicines (which focuses primarily on establishing safety and efficacy). It is therefore challenging for applicants to provide robust evidence that a product is not efficacious outside a specific sub-set.

In addition, biomarkers are increasingly used in what is known as tissue-agnostic development in oncology, where the product development is not focused on patients with a particular type of cancer, but rather on any patient expressing particular biomarkers, independent of the tissue or origin of the cancer. Treatments developed this way may display activity against multiple types of cancer or subsets thereof, which would require changes to the policy on defining the orphan condition and on which subset(s) should be taken into consideration when applying for orphan designation.

In the US, the use of sub-setting orphan designations through biomarkers is becoming more widespread, particularly in the field of oncology. Between 2009 and 2015, 28% of oncological orphan medicines there were based on biomarker-defined subsets. This represented 12% of all new oncology medicines authorised in that time period. However, as reflected above, opening the EU system to more sub-setting may not bring more developments in areas where there is no treatment available, but could put further strain on national reimbursement systems.

New ways of conducting clinical trials

There have also been major developments in how clinical trials are designed and conducted since the introduction of the Orphan and Paediatric Regulations. These developments can benefit both pharmaceutical companies and patients by improving research productivity and accelerating the rate at which new treatments are brought to market, while also reducing the burden on patients. However, some of these developments affect the way both Regulations can be applied, including the work of the Agency Committees.

For example, basket trial designs are designed around a mechanism of action, providing evidence on the mechanism of action rather than efficacy as such. As the sample sizes within each basket are small, COMP may find it challenging to estimate significant benefit. Furthermore, in cases where basket trials address a novel mechanism of action that presents itself differently from the description in the existing definition of the condition, this can pose challenges in the EMA authorisation procedure similar to the one described above.

As regards the Paediatric Regulation, these novel ways to conduct clinical trials may have a direct effect on the PIP, which requires applicants to submit paediatric investigation plans very early in the development phase. An early design of a PIP creates opportunities for discussion of paediatric matters early on in the development of a product. However, in some cases it may be challenging to consider and design all aspects of medicine development for children in the very early phases of development. This is especially true in the case of innovative and adaptive clinical trials design. This may lead to a subsequent need to amend the agreed paediatric investigation plan several times, which increases the administrative burden and may even delay authorisation. Some of the measures set out in the joint Agency-Commission paediatric action plan
[282](#footnote283)
 are designed to further explore whether there is a non-legislative way of addressing this issue.

To conclude, scientific developments will mostly have a clear positive effect on the potential for developing new treatments for patients with rare diseases. At the same time, they may challenge the framework and application of the Orphan Regulation and, to a lesser extent, that of the Paediatric Regulation. It is therefore important for the regulatory framework to be kept sufficiently up to date with such developments and their potential consequences, so that the framework can capitalise on opportunities while limiting potentially unwanted effects. A main area of tension where the Regulation is being challenged as a result of scientific advances is the definition of an orphan condition.

5.4 Coherence

Main findings

The Orphan Regulation offers a set of incentives that work well together and it is relevant to both smaller and larger developers. The fee waivers, protocol assistance, market exclusivity and support for research complement one another. However, better alignment of timing and information needs between the four Agency Committees dealing with orphan and paediatric medicines could reduce the risk of inefficiencies.

The Orphan Regulation and national research programmes and policies complement and support each other to a large extent. However, there is no monitoring to enable the interplay between EU research funding and the Orphan Regulation to be assessed. More specifically, there are no indicators to demonstrate how public research investments contribute to successful authorisations of orphan medicines. Furthermore, the Orphan Regulation does not interact in a coherent fashion with the Directive on Medicinal Products for Human Use (2001/83/EC) as regards generic entry. The Orphan Regulation only allows developers of generic medicines to initiate an application for a marketing authorisation once the market exclusivity period has expired.

The Paediatric Regulation mostly interacts in a coherent manner with related EU and national legislations and measures. However, national rules on the conduct of trials with children may still delay the completion of a paediatric investigation plan (PIP). Moreover, as regards the SPC extension reward, the fact that this incentive is granted by national patent offices that act independently makes it difficult for companies to forecast whether this can be done successfully. An improvement in the situation for multinational paediatric trials can be expected with the application of the new Regulation on clinical trials and the implementation of the joint Agency-Commission paediatric action plan.

The combined application of the Orphan and Paediatric Regulations has not provided sufficient incentives to foster the development of new innovative medicines for use in children with rare diseases.

In evaluating how the two Regulations fit within a broader over-arching architecture, the degree of consistency between the provisions of each Regulation was analysed (internal coherence). How they relate to other EU (legislative and non-legislative) and national actions (external coherence) was also assessed.

Internal coherence

Orphan Regulation

The various tools provided by the Orphan Regulation work well together to support the development of new orphan medicines. No barriers, overlaps or contradictions were identified. Responses to targeted consultations suggest that the various tools of the Orphan Regulation work together in a coherent manner. The sponsors interviewed said that each tool or incentive served a specific purpose, addressing different aspects and pressure points across the innovation lifecycle. The fee waivers, protocol assistance, market exclusivity and support for research (or for encouraging research) have created a stronger policy response to unmet medical needs than any one of those incentives would have done in isolation. They seem to function in synergy and are not disconnected or confused, according to the interviewees.

Paediatric Regulation

The overall system of obligations and rewards put in place by the Paediatric Regulation is perceived by all the stakeholders interviewed as working in a coherent way.
[283](#footnote284)
 
[284](#footnote285)
 This was also confirmed by the data, as analysed in the effectiveness section.
[285](#footnote286)

However, the fact that the SPC extension is granted by national patent offices that act independently and the timelines for applying for such a reward make it difficult for companies to predict whether the outcome of their request will be successful. Furthermore, the SPC extension leads to higher rewards if paediatric development is linked to adult development (a detailed analysis is provided in the effectiveness section).
[286](#footnote287)

Agency committees
[287](#footnote288)
 

A product may be assessed by up to four
[288](#footnote289)
 Agency committees: COMP for the orphan designation, PDCO for approval of the PIP, CHMP for the benefit-risk assessment required for marketing authorisation, and in the case of ATMPs, CAT has the primary responsibility for the assessment of the application (but the final opinion is adopted by CHMP). CHMP can also grant conditional marketing authorisations on the basis of less comprehensive data.
[289](#footnote290)

The overall opinion
[290](#footnote291)
 of members of the committees was that the committees work reasonably well together and that there are no major issues.

However, a few areas were identified where there had been occasional challenges,
[291](#footnote292)
 which may also lead to inefficiencies:

·CHMP, PDCO, CAT and COMP use different timelines for their assessments and sponsors submit different data to each committee. This can make scientific discussions difficult as they lack common ground, which can adversely affect the outcome or the timing.
[292](#footnote293)

·The timelines associated with decision-making are different for CHMP/CAT and COMP. As a result, the COMP process is not well integrated in the CHMP/CAT process, which may lead to delays in some cases.

·In addition, while it is PDCO that decides on the PIPs, the decision on the orphan designation is taken by the Commission, based on a scientific opinion from COMP. This adds more time to the process.

The majority of developers of orphan medicinal products were broadly positive in the targeted consultation about the coherence of the various committees’ activities. The clarity of communication and on time assessments were widely rated as being coherent. However, the respondents were less positive about the consistency of outcomes, especially the alignment and coherence of procedures among committees.

External coherence

Orphan Regulation

-Other legal instruments

The Orphan Regulation interacts with other EU legislative acts, mainly Directive 2001/83/EC on Human Medicinal Products, the SPC Regulation and the ATMP Regulation.
[293](#footnote294)
 Developers of orphan medicines can benefit from incentives and rewards offered by each of these legal instruments, depending on the product characteristics of the new medicine. However, while the data and market protection periods applicable to all human medicines
[294](#footnote295)
 would allow generic competitors to place generics on the market at the end of the 10-year protection period, for orphan medicinal products
[295](#footnote296)
 generic competitors can only submit an application for marketing authorisation at that point in time. This may delay generic entry.

Developers of orphan medicinal products say that the protections offered by the SPC and the Orphan Regulation have benefited pharmaceutical innovation and the development of orphan medicines in particular. They did not report any specific tensions between the operations of the two Regulations.
[296](#footnote297)

-EU and national research initiatives and programmes

The Orphan Regulation states that medicinal products designated as orphan medicinal products are eligible for incentives made available by the Community and Member States.
[297](#footnote298)

EU research incentives

A variety of EU initiatives and programmes exist that support the development of treatments for rare diseases. The EU has made major investments during the last two decades to support cross-border and interdisciplinary research in almost all medical fields including rare diseases, which has contributed to the understanding of the underlying causes of these diseases and to the development of diagnostics and treatments. Since 2000, more than €1.7 billion has been made available, via the EU Framework Programmes for Research, Technological Development and Innovation (FP5, FP6, FP7 and Horizon 2020), to over 340 collaborative research and innovation consortia (projects) in the area of rare diseases.
[298](#footnote299)
 Such research projects bring together multidisciplinary teams representing universities, research organisations, SMEs, industry and patient organisations from across Europe and beyond. 

Table 8: EU budget allocated to collaborative research & innovation projects on rare diseases

|  |  |  |  |
| --- | --- | --- | --- |
| Framework Programme | Timeframe | EU contribution, millions of euros | Number of projects addressing rare disease(s) |
| FP5 | 1998-2002 | 64 | 47 |
| FP6 | 2002-2006 | 233 | 59 |
| FP7 | 2007-2013 | >624 | >118 |
| H2020 | 2014-2019 | >808 | >137 |

Source: DG RTD (data available up to January 2020)

The field of research into rare diseases has been a good example of success, showing how further investments and resources from across Europe can be brought together to a degree that would not reasonably be possible within an individual Member State, or even a sub-set of Member States acting in isolation. These activities have increased the scale of investment by the public sector in rare disease research.
[299](#footnote300)
 

EU-financed private-public partnerships under the ‘Innovative Medicines Initiative’
[300](#footnote301)
 have also supported projects, thereby speeding up R&D of medicines for rare diseases. The ULTRA-DD project,
[301](#footnote302)
 for instance, was designed to produce new tools and resources to speed up the development of orphan medicines, especially in the areas of autoimmune and inflammatory diseases.

In addition, European Reference Networks (ERNs)
[302](#footnote303)
 play an increasingly important role, not only in research, but also in sharing information to improve diagnosis and the quality of care, as well as in providing clinical practice guidelines in medical fields where expertise is rare.
[303](#footnote304)
 
[304](#footnote305)
 ERNs are expected to have a major structuring effect on research and care by linking thematic expert centres across the EU and providing sustainable clinical networks to pool medical expertise and patient registries’ data on rare diseases.

However, an important question is whether all this public funding spent on research has led to available and accessible new orphan medicines covering an unmet medical need. The information available did not provide sufficient data to answer this question, as there is no legal obligation to follow the development of the product after the first research is conducted. The EU has limited influence over the direction of the research it supports through these programmes. Interplay between these research funding programmes and the EU Orphan Regulation is not monitored or reported in any formal sense. Moreover, research funding agencies (in both Europe and the US)
[305](#footnote306)
 lack quantitative performance indicators to demonstrate the direct correlation of public research investments with the impact of research on society, in terms of benefit to patients (e.g. new treatments, diagnostic tools, rare diseases identified, and orphan medicinal products developed). Often, research does not produce results until several years after the end of the funding period.

At the moment, the funding itself can only be linked to the obligation to have obtained an orphan designation, a prerequisite that has existed since 2009 for receiving Framework Programme funding.
[306](#footnote307)
 There was been a rise of over 50% (see Figure 5 in Chapter 5.1 of this SWD) in both the number of orphan applications submitted and the number of designations granted by the Commission over 2009-2015 (against 2000–2008). In particular, a Horizon 2020 call for Phase I/II clinical trials on rare disease therapies with an orphan designation led to a peak in the number of applications between 2014 and 2016.
[307](#footnote308)
 However, it is still too early to see results in the new orphan medicines authorised.

Another example of EU research funding is the AlphaMan project,
[308](#footnote309)
 leading to the development of an enzyme-replacement therapy for a rare genetic disease called alpha-mannosidase. This resulted in the EU marketing authorisation of Lamzede
[309](#footnote310)
 in 2018, the first ever treatment for this condition.
[310](#footnote311)
 

A non-exhaustive list of successful EU projects can be found on the dedicated DG Research website.
[311](#footnote312)

Member States’ research initiatives

It was also explored how the Orphan Regulation aligns with related measures taken at national level by Member States.

The number of Member States with a national plan supporting rare disease research into the development and availability of orphan medicinal products has grown substantially since 2009.
[312](#footnote313)
 In that year, only four Member States had a national plan or strategy, whereas by 2017 the number had increased to 23 countries.
[313](#footnote314)
 There was, however, no data available to further explore the link between these plans and the orphan designations and authorisations granted.

Paediatric Regulation

The Paediatric Regulation also interacts with EU legislation on the supplementary protection certificate for medicinal products (‘SPCs’) (Regulation (EC) 469/2009) and on clinical trials (Directive 2001/20/EC).
[314](#footnote315)

-SPC legislation

As the Paediatric Regulation provides for the possibility to receive an extension of six months of the SPC when a PIP is conducted, any modernisation or recalibration of the SPC system following the ongoing evaluation of the SPC regulation
[315](#footnote316)
 will influence the paediatric reward system. Any inefficiencies in the SPC extension system that are identified could be addressed in possible future measures following up that evaluation.

-Clinical trial legislation

The Paediatric Regulation resulted in an increase in paediatric clinical trials. The instrument for ensuring that such clinical trials are conducted, respecting the ethical principles
[316](#footnote317)
 for protecting minors from unnecessary testing, and involving children in the decision to participate in a trial or not, is the EU Clinical Trials Directive and Regulation.
[317](#footnote318)
 
[318](#footnote319)
 In substance, the Paediatric Regulation and the EU Clinical Trials legislation can be considered complementary.

However, when a PIP is agreed and the clinical trials need to be approved and conducted, several problems have been reported, such as divergent ethical views at national level on the conduct of trials with children, including requests to delay the conduct of trials with children until after data from adults become available.
[319](#footnote320)
 This may result in companies requesting a deferral of PIPs (or part of them), and consequently in delays in developing medicines for children.

While it is essential that trials are conducted in accordance with strict ethical principles and protect the safety of children, it is considered necessary for assessors to be better aware of the requirements of the Paediatric Regulation and the reasons for the various PIPs.
[320](#footnote321)
 The joint Agency-Commission Paediatric Action Plan provides for measures to tackle these issues.
[321](#footnote322)
 Moreover, the new Clinical Trial Regulation will further harmonise the conduct of multinational trials and increase paediatric expertise in the evaluation of clinical trials. This new legislation is consequently expected to help find solutions to those problems.

-EU non-legislative activities

In addition to identifying certain shortcomings of the Regulation, the Report on the 10 years of experience with the Paediatric Regulation
[322](#footnote323)
 has also identified short-term measures designed to try to improve the implementation of the Paediatric Regulation. To follow up, on such points the joint action plan on paediatrics has been developed to respond to such conclusions.
[323](#footnote324)

-EU-funded research

The impact assessment of the Paediatric Regulation deduced that certain tools set up by the legislation, and in particular the PUMA scheme, should have been complemented by EU research funding. This has not been done via a dedicated fund to promote independent research into the use of substances not covered by a patent or an SPC, as set out in the impact assessment, but via the standard EU research programmes.
[324](#footnote325)
 
[325](#footnote326)

Furthermore, to complement the PUMA scheme, the Committee on Proprietary Medicinal Products Paediatric Expert Group (the predecessor of the PDCO) at the time of the preparation of the legislation developed a list of 65 off-patent medicines considered priorities for research and development. This list continues to be updated by the PDCO; by 2017, 23 projects on 28 off-patent medicines (active substances) had received EU funding.
[326](#footnote327)

Despite having provided significant results in neglected areas, such tools to support research have not resulted in a parallel success of the PUMA scheme.

-Other national initiatives

Member States have also put in place other initiatives which complement the provisions of the Regulation.
[327](#footnote328)
 These include priority review of paediatric clinical trials applications, and fee waivers for the authorisation of paediatric clinical trials (clinical trials are authorised at national level), which streamline the conduct of studies agreed in a PIP. Furthermore, special measures have been put in place to determine the pricing of paediatric medicines or measures to reduce the use of off-label medicines when paediatrically tested alternatives are available on the market.

-International

The development of medicines is often a global affair. Products are studied and marketing authorisations are requested in various regions. Cooperation between international regulators therefore aims on the one hand to exchange information on how to address similar requests and, on the other hand, to provide similar advice and opinions to companies. These activities are ongoing at international level, mainly in ‘clusters’.
[328](#footnote329)
 In the paediatric cluster, the Agency works together with the regulators from the US, Japan, Canada and Australia. In the orphan cluster, it works together with the US regulators.

Analysis of international paediatric activities suggests that the Agency and the FDA’s joint approach to paediatric medicines (the EU and the US have very similar legislative frameworks in this area) has the potential to help reduce regulatory costs for companies in future if they submit in parallel in both regions.
[329](#footnote330)
 The Study on the economic impact of the Paediatric Regulation involved a survey in which companies were asked whether they also used PIP data for their applications to the FDA. This revealed that data from 54% of PIPs were used in some degree when applying to the FDA and/or were subject to ongoing discussions with the FDA.
[330](#footnote331)

Coherence between the two legislations

As around 90% of all rare diseases manifest themselves in childhood,
[331](#footnote332)
 there is a clear need to develop orphan medicines that also cater for children. The main concern raised by ‘non-industry’ stakeholders is the limited development of products suitable for children with rare diseases.
[332](#footnote333)
 
[333](#footnote334)
  As previously described,
[334](#footnote335)
 the Orphan and Paediatric Regulations, both alone and combined, have not provided sufficient incentive to foster the development of medicinal products for children with rare diseases.

  

5.5 EU added value

Main findings

The Orphan Regulation has enabled the parties concerned to respond in a more concerted and effective way to the challenges of developing orphan medicines. Alongside other measures, it has contributed to an increase in R&D activities in nearly all main therapeutic areas. Between 2000 and 2017, 1956 medicines under development were granted an orphan designation. This would not have been reasonably possible at the level of Member States alone, given the lack of sufficient economic incentives for R&D and limited ability to conduct clinical trials on small numbers of patients without sufficient research networks and researchers.

However, if one compares the increase in the number of orphan medicines on the market with the baseline situation before 2000, the added value of the Orphan Regulation is somewhat modest. In terms of time-to-market and availability of orphan medicines, there are substantial differences between Member States, and the added value has been comparatively low for some of them.

The Paediatric Regulation has created a positive trend in developing new medicinal products for children, similar to what has happened in the US from the 1990s on, after the introduction of paediatric legislation there.

Both Regulations respect Member States’ exclusive competences in fields such as the administration of health services, pricing, and reimbursement. Overall, the Regulations work in synergy with other instruments, such as EU research programmes and legislative acts.

EU added value refers to the changes and results observed in the areas of orphan and paediatric medicines across the EU which could not have been achieved through action at regional or national levels. Ideally, EU added value would have been established through a comparison with a counterfactual scenario in which the Orphan Regulation was not implemented (for instance, by making comparisons with another region that is similar to the EU in significant ways, but which has not introduced specific orphan legislation). However, comparable regions like the US and Japan have all introduced broadly analogous policies. There was thus no candidate comparator or source of data on which to construct such a counterfactual situation for orphan medicines.
[335](#footnote336)
 In this way, the Orphan Regulation differed from the Paediatric Regulation, for which such a comparison was possible.

The assessment of EU added value has relied mainly on desk research, specifically on comparisons with the situation in the EU before the Regulations took effect, and on a ‘comparator analysis’.
[336](#footnote337)
 The analysis was complemented by feedback from interviews and the outcomes of the targeted consultations.

Orphan Regulation

The question of whether the Orphan Regulation has generated EU added value is linked with the question of whether the results achieved surpass those which could realistically have been expected at Member States’ level (i.e. through national interventions alone).

The Orphan Regulation was the first legislative act concerning rare diseases in the EU. It represented the start of the development of a coordinated EU strategy to diagnose, treat and care for citizens with a rare disease. In 2009, the European Council of health ministers
[337](#footnote338)
 issued a recommendation for action in the area of rare diseases and recognised the topic as an important public health issue. It encouraged the drawing up and adaptation of national plans and strategies, measures to boost research, and the pooling of expertise at EU level. In 2009, a focus on rare diseases was relatively new and innovative in most Member States and only a few had national plans in place. By 2019, plans had been established in 25 Member States.
[338](#footnote339)
 
[339](#footnote340)

Stakeholders agreed
[340](#footnote341)
 that the Orphan Regulation has catalysed the development and marketing of orphan medicines and that it has contributed in ways that would not have been possible at national level alone, even when aggregated across Member States. At all events, action taken at national level alone could have led to distortions of the EU internal market.

-Subsidiarity

The authorisation of medicinal products, including orphan medicines, is fully harmonised at EU level. Thus Member States could not, and cannot, introduce specific provisions at national level in this field.

Experience in the US and Japan had shown that a key element in an effective policy of supporting R&D for orphan medicines was the creation of an official system of recognition and granting exclusive rights and incentives for a specific period.
[341](#footnote342)

The Orphan Regulation addressed the issue of small populations and market fragmentation directly by creating economies of scale to an extent that would not have been possible through individual national policy initiatives. The market for individual orphan medicines was and is too small even in the larger EU Member States, so any national initiative would have needed to provide substantial incentives for firms to change their investment behaviour.

The Orphan Regulation itself does not prevent Member States from offering additional types of incentives, such as tax rebates or prizes for successfully developed products in chosen areas. These instruments can be helpful, and are part of the measures offered under the regulatory frameworks for orphan medicines in the US and Japan
[342](#footnote343)
 and in some Member States.
[343](#footnote344)
 

Nevertheless, it was found that few EU countries offered specific financial incentives for developers of orphan medicines. Particularly for smaller Member States, it was unlikely that these incentives would have made a clear difference to the pipeline for orphan medicines.
[344](#footnote345)
 
[345](#footnote346)
 
[346](#footnote347)

The Regulation appears to have respected Member States’ exclusive competences, for example in the fields of administration of health services and pricing and reimbursement, as well as in setting taxes and tax incentives for companies. In addition, the provision of healthcare, including prescription of medicines, is the responsibility of Member States. Such national measures have had a major impact on the current accessibility of orphan medicines, as described in the effectiveness section.

-Proportionality

The Orphan Regulation can be seen as a proportionate
[347](#footnote348)
 response to what is a major challenge for all EU Member States, with more than 6000 orphan diseases affecting 35 million European citizens, many of them children.

As mentioned previously,
[348](#footnote349)
 the Orphan Regulation leaves scope for individual Member States to continue playing their part in promoting the development of orphan medicines. Member States maintain the freedom to invest national funds in rare disease research.

Thanks to the Regulation, a European orphan decision-making system was created, without which the EU might have had to rely on products coming from other markets, such as the US or Japan. This could have adversely affected both the number of orphan products and their timely availability to EU patients.

EU legislation also catalysed national initiatives in the fields of rare diseases and orphan medicines. Individual initiatives by Member States in these fields could have led to distortions of the EU internal market.

Paediatric Regulation

-Subsidiarity

As with the Orphan Regulation, Member States could not and cannot introduce specific provisions at national level concerning the authorisation of medicines for children, as this area is fully harmonised at EU level.

The impact assessment conducted in 2004
[349](#footnote350)
 showed that certain Member States had attempted to boost the authorisation of paediatric medicines by encouraging industry to conduct research in children and, where data on use of a medicine in children already existed, to submit applications for marketing authorisations. Such actions by Member States were largely unsuccessful, as they did not result in any increase in the number of paediatric medicinal products or authorised paediatric indications.
[350](#footnote351)
 That was why an intervention at EU level was considered necessary.

The value of the EU legislative intervention can also be assessed by comparing regions that have legislation on paediatric medicines with regions that lack such legislation. The number of new paediatric medicines authorised between 2007 and 2015 in the EU and the US, which have similar paediatric legislation, is twice the number of new paediatric medicines authorised in Canada (which has a voluntary scheme), and is six times higher than in Japan (which has no comparable legislation).
[351](#footnote352)
 These figures suggest that a specific EU legal framework for paediatric medicinal products was necessary to boost the development of medicines for children.

Table 9: New paediatric medicines authorised in 2007-2015.

|  |  |  |  |  |
| --- | --- | --- | --- | --- |
| Region | EU\* | US | Japan | Canada |
| New paediatric medicines | 80 | 76 | 12 | 38 |
| New paediatric indications | 141 | 173 | 38 | 107 |
| Total | 221 | 249 | 50 | 145 |

Note: The data provided by other regions included medicines that are not subject to the obligations of the Paediatric Regulation. For the purpose of this analysis, these medicines (generics, hybrid medicines, biosimilars, etc.) were excluded.

\*EU data include centrally authorised products and national/DCP/MRP products.

The Regulation appears to respect Member States’ exclusive competences. Member States remain responsible for fixing pricing and reimbursement decisions, as well as for setting taxes and tax incentives for companies. Such national measures have a major impact in determining the current accessibility of paediatric medicines on the market.

Moreover, healthcare provision, including prescription of medicines, is the responsibility of Member States. Complementary actions taken by Member States include reviewing clinical trials and data for paediatric medicines, adopting national legislation to reduce off-label use, providing financial support to research networks that focus on developing paediatric medicines, encouraging internal cooperation between networks and connecting existing networks, and creating research infrastructure for studies in children.
[352](#footnote353)
 
[353](#footnote354)

-Proportionality

The Paediatric Regulation can also be viewed as a proportionate
[354](#footnote355)
 response to the lack of appropriately tested and authorised medicines for children. At the same time, it allows scope for individual Member States to continue to play their part in promoting the development of paediatric medicines. Member States maintain the freedom to invest national funds in paediatric research.

It can therefore be concluded that the Paediatric Regulation has helped set a positive trend in developing new medicines for children, similar to what has happened in the US from the 1990s on after the introduction of a comparable legislative framework.

6.Conclusions

New, innovative medicines are essential for providing new opportunities to treat or prevent diseases. Over more than 50 years, EU pharmaceutical legislation has established a framework that encourages the development of such medicines, while also ensuring high standards of quality and safety and enabling the internal market to function smoothly. However, efforts to encourage R&D in the pharmaceutical field may not necessarily have focused on the areas of highest unmet need; rather, it but may have followed scientific leads and market opportunities. Certain therapeutic areas are better served than others. This problem has long been acknowledged for conditions with small target populations, such as rare diseases or specific patient groups, such as children. More recently, it has also been discussed in relation to areas such as antibiotics. 

Efforts made through funding research programmes did not succeed in addressing this issue convincingly. That was why additional legislative tools were considered necessary to support the development of medicines to treat rare diseases and for use in children and to promote greater patient access to such treatments.

The EU Orphan and Paediatric Regulations were introduced in 2000 and 2007 respectively. The Regulations provide a set of incentives for developers of orphan medicines and regulatory rewards accompanied by obligations for paediatric medicines. They are designed to address issues underpinning market failures in these areas.

This evaluation has assessed to what extent these two Regulations they have proven effective, efficient and relevant and bearing EU added value. It has compared the current situation with the situation in Europe before the application of the two Regulations and analysed how they have performed in comparison with the expected outcomes, taking the impact of external factors into account. The internal coherence of the actions of the two regulations as well as their interaction with other policies has also been assessed.

The Orphan Regulation
   

Since the adoption of the Regulation in 2000, 142 orphan medicines have been authorised, of which 131 have remained on the market. The number of marketing authorisations for orphan medicines has not only increased over time, but actually grown substantially faster than for non-orphan medicines. It cannot be claimed that all these 142 products were developed thanks solely to the Regulation. However, it is estimated that between 18 and 24 orphan medicines are direct results of this legislation. Moreover, access has been accelerated. All orphan medicines were available on average nine months earlier and to more people across the EU than would have been the case without the legislation.

Of the 142 authorised orphan medicines, 40 (28%) targeted diseases for which there were no alternative treatment options. The 142 authorised products have helped up to 6.3 million European patients out of roughly 35 million patients in the EU suffering from rare diseases. This is major progress in comparison to 2000, when only a limited number of medicines for specific rare diseases were on the market (and only in some Member States).

The legislation has helped through incentives to redirect investment into neglected areas and to transform therapeutic discoveries into therapies for some patients, but there is a long way to go to meet the needs of all EU patients with rare diseases. Around 95% of rare diseases have no treatment option yet (the same is true in the US). Moreover, legislation cannot replace the need for scientific leads or breakthroughs in research in the first place.

The available figures in efficiency analysis suggest that the market for orphan medicines has become more commercially attractive than it was before 2000. The Regulation introduced a designation process which identifies the pipeline of orphan medicines and, with the prospect of market exclusivity, enables new companies to attract venture capital. Between 2000 and 2017, 1956 medicines under development were granted an orphan designation, covering a large spectrum of therapeutic areas, with anti-cancer treatments accounting for around a third of all designations and authorised products so far. This number indicates a clear positive impact.

However, the transformation from concept (i.e. orphan designation) to authorised orphan medicine remains slow, even bearing in mind that medicines have long development cycles of as many as 10 to 15 years. In this regard, the EU is still lagging behind the US and Japan. In addition, the US has authorised 351 orphan medicines over the last 10 years. Differences between the US and EU may be explained to some extent by the EU’s two-stage process, in which orphan designations must be confirmed at the time of marketing authorisation (as opposed to the US’s one-off designation). Japan’s high approval ratio is consistent with the approach of designating only products with a strong chance of approval.

The Orphan Regulation uses a prevalence threshold (the condition must affect no more than 5 in 10,000 patients in the EEA) as an important criterion for products eligible for support under the Regulation. The evaluation results raise the issue of whether the current prevalence criterion (on its own) is still an appropriate way to define a rare disease, whether a different method for calculating prevalence is needed, or whether a different criterion should be applied. Advances in science, such as personalised medicine approaches and the use of biomarkers, already allow to better target treatments to responder patients. The concept of personalised medicine could add another layer complexity to the current regulatory framework. While such developments may hold great potential for optimal tailoring of treatments to diseases, they should not lead to unnecessary multiplication of rare diseases out of common diseases, neither of exclusivity periods.

The Orphan Regulation uses several incentives to make a previous neglected area more attractive to developers of orphan medicines. However, these incentives come at a cost. The costs to the Member States’ health systems for reimbursing orphan medicines between 2000 and 2017 totalled about €20-25 billion; in addition to the EU and national public funding invested in research.

On the other hand, thanks to orphan medicines, patients gained 210,000 to 440,000 quality-adjusted life years, which constitutes a substantial improvement in the quality of life of patients with rare diseases in the EU. Furthermore, as the costs and benefits are based on an assessment of the 2000-2017 period, it seems quite likely that lower costs and/or higher availability of treatments for patients will apply in the longer term, as more generics and biosimilars will enter the market once existing products’ orphan status expires.

The evaluation gives a nuanced picture of the effectiveness of the incentives provided by the Regulation. Developers of orphan medicines, particularly SMEs, have benefited from scientific advice that seems to have improved the possible success rate of a development. The overall share of SMEs has risen so much that they now account for half of requests for orphan designation. However, SMEs may not necessarily bring orphan medicines to the market themselves, as promising medicines are often acquired by larger pharmaceutical companies at a late stage of development.

One of the shortcomings that has been identified is that research institutes and academia cannot benefit from the fee waiver for which the Regulation provides, as it is reserved for SMEs.

As regards the Regulation’s design, market exclusivity is the main incentive it provides. While the evaluation provides no evidence that might cast doubt on the market exclusivity concept as such, it exemplifies the weaknesses of a one-size-fits-all incentive.

The findings of the evaluation suggest that for the 73% of orphan medicines the market exclusivity reward has helped to increase profitability for these products, without overcompensating the sponsor. However, for the 14% of orphan medicines, the 10-year market exclusivity may have led to overcompensation. Hence the 10-year exclusivity is thus not fully justified for certain orphan medicines. These are often well-established use products, or medicines authorised for multiple orphan conditions.

Low turnovers do not necessarily signify an ‘insufficient’ return on investment for orphan medicines, as this depends on the specific situation: it is important to take account of development costs and whether there is any generic competition after the expiry of any protection for a given product. Without any precise data on development costs, it was difficult to estimate what would constitute an appropriate reward for the reduced return on investment of an orphan medicine. Nor is it easy to estimate the level of return of investment above which no reward is needed.

The real effect of market exclusivity was calculated to be an additional protection period averaging 3.4 years (in addition to the protection provided by patents/SPCs). The corresponding value of this reward was estimated at 30% of revenues from sales of orphan medicines. The cost-benefit analysis for the pharmaceutical industry due to the Regulation has been positive.

Generic competition, according to the evaluation study, has only been observed for very few products to date. As market protection incentives will only expire in the coming years for several authorised orphan medicines, it seems likely that there will be increased generic entry from that moment. For orphan medicines, however, the literature suggests a slower price fall upon generic entry in comparison to other medicines. Among other factors, this may be because an application for a generic of an can be submitted i.e. only on the day the exclusivity period of the orphan medicine expires.

While the Regulation includes a mechanism to reduce the exclusivity period if a product is deemed to be profitable, the conditions under which the market exclusivity can be reduced to six years ex post are difficult to apply and rarely used. This finding goes hand-in-hand with the fact that only one application has been received under the ‘insufficient return on investment’ criterion, and that was subsequently withdrawn. This has shown that it is hard to estimate future investments and the returns on them in advance, before the therapeutic indications for which the product may be used have been established, and before the price at which it is to be sold is clear.

In recent years, it has been suggested that the ‘insufficient return on investment criterion’ could be used by developers in the field of novel antimicrobials. However, so far it has failed to attract companies, despite the unmet need and the clear market failure in this area.

The Regulation’s potential inefficiencies and undesirable consequences were identified in certain cases. There are 22 orphan products authorised for two or more orphan indications, each referring to distinct orphan conditions, which are entitled to multiple periods of market exclusivity (‘indication stacking’). Although it is desirable to broaden the therapeutic areas for which an orphan medicine can be used and this should be encouraged to serve patients in need. However, it is often unclear whether the additional market exclusivity period was needed to recover the additional costs of R&D. Additional orphan indications have been also identified as a barrier to developing generic orphan medicines. However, the overall ‘inefficiency’ is limited as the number of products authorised for multiple orphan indications in the EU is relatively small, and in most cases there is a very big overlap in the periods of market exclusivity for each indication. Finally, indication stacking should be seen in the light of advances in personalised medicine.

Medicines that were n well-established use as a magistral or officinal formula before their authorisation as orphan medicines, or which are repurposed established medicines, account for 19% of orphan medicinesin the EU. This is a lower figure than in the US. However, recent cases in which producers substantially increased the price of a newly-authorised orphan medicine that was already available to patients as a magistral or officinal formula, at a much lower price, have raised questions about this authorisation route. These price increases seem to bear no relation to actual R&D costs.. Although price setting lies beyond the remit of the orphan Regulation, additional market exclusivity seems to be the main factor influencing monopolistic price setting in these cases. Consideration should therefore be given to the possibility of the Regulation’s providing differentiated incentives, depending on the type of application for marketing authorisation or the level of investment in R&D.

There may be room for simplification and streamlining of internal processes including different scientific committees within the European Medicines Agency to avoid the risk of inconsistencies and delays in some cases. Furthermore, some procedures create additional administrative burdens and it should be considered if they are still necessary and proportionate (e.g. the obligation for sponsors to submit an annual report on the orphan designation to the Agency).

The instruments for which the legislation provides have been supported by a variety of EU initiatives and programmes, such as collaborative research and innovation projects, all aiming to boost the development of treatments for rare diseases. In addition, Member States have funded national programmes to support patient care and research into rare diseases. Despite this remarkable financial effort, the information available does not allow a direct link to be made between the publicly funded research projects on rare diseases and the orphan medicines actually developed. The reason for this is that the Regulation and the specific research programmes lack monitoring arrangements.

It is worth pointing out here that the Regulation is only one element in a set of measures designed to improve the situation of patients with rare diseases. The timely diagnosis of a rare disease or the availability of expert centres in the EU, which are now supported by the European Reference Networks, are other examples. Although important, the Orphan Regulation is only one piece in this puzzle.

Finally, the tools provide by the Regulation to ensure that patients suffering from rare conditions have the same quality of treatment as any other patient have only proven partially effective. While the availability of orphan medicines has increased under the Regulation, their accessibility varies considerably across Member States, mainly owing to factors beyond the Regulation (such as strategic launch decisions made by marketing authorisation holders, national pricing policies and the characteristic of reimbursement systems). The Regulation does not impose any obligation to marketing authorisation holders to market an authorised orphan medicine in all Member States. Nor does it contain any provisions on such matters as transparency of R&D costs or return on investment, to facilitate downstream decisions that would influence the affordability and accessibility of orphan medicines.

The Paediatric Regulation

As regards the Paediatric Regulation, the main innovation to improve the landscape was the introduction of a legal obligation for all new medicines under development.

This has resulted in an increase of almost 50% in clinical trials including children and in over 1000 paediatric investigation plans (PIPs) agreed. While most PIPs are still ongoing, given the long development time of medicinal products, the number of PIPs completed is gradually increasing, and 60% of all PIPs have been completed in the last three years.

The number of paediatric products authorised has also increased after the adoption of the Regulation. By 2016, 101 paediatric medicines and 99 new paediatric indications had been centrally authorised. In the same period, 10 new paediatric medicines received a national authorisation and 57 new paediatric indications were added to nationally authorised products.

In addition, the submission and analysis of clinical data already available before the Regulation took effect have enabled information on use in children to be added to almost 200 medicines. This means that these medicines can now be used more safely to benefit children.

These results are consistent with the impact assessment, which predicted that it would take 10 to 15 years for all patent-protected medicines (unless specifically exempted) to be specifically tested for children, and up to 20 years for most medicines to be authorised for paediatric use.

In contrast to these positive results, the evaluation also found that new paediatric products such as orphan drugs are not being developed in the therapeutic areas where needs are greatest. The Regulation has no effective instrument for channelling R&D into specific therapeutic areas. Development has been boosted mainly in areas where adult development was already planned. It thus looks as if the Regulation works best in areas where the needs of adult and paediatric patients overlap. However, major therapeutic advances have mostly failed to materialise for diseases that are rare and/or unique to children, and which often receive equal amounts of support under the orphan legislation. The existing design of the obligations laid down in the legislation may not be up to the task of capturing all adult developments that could potentially benefit children. For example, medicines are increasingly studied on the basis of their mechanism of action. The mechanism of action of a product developed to treat an ‘adult-only’ disease could also be helpful in treating a different disease in children. However, the Regulation exempts products for adult-only diseases from the obligation of designing a PIP. Another example concerns innovative clinical trial design, which may face difficulties with fitting in with the way PIPs are currently designed and agreed.

Moreover, the existing design of the rewards may not be such as to support the prioritisation of product development in areas of specifically paediatric need. This is true of the main reward the Regulation offers: the possibility of obtaining a six-month extension of the supplementary protection certificate (SPC) to offset the cost of conducting the mandatory clinical studies in children. This reward has not proven effective in encouraging industry to develop medicines in line with children’s most pressing needs, where these differ from the needs of adults. Economically speaking, it actually brings far greater benefits for products with larger sales volumes. Most such products are medicines developed for use in adults as well as children.

The other major rewards provided by the Regulation, the additional two years of market exclusivity (the ‘orphan reward’) and the paediatric use marketing authorisation, PUMA, have rarely been used. They have thus done little to boost development in areas of unmet paediatric needs. The orphan reward, which cannot be granted in addition to the six-month extension of the SPC, is considered less valuable by developers than the SPC extension. Consequently, developers prefer to seek an SPC extension whenever possible.

The PUMA scheme, designed to channel EU research funds into boosting the development of new paediatric indications in off-patent medicines, has yielded disappointing results so far. However, about 20 PUMA-related PIPs are currently under way, so outcomes may improve in the next few years. Factors beyond the Regulation are the main reasons for the PUMA scheme’s failure to yield more than a limited number of products. One example is the difficulty of obtaining higher prices than those applicable to the existing product, to cover the cost of new clinical research. Another is the difficulty encountered in conducting paediatric clinical trials of old products that are already available on the market and often widely used off-label. This outcome did not come as a surprise; the impact assessment had already predicted it as a possible scenario.

The Regulation includes some instruments to ensure that a paediatric medicine is placed on all EU markets once its PIP is completed and it has been authorised. Yet accessibility of paediatric medicines on EU markets can still be problematic. Their launch in the various EU markets is closely linked to the launch of the adult equivalent. This results in what are known as ‘staggered roll-outs’.

In economic terms, the cost-benefit analysis conducted reveals a balance that is positive for both industry and society if one weighs up all the Regulation’s impacts, both direct and indirect. This shows that combining obligations and rewards is an appropriate way to boost the development of children’s medicines. However, the use of rewards was limited to 55% of the potentially eligible PIPs completed. At the same time, the SPC extension resulted in over-compensation in some cases and under-compensation in others. These facts indicate that the current system has certain limitations.

There have been comments from industry that the SPC system, regulated by a separate EU legislative act, is complex. Companies have to apply independently for SPCs (and for extensions) to patent offices in each Member State, which grant them independently. The SPC legislation is currently undergoing evaluation. While any modernisation or recalibration may address some of the inefficiencies identified, it could also directly affect the functioning of the paediatric reward system and thereby the Regulation itself. This shows the risks of using an ‘external’ legal instrument to provide the main reward available under the Regulation.

The legislation itself is perceived as burdensome by industry because it requires companies to establish the paediatric research plan – including the design of the paediatric trials – with the Agency at an early stage of development. At those early stages, however, overall product development may be subject to considerable change, requiring changes to the PIP as a result. This means the companies concerned have to submit requests for modifications to the Agency. This is particularly problematic in the case of an innovative trial design, where development plans are often shaped by the results obtained in previous phases of clinical development. Developers also see the national authorisation of paediatric trials as potentially burdensome, since it may in certain cases contradict what has already been agreed on in a PIP.

These aspects can be expected to improve with the application of the new Regulation on clinical trials, which will better harmonise the conduct of multinational trials and the implementation of the ongoing joint Agency-Commission paediatric action plan, which explores possible ways to improve the PIP procedure.

Outlook

When the Regulations were designed, the main priority was to increase the number of products for patients with rare and paediatric diseases in the EU. The Regulations met these objectives. However, expectations have developed further. It is recognised that the marketing authorisation stage is an interim step which does not necessarily mean that a given product is available across the EU, let alone that it is affordable for national health systems. Moreover, even within the small area of orphan and paediatric diseases, needs differ or change over time. Clustering of products is observable in some areas, while in others R&D is wholly absent, leaving high unmet needs. The Regulations have no tools to boost development in specific therapeutic areas of orphan and paediatric medicines. Scientific leads, market forces and expectations regarding revenues continue to exercise a strong influence on investment decisions.

From the outset, the two Regulations were never intended to be isolated measures to address the challenges identified. They were added to existing instruments, such as research funding and other policy tools, which could not on their own fully compensate for companies’ lack of interest in investing in this area.

Accordingly, this means that the effects of the Paediatric Regulation cannot be viewed in isolation. Although it is an enabler, its objectives need to be aligned with other policies in order to create a seamless ecosystem from R&D to marketing. Any future adaptations would need to take all stages of public intervention into account. They would also need to take account of where public intervention is most effective and ensure that different interventions complement one another. Such an approach is necessary to prevent market-driven considerations from dominating this priority area.

Publicly funded research is important in this regard. However, not enough information was available to show whether public funding for research programmes had produced new orphan medicines for unmet medical needs, let alone whether they were available and readily accessible to patients across the EU.

While the two Regulations had appropriate objectives in terms of tackling market failure, the instruments chosen have had some unintended effects and created inefficiencies which need to be corrected. For example, orphan designations are sometimes granted on the basis of the prevalence criterion to products that have high returns on investment.

Moreover, some scientific developments could challenge established concepts used in both Regulations. Current legal definitions, used in both instruments, are directly linked to the concept of a disease and, for orphan medicines, to the prevalence of the condition. These legal provisions require amendment to ensure that the Regulations accommodate new scientific developments.

Finally, new issues such as unequal access and affordability create tensions and call for action. However, the Regulations can only go so far in addressing such issues, which are largely dependent on external factors.

Any future response to the shortcomings and future challenges identified in this evaluation should strike a balance between incentives for innovation on the one hand, and availability and patient access (for orphan and paediatric patients) on the other. These aspects are closely linked with the key objectives of the Pharmaceutical Strategy for Europe, of which orphan and paediatric legislation is part. The purpose of the Strategy is to create a future-proof regulatory framework through a wide-ranging examination of the pharmaceutical sector. Any changes to the orphan and paediatric framework will need to demonstrate that it contributes to these goals. Such changes should encourage investment in research and technologies that will actually reach patients and meet their therapeutic needs, while addressing market failures.

:   [(1)](#footnoteref2)
     
       The Orphan Regulation incentivises new developments while the Paediatric Regulation rewards the companies for testing the possible use of their medicines in children.
:   [(2)](#footnoteref3)
     
    <Ex-post evaluations are used throughout the European Commission to assess whether a specific intervention was justified and whether it worked (or is working) as expected in achieving its objectives and why.>
:   [(3)](#footnoteref4)

    [Wakap at al, Eur j Hum genetics, (28) p.165, 2019](https://www.nature.com/articles/s41431-019-0508-0)
:   [(4)](#footnoteref5)
     
       COM(2017) 626.
:   [(5)](#footnoteref6)
     
       
    <https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12421-Pharmaceutical-Strategy-Timely-patient-access-to-affordable-medicines>
:   [(6)](#footnoteref7)

    [Data obtained from the Agency.](Data obtained from the Agency. )
:   [(7)](#footnoteref8)

    <Council conclusions on strengthening the>
     [balance]( balance)
     in the pharmaceutical systems in the EU and its Member States https://www.consilium.europa.eu/en/press/press-releases/2016/06/17/epsco-conclusions-balance-pharmaceutical-system/
:   [(8)](#footnoteref9)
     
       ‘Options for improving access to medicines’; EP resolution of 2 March 2017 (2016/2057(INI)).
:   [(9)](#footnoteref10)
     
       EP resolution of 15 December 2016 on the regulation on paediatric medicines (2016/2902(RSP)) 
    [http://www.europarl.europa.eu/doceo/document/TA-8-2016-12-15\_EN.html#sdocta7](http://www.europarl.europa.eu/doceo/document/TA-8-2016-12-15_EN.html)
:   [(10)](#footnoteref11)
     
       Introduction of the explanatory memorandum to the Commission proposal for the Orphan Regulation (COM(1998) 450 final).
:   [(11)](#footnoteref12)
     
       Alternatively, the EU would have needed to rely on ‘free-riding’ of US-approved medicines, which could have had a negative impact both on the number of orphan products and their timely availability to EU patients. Moreover, some Member States had considered acting independently at the time, and therefore EU action was considered necessary to avoid distortion of the internal market in an already heavily regulated field of medicines.
:   [(12)](#footnoteref13)
     
       Section ‘Other incentives’ in explanatory memorandum (COM(1998) 450 final).
:   [(13)](#footnoteref14)
     
       Section 6.1.1 of the 2019 Orphan study report.
:   [(14)](#footnoteref15)
     
       See Article 3(2) of (implementing) Regulation No 847/2000.
:   [(15)](#footnoteref16)
     
       Article 3(1) sub b of the Orphan Regulation.
:   [(16)](#footnoteref17)
     
       Article 9(1) of the Orphan Regulation.
:   [(17)](#footnoteref18)
     
       Protocol assistance offers the sponsor of a designated orphan medicine the possibility of requesting advice from the Agency on the conduct of tests and trials, as it is a scientific advice for medicinal products which receives an orphan designation (Article 6 of the EU Orphan Regulation).
:   [(18)](#footnoteref19)
     
       Regulation 726/2004.
:   [(19)](#footnoteref20)
     
       See Article 8 of the Orphan Regulation.
:   [(20)](#footnoteref21)
     
       See Article 37 of the Paediatric Regulation.
:   [(21)](#footnoteref22)
     
       Article 8(2) of the EU Orphan Regulation.
:   [(22)](#footnoteref23)
     
       Section 1.4.2. of the Study on the economic impact of the supplementary protection certificates, pharmaceutical incentives and rewards in Europe (2018).
:   [(23)](#footnoteref24)
     
       Chapter 2.1 of the 
    [Study on the economic impact of supplementary protection certificates, pharmaceutical incentives and rewards in Europe](https://ec.europa.eu/health/sites/health/files/human-use/docs/pharmaceuticals_incentives_study_en.pdf)
     (2018).
:   [(24)](#footnoteref25)
     
       Articles 15 and 16 of the Paediatric Regulation, No 1901/2006.
:   [(25)](#footnoteref26)
     
       Article 11 of the Paediatric Regulation, No 1901/2006.
:   [(26)](#footnoteref27)
     
       Articles 20 and 21 of the Paediatric Regulation, No 1901/2006.
:   [(27)](#footnoteref28)
     
       The SPC system is codified in Regulation (EC) No 469/2009.
:   [(28)](#footnoteref29)
     
       The SPC adds up to a maximum of five years of additional patent time for innovative active ingredients for medicinal products in cases where they have lost more than five years of effective protection owing to the length of time taken by R&D.
:   [(29)](#footnoteref30)
     
       Regulation (EC) No 469/2009 of the European Parliament and of the Council of 6 May 2009.
:   [(30)](#footnoteref31)
     
       Article 30 of the Paediatric Regulation.
:   [(31)](#footnoteref32)
     Ciani O, Jommi C. The role of health technology assessment bodies in shaping drug development. DrugDes Devel Ther. 2014;8:2273-2281 https://doi.org/10.2147/DDDT.S49935
:   [(32)](#footnoteref33)
     
       See, for instance, the Interim report on Orphan diseases and drugs (Saphir Europe), February 1995, and Section 2.1 of the Study to support the evaluation of the EU Orphan Regulation (Technopolis Group and Ecorys – August 2019).
:   [(33)](#footnoteref34)
     
       5 of these 15 products belonged to the group of ‘immunomodulating agents’, 3 addressed diseases of the blood & blood-forming organs like leukaemia, and another 3 addressed diseases of the alimentary tract and metabolism. The rest addressed diseases of the genito-urinary system and the nervous system.
:   [(34)](#footnoteref35)
     
       Orphanet Report Series, 2019.
:   [(35)](#footnoteref36)
     
       See Orphan study report (2019), Section 2.3.
:   [(36)](#footnoteref37)
     
       See Orphan study report (2019), Section 2.2.
:   [(37)](#footnoteref38)
     
       Like endocrine therapy, immunostimulants or immunosuppressants.
:   [(38)](#footnoteref39)
     
       See Orphan study report (2019), Section 2.2.
:   [(39)](#footnoteref40)
     
       
    [5-year Report to the European Commission, General report on the experience acquired as a result of the application of the Paediatric Regulation](https://ec.europa.eu/health/sites/health/files/files/paediatrics/2012-09_pediatric_report-annex1-2_en.pdf)
    .
:   [(40)](#footnoteref41)
     
       The Agency’s five-year report (Section 3).
:   [(41)](#footnoteref42)
     
       
    [COM(2004)599 final Commission extended impact assessment](https://ec.europa.eu/smart-regulation/impact/ia_carried_out/docs/ia_2004/sec_2004_1144_en.pdf)
     and the Agency’s five-year report to the Commission (Section 3).
:   [(42)](#footnoteref43)
     
       Allocated to 23 projects for basic research, clinical research, and to set up European registries and databases and pan-EU rare disease networks.
:   [(43)](#footnoteref44)
     
       See Orphan study report (2019), Section 2.5 (France, Italy, Spain, Denmark and Sweden).
:   [(44)](#footnoteref45)
     
       Directive 2001/20/EC.
:   [(45)](#footnoteref46)
     
       Comparison of availability and access in the EU to medicines that came to the market through orphan jurisdictions in the US and Japan before 2000. See also Section 2.2. of the Orphan study report (2019).
:   [(46)](#footnoteref47)
     
       Using data from a 
    [US Government Accountability Office Report on orphan drugs (November 2018)](https://www.gao.gov/assets/700/695765.pdf)
    .
:   [(47)](#footnoteref48)
     
       Chapter 1 of the 
    [Study on the economic impact of supplementary protection certificates, pharmaceutical incentives and rewards in Europe](https://ec.europa.eu/health/sites/health/files/human-use/docs/pharmaceuticals_incentives_study_en.pdf)
     
    <(2018)>
    <.>
:   [(48)](#footnoteref49)

    <Commission notice on the application of Articles 3, 5 and 7 of Regulation (EC) No 141/2000 on orphan medicinal products; C/2016/7253; OJ C 424, 18.11.2016, p>
    <p>
    <. 3–9>
    <.>
:   [(49)](#footnoteref50)
     
       
    [Guideline on aspects of the application of Article 8(1) and (3) of Regulation (EC) No 141/2000: Assessing similarity of medicinal products versus authorised orphan medicinal products benefiting from market exclusivity and applying derogations from that market exclusivity](https://ec.europa.eu/health/sites/health/files/files/orphanmp/doc/c_2008_4077_en.pdf)
    <.>
:   [(50)](#footnoteref51)
     
       
    [Guideline on the aspects of application of Article 8(2) of Regulation (EC) No 141/2000: Review of the period of market exclusivity of orphan medicinal products](https://ec.europa.eu/health/sites/health/files/files/orphanmp/doc/c_2008_4051_en.pdf)
    <.>
:   [(51)](#footnoteref52)
     
       Commission Regulation (EC) No 2049/2005 of 15 December 2005 laying down, pursuant to Regulation (EC) No 726/2004 of the European Parliament and of the Council, rules regarding the payment of fees to, and the receipt of administrative assistance from, the European Medicines Agency by micro, small and medium-sized enterprises.
:   [(52)](#footnoteref53)

    [Section 3.4 of](Section 3.4 of ) 
    [the](the ) 
    <Orphan study report (2019).>
:   [(53)](#footnoteref54)

    <Commission Staff Working Document on the>
     [experience acquired with the Orphan Regulation from 2000 to 2005.]( experience acquired with the Orphan Regulation from 2000 to 2005.)
:   [(54)](#footnoteref55)
     
       Section 5.2. of the Orphan study report (2019).
:   [(55)](#footnoteref56)
     
       These numbers are further benchmarked against the performance of the Orphan Drugs Act in the United States in Chapters 5.1 (effectiveness) and 5.2 (efficiency).
:   [(56)](#footnoteref57)
     
       
    [US Government Accountability Office Report on orphan drugs (November 2018)](https://www.gao.gov/assets/700/695765.pdf)
    [, p. 23.](, p. 23. ) 
    See further elaboration of the benchmark with the US in Chapter 5.1 (effectiveness).
:   [(57)](#footnoteref58)
     
       Section 5.4.4. of the Orphan study report (2019).
:   [(58)](#footnoteref59)
     
       
    [https://www.forbes.com/sites/nicolefisher/2015/04/22/are-ma-replacing-rd-in-pharma/#4f7c8116a21d](https://www.forbes.com/sites/nicolefisher/2015/04/22/are-ma-replacing-rd-in-pharma/)
:   [(59)](#footnoteref60)
     
       
    <https://www.ema.europa.eu/en/committees/paediatric-committee-pdco>
:   [(60)](#footnoteref61)
     
       Communication from the Commission (2014C 338/01).
:   [(61)](#footnoteref62)
     
       Section 3 of the Commission five-year report.
:   [(62)](#footnoteref63)
     
       Agency’s 10 years report, section 3.1, 10 years of the EU paediatric regulation (COM(2017)626) and annual reports from the 
    [Agency](https://ec.europa.eu/health/human-use/paediatric-medicines_en)
    <.>
:   [(63)](#footnoteref64)
     

    Ibid.
:   [(64)](#footnoteref65)
     
       Under Article 11 of the Paediatric Regulation, a waiver can be agreed if the products may be inefficient or unsafe in children, if the disease they intend to treat does not exist in children, or if the product would not bring a significant therapeutic benefit compared with an existing treatment.
:   [(65)](#footnoteref66)
     
       Article 34.4 of the Paediatric Regulation.
:   [(66)](#footnoteref67)
     
       
    <https://ec.europa.eu/health/human-use/paediatric-medicines_en>
:   [(67)](#footnoteref68)
     
       Article 26 of the Paediatric Regulation.
:   [(68)](#footnoteref69)
     
       
    [Report from the Agency to the European Commission 2018](https://ec.europa.eu/health/sites/health/files/files/paediatrics/2018_annual_report.pdf)
:   [(69)](#footnoteref70)
     
       Including new paediatric pharmaceutical formulations and indications.
:   [(70)](#footnoteref71)
     
       EMA, 10-year report, section 1.1 and annual reports from the 
    [Agency](https://ec.europa.eu/health/human-use/paediatric-medicines_en)
    .
:   [(71)](#footnoteref72)
     
       Articles 45 and 46 of the Paediatric Regulation.
:   [(72)](#footnoteref73)
     
       Commission 10-year report.
:   [(73)](#footnoteref74)
     
       EMA annual reports to the European Commission, 
    <https://ec.europa.eu/health/human-use/paediatric-medicines_en>
    <.>
:   [(74)](#footnoteref75)
     
       
    [Commission Staff Working Document on the experience acquired as a result of the application of Regulation (EC) No 141/2000 on orphan medicinal products and account of the public health benefits obtained](https://ec.europa.eu/health/sites/health/files/files/orphanmp/doc/orphan_en_06-2006_en.pdf)
:   [(75)](#footnoteref76)
     
       Inventory of Union and Member State incentives to support research into, and the development and availability of, orphan medicinal products: 
    [2015](https://ec.europa.eu/health/sites/health/files/files/orphanmp/doc/orphan_inv_report_20160126.pdf)
    , 
    [2005](https://ec.europa.eu/health/sites/health/files/files/orphanmp/doc/inventory_2006_08_en.pdf)
    , 
    [2002](https://ec.europa.eu/health/sites/health/files/files/orphanmp/doc/updinventory_0802_en.pdf)
    .
:   [(76)](#footnoteref77)
     
       
    [Better Medicines for Children From Concept to Reality.](https://ec.europa.eu/health/sites/health/files/files/paediatrics/2013_com443/paediatric_report-com%282013%29443_en.pdf) 

    [State of Paediatric Medicines in the EU, 10 years of the EU Paediatric Regulation](https://ec.europa.eu/health/sites/health/files/files/paediatrics/docs/2017_childrensmedicines_report_en.pdf)
    <.>
:   [(77)](#footnoteref78)
     
       
    [General report on the experience acquired as a result of the application of the Paediatric Regulation (5-year Report to the European Commission, July 2012)](https://ec.europa.eu/health/sites/health/files/files/paediatrics/2012-09_pediatric_report-annex1-2_en.pdf)
    ;
    [General report on the experience acquired as a result of the application of the Paediatric Regulation (10-year Report to the European Commission, August 2017)](https://ec.europa.eu/health/sites/health/files/files/paediatrics/2016_pc_report_2017/ema_10_year_report_for_consultation.pdf)
    <.>
:   [(78)](#footnoteref79)
     
       
    [Roadmap for the evaluation of the legislation on medicines for children and rare diseases (medicines for special populations)](https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/1248-Evaluation-of-the-legislation-on-medicines-for-children-and-rare-diseases-medicines-for-special-populations-)
:   [(79)](#footnoteref80)
     
       
    [Multi-stakeholder workshop held at the Agency on 20 March 2018.](https://www.ema.europa.eu/en/documents/report/how-better-apply-paediatric-legislation-boost-development-medicines-children-report-multi_en.pdf)
:   [(80)](#footnoteref81)
     
       Conference organised by the Commission, ‘
    [Medicines for Rare Diseases and Children: Learning from the Past, Looking to the Future’](https://ec.europa.eu/health/sites/health/files/files/paediatrics/docs/ev_20190617_report_en.pdf)
    . 17 June 2019.
:   [(81)](#footnoteref82)
     
       Study to support the evaluation of the EU Orphan Regulation, final report, July 2019).
:   [(82)](#footnoteref83)
     
       
    [Study on the economic impact of the Paediatric Regulation, including its rewards and incentives](https://ec.europa.eu/health/sites/health/files/files/paediatrics/docs/paediatrics_10_years_economic_study.pdf;)
     (2016).
:   [(83)](#footnoteref84)
     
       
    [Study on the economic impact of supplementary protection certificates, pharmaceutical incentives and rewards in Europe](https://www.copenhageneconomics.com/dyn/resources/Publication/publicationPDF/5/445/1527517171/copenhagen-economics-2018-study-on-the-economic-impact-of-spcs-pharmaceutical-incentives-and-rewards-in-europe.pdf)

    <(Copenhagen Economics, 2018)>
    <.>
:   [(84)](#footnoteref85)

    <Aggregated data on uptake and costs of incentives relat>
    <ing>
     [to the EU Orphan Regulation were provided.]( to the EU Orphan Regulation were provided.)
:   [(85)](#footnoteref86)

    <IQVIA is a contract research and analytical>
     services organisation that collects data including global pharmaceutical sales data (
    <https://www.iqvia.com/>
    ). MPA Business Services is a business intelligence and market research company for the pharmaceutical and healthcare industry. It provides services including patent analytics services (
    <http://mpasearch.co.uk/>
    ).
:   [(86)](#footnoteref87)
     
       See the abstract of the Orphan study (2019).
:   [(87)](#footnoteref88)
     
       
    [Study on the economic impact of supplementary protection certificates, pharmaceutical incentives and rewards in Europe](https://ec.europa.eu/health/sites/health/files/human-use/docs/pharmaceuticals_incentives_study_en.pdf)

    <( 2018)>
    <.>
:   [(88)](#footnoteref89)

    <Section 8.2.2. of the Orphan study report (2019).>
:   [(89)](#footnoteref90)

    [The contractor had referred to](The contractor had referred to ) 
    <‘>
    <normal profit margins>
    <’>
     [without quantifying]( without quantifying ) 
    <them>
     [(and]( (and ) 
    <de facto>
     [counting]( counting ) 
    <profits as costs). See, for further explanation, Chapter 5.2.1. of this SWD.>
:   [(90)](#footnoteref91)

    [Better Medicines for Children, From Concept to Reality;](https://ec.europa.eu/health/sites/health/files/files/paediatrics/2013_com443/paediatric_report-com%282013%29443_en.pdf) 

    [State of Paediatric Medicines in the EU 10 years of the EU Paediatric Regulation](https://ec.europa.eu/health/sites/health/files/files/paediatrics/docs/2017_childrensmedicines_report_en.pdf)
    <.>
:   [(91)](#footnoteref92)

    [General report on the experience acquired as a result of the application of the Paediatric Regulation (5-year Report to the European Commission, July 2012)](https://ec.europa.eu/health/sites/health/files/files/paediatrics/2012-09_pediatric_report-annex1-2_en.pdf)
    ;
    [General report on the experience acquired as a result of the application of the Paediatric Regulation (10-year Report to the European Commission, August 2017)](https://ec.europa.eu/health/sites/health/files/files/paediatrics/2016_pc_report_2017/ema_10_year_report_for_consultation.pdf)
:   [(92)](#footnoteref93)
     
       
    <https://ec.europa.eu/health/human-use/paediatric-medicines_en>
:   [(93)](#footnoteref94)

    [US Government Accountability Office Report on orphan drugs (November 2018)](https://www.gao.gov/assets/700/695765.pdf)
    <, p. 23.>
:   [(94)](#footnoteref95)

    <For all calculations, see Section 1.4.2. of Annex 3.>
:   [(95)](#footnoteref96)
     
       Idem.
:   [(96)](#footnoteref97)
     
       Murakami M and Narukawa M, Drug Discovery Today, (2016), 21(4):544-549.
:   [(97)](#footnoteref98)
     
       See also Annex 7 (International context).
:   [(98)](#footnoteref99)
     
       US Government Accountability Office Report on orphan drugs (November 2018), p. 7.
:   [(99)](#footnoteref100)
     
       See Chapter 5.2 and Annex 3 of this SWD.
:   [(100)](#footnoteref101)
     
       Section 10.2 of Orphan study report (2019).
:   [(101)](#footnoteref102)
     
       A natural monopoly that could give pharmaceutical companies a very strong bargaining position in price negotiations with payers. (Section 1.1 of the Study on the economic impact of supplementary protection certificates, pharmaceutical incentives and rewards in Europe (2018)).
:   [(102)](#footnoteref103)
     
       US Government Accountability Office Report on orphan drugs (November 2018), pp. 31-32.
:   [(103)](#footnoteref104)
       
    [Inventory of EU and national incentives to support research and development](https://ec.europa.eu/health/sites/health/files/files/orphanmp/doc/orphan_inv_report_20160126.pdf)
    <.>
:   [(104)](#footnoteref105)
     
       Section 7.1.1. of the Orphan study report (2019).
:   [(105)](#footnoteref106)
     
       An analysis of this reward will be provided in Chapter 5.1.3. of this SWD.
:   [(106)](#footnoteref107)
     
       Section 7.1.1. of the Orphan study report (2019).
:   [(107)](#footnoteref108)
     
       Section 7.5.2. of the Orphan Study report (2019).
:   [(108)](#footnoteref109)
     
       SMEs are micro, small and medium-sized enterprises (companies employing fewer than 250 people, with an annual turnover not exceeding EUR 50 million, and/or an annual balance sheet total not exceeding EUR 42 million.
:   [(109)](#footnoteref110)
     
       Although in a recent US report developers downplayed the significance of US incentives for developing orphan drugs (US Government Accountability Office Report on orphan drugs, November 2018, p. 31).
:   [(110)](#footnoteref111)
     
       See also Annex 7 for a comparison of incentives offered by the EU, US and Japanese regulatory frameworks.
:   [(111)](#footnoteref112)
     
       70% of global revenues from orphan medicines come from the US (Orphan Drug Report 2019, EvaluatePharma). See also Chapter 5.2. of this SWD.
:   [(112)](#footnoteref113)
     
       The concept was important for decision making. Value in Health, Volume 22, Issue 11, November 2019, pp. 1275-1282;
:   [(113)](#footnoteref114)
     
       See, inter alia, the outcomes of the European Commission Conference on ‘Medicines for Rare Diseases  and Children: Learning from the Past, Looking to the Future’ (June 2019) – details in Annex 2 (Synopsis report).
:   [(114)](#footnoteref115)
     
       See Section 5.4.1 of the Orphan study report (2019).
:   [(115)](#footnoteref116)
     
       Orphan products, like any medicinal product, must be clinically tested before attaining marketing authorisation. While the legislation may act as enabler, it cannot substitute inherent research challenges that affect product development.
:   [(116)](#footnoteref117)
     
       US Government Accountability Office Report on orphan drugs, November 2018.
:   [(117)](#footnoteref118)
     
       See Chapter 2 (Baseline and points of comparison) of this SWD. These ‘orphan-likes’ were not formally labelled as orphan products in the EU, but have likely also served the rare disease population in the EU.
:   [(118)](#footnoteref119)
     
       Such as endocrine therapy, immunostimulants or immunosuppressants.See Section 2.2. of the Orphan study report (2019).
:   [(119)](#footnoteref120)
     
       
    [US Government Accountability Office Report on orphan drugs, November 2018](https://www.gao.gov/assets/700/695765.pdf)
    , p. 23.
:   [(120)](#footnoteref121)
     
       Idem, p. 30.
:   [(121)](#footnoteref122)
     
       Article 3C of Commission Regulation (EC) No 847/2000 of 27 April 2000 laying down the provisions for implementation of the criteria for designation of a medicinal product as an orphan medicinal product and definitions of the concepts ‘similar medicinal product’ and ‘clinical superiority’. Available at  
    <https://ec.europa.eu/health//sites/health/files/files/eudralex/vol-1/reg_2000_847/reg_2000_847_en.pdf>
    . Accessed 13 January 2019.
:   [(122)](#footnoteref123)
     
       Owing to major developments in the field of ATMPs, the definition of ‘similar medicinal product’ was amended in 2018 by Commission Regulation (EC) 2018/781.
:   [(123)](#footnoteref124)
     
       Brabers, Moors, Van Weely, & La De Vrueh, (2011) ‘Does market exclusivity hinder the development of follow-on orphan medicinal products in Europe?’ Orphanet J Rare Dis, 6: 59.
:   [(124)](#footnoteref125)
     
       Nguengang Wakap S, Lambert DM, Olry A, Rodwell C, Gueydan C, Lanneau V, et al. Estimating cumulative point prevalence of rare diseases: analysis of the Orphanet database. Eur J Hum Genet. 2019. 10.1038/s41431-019-0508-0.
:   [(125)](#footnoteref126)
       Special Report No 21/2019, ‘Addressing antimicrobial resistance: progress in the animal sector, but this health threat remains a challenge for the EU’ (European Court of Auditors, November 2019).
:   [(126)](#footnoteref127)
      
       Generating Antibiotic Incentives Now (GAIN), part of the Food and Drug Administration Safety and Innovation Act (FDASIA).
:   [(127)](#footnoteref128)
     
       For detailed calculations, see Section 1.4.2. of Annex 3.
:   [(128)](#footnoteref129)
       Commission Staff Working Document on the experience acquired with the Orphan Regulation from 2000 to 2005.
:   [(129)](#footnoteref130)
     
       Stakeholders suggested that, to improve overall availability and access, measures are needed that focus on greater alignment of pricing and reimbursement policies and procedures and on joint procurement and negotiation. Sections 6.2.3. and 9.5.2. of the Orphan study report (2019)).
:   [(130)](#footnoteref131)
     
       This was measured through IQVIA sales data (2008–2016), where any sales figure larger than zero is considered indicative of availability of a medicine on the market.
:   [(131)](#footnoteref132)
     
       Source: analysis of IQVIA data in Section 6.2.1. of the Orphan study report (2019). This included withdrawn and expired orphan medicines.
:   [(132)](#footnoteref133)
     
       Parallel imports and exports of medicinal products are a lawful form of trade within the EU Single Market. However, in certain cases Member States may restrict parallel trade, as long as the measures are justified, reasonable and proportionate, to ensure a legitimate public interest. (
    <https://europa.eu/rapid/press-release_IP-18-3459_en.htm>
    ).
:   [(133)](#footnoteref134)
     
       See also Section 2.2 of the Study on the economic impact of the supplementary protection certificates, pharmaceutical incentives and rewards in Europe (2018).
:   [(134)](#footnoteref135)
     
       Section 2.2 of the Study on the economic impact of the supplementary protection certificates, pharmaceutical incentives and rewards in Europe (2018).
:   [(135)](#footnoteref136)
     
       Gross domestic product, measuring the overall size of an economy with derived indicators such as GDP per inhabitant (per capita). See also: https://ec.europa.eu/eurostat/statistics-explained/index.php/National\_accounts\_and\_GDP
:   [(136)](#footnoteref137)
     
       Health ministries are typically involved in laying down the policies and criteria that determine how public funds can be directed for pharmaceutical products.
:   [(137)](#footnoteref138)
     
       A health technology assessment measures the added value of a new health technology compared to existing ones. Examples of health technologies include medicinal products, medical equipment, diagnostic and treatment methods, rehabilitation, and prevention methods (see also: 
    <https://ec.europa.eu/health/technology_assessment/overview_en>
    ).
:   [(138)](#footnoteref139)
     
       See Section 6.2.2. of the Orphan study report (2019).
:   [(139)](#footnoteref140)
       Sarnola, K. et al. Eur J Clin Pharmacol 74, 895–902 (2018).
:   [(140)](#footnoteref141)
       Malinowski KP et al. Front. Pharmacol. 9:1263 (2018).
:   [(141)](#footnoteref142)
     
       Section 9.5 of the Orphan study report (2019).
:   [(142)](#footnoteref143)
     
       Section 9.5.2 of the Orphan study report (2019).
:   [(143)](#footnoteref144)
     
       
    <https://ec.europa.eu/health/technology_assessment/eu_cooperation_en>
:   [(144)](#footnoteref145)
     
       A doctor needs to be aware of the availability and potential benefits of a treatment before they can allow a prescription. Usually, this involves a form of codification in prescription guidelines developed by medical professional associations. Additionally, adequate capacity needs to be available to correctly diagnose a rare disease. These factors influence doctors’ decisions when prescribing medicines for patients.
:   [(145)](#footnoteref146)
     
       Section 6.2.2. of the Orphan study report (2019).
:   [(146)](#footnoteref147)
     
       
    [Replies](https://ec.europa.eu/health/sites/health/files/files/paediatrics/2016_pc_report_2017/2016_pc_report_2017_summary.pdf)
     to the public consultation on the Commission report on the Paediatric Regulation.
:   [(147)](#footnoteref148)
     
       10 years of the EU paediatric regulation, report from the Commission to the European Parliament and the Council (COM(2017) 626, Section 3 and 
    [annual reports from the Agency](https://ec.europa.eu/health/human-use/paediatric-medicines_en)
    .
:   [(148)](#footnoteref149)
     
       10 years of the EU paediatric regulation, report from the Commission to the European Parliament and the Council (COM(2017) 626, Section 8 – source: EudraCT.
:   [(149)](#footnoteref150)
     
       Section 3.5 of the Agency’s 10 years report.
:   [(150)](#footnoteref151)
     
       Idem.
:   [(151)](#footnoteref152)
     
       10 years of the EU paediatric regulation, report from the Commission to the European Parliament and the Council (COM(2017) 626, Section 3.
:   [(152)](#footnoteref153)
     
       Section 1.1 of the Agency 10 years report.
:   [(153)](#footnoteref154)
     
       Articles 45 and 46 of the Paediatric Regulation.
:   [(154)](#footnoteref155)
     
       Chapter 2 of the Agency 10 years report.
:   [(155)](#footnoteref156)
     
       Product-specific and class waivers 10 years report from the Agency (Section 3) and Commission 10-year report (Section 4).
:   [(156)](#footnoteref157)
      
       In 2016, 486 were product-specific waivers. By 2018, the figure had risen to over 600 product-specific waivers.
:   [(157)](#footnoteref158)
     
       Article 11 of the Paediatric Regulation.
:   [(158)](#footnoteref159)
      
       The new US legislation, set to become fully applicable in 2020, will incorporate the concept of mechanism of action and observed changes in oncology drug development towards histology-independent indication. See: 
    <https://www.congress.gov/115/plaws/publ52/PLAW-115publ52.pdf>
:   [(159)](#footnoteref160)
     
       Section 3.14 of the Agency 10 years report.
:   [(160)](#footnoteref161)
     
       Idem 199.
:   [(161)](#footnoteref162)
     
       According to preliminary data received by the Agency.
:   [(162)](#footnoteref163)
     
       Article 20 of the Paediatric Regulation states that deferrals are to be granted when it is appropriate to conduct studies in adults prior to initiating studies in the paediatric population or when studies in the paediatric population will take longer to conduct than studies in adults.
:   [(163)](#footnoteref164)
     
       Article 41 of the Paediatric Regulation.
:   [(164)](#footnoteref165)
     
       
    <https://www.ema.europa.eu/en/human-regulatory/research-development/paediatric-medicines/paediatric-clinical-trials>

    [(](( ) 
    <https://www.clinicaltrialsregister.eu/>
    [)]() )
:   [(165)](#footnoteref166)
     
       Study on the economic impact of supplementary protection certificates, pharmaceutical incentives and rewards in Europe (2018), Chapter 4.1.3.
:   [(166)](#footnoteref167)
     
       10 years of the EU paediatric regulation, report from the Commission to the European Parliament and the Council (COM/2017/0626, Section 6).
:   [(167)](#footnoteref168)
     
       Study on the economic impact of supplementary protection certificates, pharmaceutical incentives and rewards in Europe (2018), Chapter 5.
:   [(168)](#footnoteref169)
     
       Products with annual revenues exceeding USD 1 billion.
:   [(169)](#footnoteref170)
     
       See chapter 3.2.2. of this evaluation.
:   [(170)](#footnoteref171)
     
       Section 6.2.1. of the Agency’s 10 years report.
:   [(171)](#footnoteref172)
     
       Articles 36 and 37 of the Paediatric Regulation.
:   [(172)](#footnoteref173)
     
       Chapter 5 (case study Glivec) of the Study on the economic impact of the supplementary protection certificates, pharmaceutical incentives and rewards in Europe (2018).
:   [(173)](#footnoteref174)
     
       Mukattash TL, Millership JS, Collier PS, McElnay JC. Healthcare professional experiences and attitudes on unlicensed/off-label paediatric prescribing and paediatric clinical trials. Eur J Clin Pharmacol. 67(5):449-461, 2011.
:   [(174)](#footnoteref175)
     
       
    [Public consultation](https://ec.europa.eu/health/human-use/paediatric-medicines/developments/2016_pc_report_2017_en)
     conducted by the Commission with a view to drawing up the report to the European Parliament and the Council on the 10 years of the Paediatric Regulation (see Annex 2, Synopsis report, for details of the consultation.
:   [(175)](#footnoteref176)
     
       
    [Public consultation on the functioning of the Paediatric regulation conducted by the Commission in 2016](https://ec.europa.eu/health/sites/health/files/files/paediatrics/2016_pc_report_2017/2016_pc_report_2017_summary.pdf)
:   [(176)](#footnoteref177)
     
       This also emerged at the conference held by the Commission in June 2019.
:   [(177)](#footnoteref178)
     
       Section 3.1 of the Agency 10 years report.
:   [(178)](#footnoteref179)
     
       Section 3.2 of the Agency 10 years report.
:   [(179)](#footnoteref180)
     
       10 years of the EU paediatric regulation, report from the Commission to the European Parliament and the Council (COM(2017) 626, Section 4 (period of reference: 2007-2015).
:   [(180)](#footnoteref181)
     
       For example, the inventory of 
    [therapeutic needs](https://www.ema.europa.eu/en/human-regulatory/research-development/paediatric-medicines/needs-paediatric-medicines)
     developed by the Agency in accordance with Article 43 of the Paediatric Regulation was designed to help developers of medicinal products identify opportunities; this activity is ongoing in the joint Agency-Commission paediatric action plan (action 1).
:   [(181)](#footnoteref182)
     
       Estimating cumulative point prevalence of rare diseases: analysis of the Orphanet database, European Journal of Human Genetics, 2019.
:   [(182)](#footnoteref183)
     
       Section 5.4.5 of the Orphan study report (2019).
:   [(183)](#footnoteref184)
     
       Section 3.17 of the Agency 10 years report.
:   [(184)](#footnoteref185)
     
       Section 9.1.2 of the Orphan study.
:   [(185)](#footnoteref186)
     
       10 years of the EU paediatric regulation, report from the Commission to the European Parliament and the Council (COM(2017) 626, section 3.
:   [(186)](#footnoteref187)
     
       Article 36(3) of the Paediatric Regulation.
:   [(187)](#footnoteref188)
     
       Article 33 of the Paediatric Regulation.
:   [(188)](#footnoteref189)
       Article 35 of the Paediatric Regulation.
:   [(189)](#footnoteref190)
     
       Communication to the Commission about a Draft Proposal for a European Parliament and Council Regulation (EC) on orphan medicinal products and Explanatory Memorandum (p. 6 - impact on firms).
:   [(190)](#footnoteref191)
     
       
    <https://ec.europa.eu/smart-regulation/impact/ia_carried_out/docs/ia_2004/sec_2004_1144_en.pdf>
:   [(191)](#footnoteref192)
     
    [Directorate-General for Research and Innovation](https://op.europa.eu/en/publication-detail?p_p_id=publicationDetails_PublicationDetailsPortlet&p_p_lifecycle=1&p_p_state=normal&p_p_mode=view&_publicationDetails_PublicationDetailsPortlet_javax.portlet.action=author&facet.author=RTD&language=en&facet.collection=EUPub)
     (
    [European Commission](https://op.europa.eu/en/publication-detail?p_p_id=publicationDetails_PublicationDetailsPortlet&p_p_lifecycle=1&p_p_state=normal&p_p_mode=view&_publicationDetails_PublicationDetailsPortlet_javax.portlet.action=author&facet.author=COM,ECFIN,TASKF,OIL,OIB,REPRES_NLD,REPRES_LVA,JLS,ERC,MARKT,MARE,REGIO,REA,BEPA,PRESS,BDS,ELARG,PMO,REPRES_LIT,AGRI,REPRES_SPA_BCN,SPP,ECHO,EAPH,REPRES_GBR_LON,REPRES_EST,FPI,REPRES_SPA_MAD,CASSTM,CNECT,DIGIT,HOME,ENER,REPRES_HUN,IEEA,EASME,COMP,REPRES_CZE,REPRES_BGR,SCR,REPRES_MLT,REPRES_PRT,REPRES_CYP,REPRES_HRV,CLIMA,EAHC,REPRES_SWE,REPRES_SVN,DEL_ACC,INFSO,EACI,ETHI,DG18,DG15,DG10,CHAFEA,REPRES_DEU_MUC,REPRES_POL_WAW,ESTAT,DEVCO,DGT,EPSC,GROW,SANTE,NEAR,FISMA,JUST,COM_CAB,SCAD,REPRES_GBR,REPRES_POL,TASKF_A50_UK,REPRES_SPA,REPRES_FRA,REPRES_ITA,ACSHHPW,PC_BUDG,IAB,RSB,PC_CONJ,COM_COLL,ACSH,EVHAC,PC_MTE,REPRES_DEU,REPRES_SVK,JUSTI,REPRES_DEU_BON,SCIC,REPRES_FRA_PAR,SJ,SG,REPRES_POL_WRO,OLAF,REPRES_DEU_BER,CCSS,FSU,REPRES_IRL,HR,REPRES_LUX,REPRES_FIN,TAXUD,COMMU,SANCO,ENTR,AUDIT,IGS,REPRES_ITA_MIL,MOVE,BUDG,REPRES_ROU,RTD,IAS,BTL,TENTEA,BTB,CMT_EMPL,DG01B,DG01A,REPRES_BEL,REPRES_GBR_CDF,ENV,DG23,DG17,DG07,DG03,DG02,DG01,REPRES_AUT,INEA,EMPL,EAC,TRADE,TREN,REPRES_ITA_ROM,RELEX,AIDCO,REPRES_GRC,EACEA,REPRES_GBR_BEL,REPRES_FRA_MRS,REPRES_GBR_EDI,REPRES_DAN,JRC,DEV,SRSS,HAS,STECF,DPO,SAM_ADV,UKTF,REFORM,DG22,DG14,DG11,DEFIS,IDEA&language=en&facet.collection=EUPub)
    ): ‘Rare diseases: A major unmet medical need’, November 2017; https://ec.europa.eu/info/publications/rare-diseases\_en
:   [(192)](#footnoteref193)
     
       Study on the economic impact of the supplementary protection certificates, pharmaceutical incentives and rewards in Europe ( 2018).
:   [(193)](#footnoteref194)
     
       Idem; Section 2.1, Impact on innovation.
:   [(194)](#footnoteref195)
     
       For more details, see Section 1.4.2. of Annex 3.
:   [(195)](#footnoteref196)
     
       There are two types of sponsors in the pharmaceutical industry: developers of innovative medicines (‘originators’) and developers of generic medicines. While both originators and developers of generic medicines need to cover the costs of manufacturing, marketing and distribution of orphan medicines in the EU, it is the originators that cover R&D costs. These costs are limited for developers of generic medicines.
:   [(196)](#footnoteref197)
     
       Section 8.2.2. of the Orphan study report (2019).
:   [(197)](#footnoteref198)
     
       Section 8.2.2. of the Orphan study report (2019).
:   [(198)](#footnoteref199)
     
       The sum of €11 billion corresponds to the rounded extra R&D costs of 21 extra products attributed to the EU Regulation. See also Section 2.1. of Annex 3.
:   [(199)](#footnoteref200)
     
       Section 8.3.2. of the Orphan study report (2019).
:   [(200)](#footnoteref201)
     
       This 70% is derived from the assumption of a 30% ‘market rent’ due to the orphan exclusivity.
:   [(201)](#footnoteref202)
     
       See, for instance, Hill et al., 2018, that aimed to ‘estimate the generic price that can be achieved if profit margins are competitive’. Although more specific profit margins are likely applicable to this specific market setting (low volume and low number of competitors), these were not readily retrievable from the literature.
:   [(202)](#footnoteref203)
     
       A margin of 7% (10% of 70%) is the amount remaining (after subtracting the 30% exclusivity reward) as a ‘competitive profit margin’ (a margin that would apply, for instance, where there is generic market competition). 37% x 19.11b = 7.07 billion as a net benefit of additional orphan medicines in the EU. This implies that the cost of selling these extra orphans is 12.04b (19.11b - 7.07 b).
:   [(203)](#footnoteref204)
     
       Almost 45% of this is attributable to sales from newly developed orphan medicines, another 44% is due to faster access to the EU/EEA market for the other 110 orphan medicines, and 11% can be attributed to the wider spread of medicines.
:   [(204)](#footnoteref205)
     
       Section 8.2.2. of the Orphan study report (2019).
:   [(205)](#footnoteref206)
     
       70% of global revenues from orphan medicines come from the US alone (Orphan Drug Report 2019, EvaluatePharma).
:   [(206)](#footnoteref207)
     
       Section 8.2.1. of the Orphan study report (2019).
:   [(207)](#footnoteref208)
     
       See Section 2.4. in Annex 3 for assumptions.
:   [(208)](#footnoteref209)
     
       Section 8.2.3. of the Orphan study report (2019).
:   [(209)](#footnoteref210)
     
       No data available.
:   [(210)](#footnoteref211)
     
       The Agency’s fee system was evaluated in 2019. The outcome of this evaluation shows that the current fee system is generally efficient and effective, including in funding some non-fee-generating and uncompensated activities, as well as reductions and fee waivers. See: 
    <https://ec.europa.eu/health/human-use/legal-framework/ema_fees_en>
:   [(211)](#footnoteref212)
     
       The costs of this assistance, incurred by the Agency, are fully financed by the EU.
:   [(212)](#footnoteref213)
     
       See Section 1.4.2. of Annex 3 for detailed calculations.
:   [(213)](#footnoteref214)
     
       See Section 2 of Annex 3 for detailed calculations.
:   [(214)](#footnoteref215)
     
       See Section 2.3. of Annex 3 for detailed calculations.
:   [(215)](#footnoteref216)
     
       See Section 2.4. of Annex 3 for detailed calculations.
:   [(216)](#footnoteref217)
     
       The calculated societal cost-effectiveness (outcome-efficiency expressed in terms of euros per health effect gained) of the Orphan Regulation is not out of line with the upper cost-effectiveness values commonly observed in health economic evaluations of new technologies for EU healthcare systems.
:   [(217)](#footnoteref218)
     
       QALYs (quality-adjusted life years) are 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 quality of life.
:   [(218)](#footnoteref219)
     
       Direct impacts on healthcare costs are typically taken into account in health technology assessments (HTAs). The extra costs to the healthcare system had to be assumed to be equal to the extra revenues accruing to industry because only a few HTA reports contain all the relevant elements around cost of treatment with orphan medicine and cost savings for alternative (comparator) treatment, QALYs and ICERs.
:   [(219)](#footnoteref220)
     
       ICER is a measure of the ‘value for money’ a medicine offers in comparison to other treatments. ICERs were available for 32 orphan medicines. 24 ICERs relate to orphan medicines that have not been withdrawn from the market and for which sales were recorded in the EU.
:   [(220)](#footnoteref221)
     
       ICERs were available for 32 orphan medicines, 24 of which were orphan medicines that have not been withdrawn from the market and for which sales were recorded in the EU.
:   [(221)](#footnoteref222)
       See, for instance, the threshold of €80,000 per QALY in the Netherlands. (
    <https://kce.fgov.be/sites/default/files/atoms/files/d20081027396.pdf>
    ).
:   [(222)](#footnoteref223)
     
       See Section 2.4 of Annex 3 for detailed calculations.
:   [(223)](#footnoteref224)
     
       Section 8.2.5. of the Orphan study report (2019).
:   [(224)](#footnoteref225)
     
       See limitations in Chapter 4.2. of this SWD.
:   [(225)](#footnoteref226)
     
       As already described in Chapter 2 (Background to the intervention) of this SWD.
:   [(226)](#footnoteref227)
     
       A monopoly rent refers to a situation in which a monopoly producer lacks competition and can thus sell its goods and services at a price above (and sometimes far above) the otherwise competitive market price (at the expense of consumers and payers).
:   [(227)](#footnoteref228)
     
       See Section 6.1.1. of the Orphan study report (2019).
:   [(228)](#footnoteref229)
     
       As already stated in Chapter 4.2, the following limitations to the IQVIA database applied: data on revenues and volume data only covered 2008–2017 for most EEA countries (excluding Cyprus, Malta, Denmark, Iceland and Liechtenstein); the IQVIA data did not include revenue and volume data in non-EU jurisdictions (like the US); revenues were based on list prices (and not on net prices).
:   [(229)](#footnoteref230)
     
       For more details, see Section 1.4. of Annex 3.
:   [(230)](#footnoteref231)
     
       For detailed calculations, see Section 2.1. of Annex 3.
:   [(231)](#footnoteref232)
     
       While the expectation of low returns on investment can indeed drive market failure, it is by no means the sole reason. Insufficient basic research, lack of scientific leads for product development, and the complexity of the clinical trials of medicines for rare diseases all play an important part as well.
:   [(232)](#footnoteref233)
     
       See Section 1.4. of Annex 3.
:   [(233)](#footnoteref234)
       Section 8.4.3. of the Orphan study report (2019).
:   [(234)](#footnoteref235)
     
       Section 2.3 of the Study on the economic impact of the supplementary protection certificates, pharmaceutical incentives and rewards in Europe (2018).
:   [(235)](#footnoteref236)
     
       Section 8.3.4. of the Orphan study report (2019).
:   [(236)](#footnoteref237)
     
       
    [US Government Accountability Office Report on orphan drugs, November 2018](https://www.gao.gov/assets/700/695765.pdf)
    , p. 23.
:   [(237)](#footnoteref238)
     
       The prevalence of a condition would consequently be based on the sub-type and sub-population. The aim of this is to obtain the incentives associated with the Regulation through these new subgroups.
:   [(238)](#footnoteref239)
     
       Section 8.4.1. of the Orphan study report (2019).
:   [(239)](#footnoteref240)
     
       Data taken from Chapter 5.3 of the 
    [Study on the economic impact of supplementary protection certificates, pharmaceutical incentives and rewards in Europe](https://ec.europa.eu/health/sites/health/files/human-use/docs/pharmaceuticals_incentives_study_en.pdf)
     (2018).
:   [(240)](#footnoteref241)
     
       Chapters 5.4 and 7 of the Study on the effects of supplementary protection mechanisms for pharmaceutical products (Technopolis, 2018).
:   [(241)](#footnoteref242)
     
       Data up to 2018 (Section 5.5 of the Orphan study report (2019)).
:   [(242)](#footnoteref243)
     
       
    [US Government Accountability Office Report on orphan drugs, November 2018](https://www.gao.gov/assets/700/695765.pdf)
    , p. 24.
:   [(243)](#footnoteref244)
     
       Commission notice on the application of Articles 3, 5 and 7 of Regulation (EC) No 141/2000 on orphan medicinal products, C/2016/7253; OJ C 424, 18.11.2016, pp. 3–9.
:   [(244)](#footnoteref245)
     
       
    [US Government Accountability Office Report on orphan drugs, November 2018](https://www.gao.gov/assets/700/695765.pdf)
    , p. 34.
:   [(245)](#footnoteref246)
     
       Final Report of the Study on the economic impact of the Paediatric Regulation, including its rewards and incentives (December 2016); Section 2.2.
:   [(246)](#footnoteref247)
     
       R&D costs include the costs of in-vitro studies and animal studies conducted during the development of a paediatric formulation, clinical trials, and other R&D costs.
:   [(247)](#footnoteref248)
     
       Final Report of the Study on the economic impact of the Paediatric Regulation, including its rewards and incentives – December 2016, Section 2.2.4.4.
:   [(248)](#footnoteref249)
     
       Final Report of the Study on the economic impact of the Paediatric Regulation, including its rewards and incentives – December 2016, Section 2.2.
:   [(249)](#footnoteref250)
     
       Other R&D costs are incurred through activities ranging from, for example, preparing study outlines; medical writing for a clinical plan, including data and database management; coordination activities and transaction costs; and conducting non –interventional studies.
:   [(250)](#footnoteref251)
     
       Study on the economic impact of the Paediatric Regulation, including its rewards and incentives – Final Report, December 2016; Section 3.2.6.
:   [(251)](#footnoteref252)
     
       In many cases, healthcare professionals prescribe cheaper generic products off-label, in preference to the newly-authorised paediatric indication. In addition, national healthcare systems may be reluctant to reimburse the PUMA-rewarded product when cheaper alternatives are available.
:   [(252)](#footnoteref253)
     
       Administrative costs are not included in this calculation. They can be estimated at €78 million/year for all PIPs. Even if such figures were included, the cost-benefit calculation for industry would thus remain positive.
:   [(253)](#footnoteref254)
     
       Article 48 of the Paediatric Regulation.
:   [(254)](#footnoteref255)
     
       
    [Commission Staff Working Document on the evaluation of the European Medicines Agency’s fee system](https://ec.europa.eu/health/sites/health/files/files/fees/evaluation_ema_fee_swd2019336_en.pdf)
    <.>
:   [(255)](#footnoteref256)
     
       The costs of PUMA-related fee incentives are fully borne by the EMA.
:   [(256)](#footnoteref257)
     
       Section 2.1 of the EMA fee system study.
:   [(257)](#footnoteref258)
     
       Details can be found in Annex 3. Study on the economic impact of the Paediatric Regulation, including its rewards and incentives – Final Report, December 2016: Chapter 6.
:   [(258)](#footnoteref259)
     
       Sufficient data were available for only eight medicinal products to conduct the CBA. See Section 6.2.1 of the Paediatric study report (December 2016).
:   [(259)](#footnoteref260)
     
       Study on the economic impact of the Paediatric Regulation, including its rewards and incentives – Final Report, December 2016: Chapter 6.3.5
:   [(260)](#footnoteref261)
     
       Study on the economic impact of the Paediatric Regulation, including its rewards and incentives – Final Report, December 2016: Chapter 6.2.
:   [(261)](#footnoteref262)
     
       Study on the economic impact of the Paediatric Regulation, including its rewards and incentives – Final Report, December 2016: Chapter 6.3.5.
:   [(262)](#footnoteref263)
     
       Study on the economic impact of the Paediatric Regulation, including its rewards and incentives – Final Report, December 2016: Chapter 6.4, Table 28 in particular. For simplicity, it was assumed that the rate of return over the years would be linear, with a maximum cumulative return on investment 10 years after the initial R&D investment. However, in practice the spill-over effects are expected to be highest in the earlier years and to follow a decay curve.
:   [(263)](#footnoteref264)
     
       Study on the economic impact of the Paediatric Regulation, including its rewards and incentives – Final Report, December 2016. Chapter 2.3.
:   [(264)](#footnoteref265)
      
       Study on the economic impact of the Paediatric Regulation, including its rewards and incentives – Final Report, December 2016. Section 2.3.
:   [(265)](#footnoteref266)
     
       Li, J.S. et al., 2007. Economic Return of Clinical Trials Performed Under the Pediatric Exclusivity Program. JAMA, 297(5), pp. 480–488; Baker-Smith, C.M. et al., 2008. The economic returns of pediatric clinical trials of antihypertensive drugs. American Heart Journal, 156(4), pp. 682–688.
:   [(266)](#footnoteref267)
       Regulation (EC) 536/2014 on clinical trials on medicinal products for human use.
:   [(267)](#footnoteref268)
     
        Unlike the obligations under the Paediatric Regulation.
:   [(268)](#footnoteref269)
     
       How this affects the fees system and the Agency’s long-term sustainability was assessed in the 2019 evaluation of the Agency’s fee system. See: 
    <https://ec.europa.eu/health/human-use/legal-framework/ema_fees_en>
:   [(269)](#footnoteref270)
     
       Study on the economic impact of the Paediatric Regulation, including its rewards and incentives – Final Report, December 2016: Chapter 4.3).
:   [(270)](#footnoteref271)
     
       
    <https://www.ema.europa.eu/en/documents/report/european-medicines-agency-european-commission-dg-health-food-safety-action-plan-paediatrics_en.pdf>
:   [(271)](#footnoteref272)
     
       Study on the economic impact of the Paediatric Regulation, including its rewards and incentives – Final Report, December 2016: Chapters 4.3 and 4.5.
:   [(272)](#footnoteref273)
     
       10 years of the EU paediatric regulation, report from the Commission to the European Parliament and the Council, (COM(2017) 626, Section 9.
:   [(273)](#footnoteref274)
     
       See also the description of the intervention and its objectives in Chapter 2 of this SWD.
:   [(274)](#footnoteref275)
     
       https://www.who.int/whr/2007/overview/en/index1.html
:   [(275)](#footnoteref276)
     
       A European One Health Action Plan against Antimicrobial Resistance (AMR): https://ec.europa.eu/health/amr/sites/amr/files/amr\_action\_plan\_2017\_en.pdf
:   [(276)](#footnoteref277)
     
       Section 6.4 of the Orphan study report (2019).
:   [(277)](#footnoteref278)
     
       
    <https://ec.europa.eu/health/amr/antimicrobial-resistance_en>
:   [(278)](#footnoteref279)
     
       See Chapter 2.1. of this SWD.
:   [(279)](#footnoteref280)
       Section 7.2.4. of the Orphan study report (2019)
:   [(280)](#footnoteref281)
     http://data.consilium.europa.eu/doc/document/ST-15054-2015-INIT/en/pdf
:   [(281)](#footnoteref282)
     
       The Agency defines a biomarker as ‘a biological molecule found in blood, other body fluids, or tissues that can be used to follow body processes and diseases in humans and animals.’ 
    <https://www.ema.europa.eu/en/glossary/biomarker>
    .
:   [(282)](#footnoteref283)
     
       
    <https://www.ema.europa.eu/en/documents/report/european-medicines-agency-european-commission-dg-health-food-safety-action-plan-paediatrics_en.pdf>
:   [(283)](#footnoteref284)
     
       
    [Public consultation on the Paediatric regulation conducted in 2016).](https://ec.europa.eu/health/human-use/paediatric-medicines/developments/2016_pc_report_2017_en)
:   [(284)](#footnoteref285)
     
       Section 4.2 of the Orphan study report (2019).
:   [(285)](#footnoteref286)
     
       Chapter 5.1 of this SWD.
:   [(286)](#footnoteref287)
     
       Section 5.2 (Effectiveness) of this SWD.
:   [(287)](#footnoteref288)
     
       Section 9.3 of the Orphan study report (2019).
:   [(288)](#footnoteref289)
     
       Depending on the type of product and orphan indication.
:   [(289)](#footnoteref290)
     
       Commission Regulation (EC) No 507/2006. This Regulation stipulates that to meet patients’ unmet medical needs and in the interests of public health, it may be necessary to grant conditional marketing authorisations (‘CMAs’) on the basis of less comprehensive data than is normally the case.
:   [(290)](#footnoteref291)
     
       Section 9.3 of the Orphan study report (2019).
:   [(291)](#footnoteref292)
     
       Idem.
:   [(292)](#footnoteref293)
     
       For example, PDCO and COMP may look at the same product development without any formal interaction.
:   [(293)](#footnoteref294)
     
       See also Section 2.1 of this SWD.
:   [(294)](#footnoteref295)
     
       Article 10 of Directive 2001/83/EC).
:   [(295)](#footnoteref296)
     
       Article 8(1) of the Orphan Regulation.
:   [(296)](#footnoteref297)
     
       Section 9.1.1. of the Orphan study report (2019).
:   [(297)](#footnoteref298)
     
       Aid for research into the development and availability of orphan medicinal products (Article 9(1) of the Orphan Regulation).
:   [(298)](#footnoteref299)
     
       On the basis of DG RTD data.
:   [(299)](#footnoteref300)
     
       Section 10.5 of the Orphan study report (2019).
:   [(300)](#footnoteref301)
     
       IMI is a joint undertaking between the European Union and the European Federation of Pharmaceutical Industries and Associations (EFPIA). The focus of research under the IMI umbrella has been partly led by industry (
    <https://www.imi.europa.eu/).>
:   [(301)](#footnoteref302)
     
       https://www.imi.europa.eu/projects-results/project-factsheets/ultra-dd
:   [(302)](#footnoteref303)
     
       Virtual networks involving healthcare providers across Europe that were established in 2017 and are financed under the EU health programme (
    <https://ec.europa.eu/health/ern_en>
    ).
:   [(303)](#footnoteref304)
     
       Most ERNs cover adult and paediatric conditions, but some of the thematic networks included in the project focus on rare paediatric diseases.
:   [(304)](#footnoteref305)
     
       See also the introductory chapter of the Special Report of the European Court of Auditors (‘EU actions for cross-border healthcare: significant ambitions but improved management required’, 2019).
:   [(305)](#footnoteref306)
     
       Based on information from DG RTD.
:   [(306)](#footnoteref307)
     
       See Chapter 3.3 of the Inventory of Union and Member State incentives to support research, development and availability of orphan medicinal products (SWD(2015) 13 FINAL).
:   [(307)](#footnoteref308)
     
       Section 9.4 of Orphan study report (2019). See also Figure 3 in Chapter 5.1 of this SWD (effectiveness) with the number of designations granted per year (2000 – 2017).
:   [(308)](#footnoteref309)
     
       
    [ALPHA-MAN (Clinical development of Enzyme Replacement Therapy in alpha-Mannosidosis patients using recombinant human enzyme.)](https://cordis.europa.eu/project/rcn/96911/reporting/en)
:   [(309)](#footnoteref310)
     
       Official Journal of the European Union, C 150, 27 April 2018.
:   [(310)](#footnoteref311)
     
       Section 9.4 of the Orphan study report (2019).
:   [(311)](#footnoteref312)
      
       
    <https://ec.europa.eu/info/research-and-innovation/events/special-features/world-rare-diseases-day_en>
:   [(312)](#footnoteref313)
     
       The EPSCO council recommended the establishment of national rare disease plans in 2009.
:   [(313)](#footnoteref314)
     
       Section 9.5 of the Orphan study report (2019).
:   [(314)](#footnoteref315)
     
       The SPC Regulation is designed to offset the loss of patent protection for pharmaceutical products that occurs due to compulsory testing and clinical trials before a marketing authorisation can be obtained. The Clinical Trials Directive provides a legal framework for the conduct of clinical trials in Europe and contains specific provisions on clinical trials conducted with the participation of minors.
:   [(315)](#footnoteref316)
     
       
    <https://ec.europa.eu/growth/industry/intellectual-property/patents/supplementary-protection-certificates_en>
:   [(316)](#footnoteref317)
     
       Recital 7 of the Paediatric Regulation.
:   [(317)](#footnoteref318)
     
       Directive 2001/20/EC (a new Regulation (EC) No 536/2014 on clinical trials was adopted in 2014, but has not come into force yet).
:   [(318)](#footnoteref319)
     
       The date of application of the Regulation depends on the Agency’s finalising a database that is necessary for its operation.
:   [(319)](#footnoteref320)
     
       Multi stakeholder workshop on ‘How to better apply the Paediatric Regulation to boost development of medicines for children’, 
    <https://www.ema.europa.eu/en/documents/report/how-better-apply-paediatric-legislation-boost-development-medicines-children-report-multi_en.pdf>
:   [(320)](#footnoteref321)
     
       This issue was discussed during a 
    [multi-stakeholder workshop](https://www.ema.europa.eu/en/documents/report/how-better-apply-paediatric-legislation-boost-development-medicines-children-report-multi_en.pdf)
     held in March 2018 to draw up the Agency-Commission joint paediatric action plan.
:   [(321)](#footnoteref322)
     
       Topic areas 2 and 3 of the action plan: 
    <https://www.ema.europa.eu/en/documents/report/european-medicines-agency-european-commission-dg-health-food-safety-action-plan-paediatrics_en.pdf>
:   [(322)](#footnoteref323)
     
       State of Paediatric Medicines in the EU – 10 years of the EU Paediatric Regulation: Report from the Commission to the European Parliament and the Council (
    [COM(2017)626](https://ec.europa.eu/health/sites/health/files/files/paediatrics/docs/2017_childrensmedicines_report_en.pdf)
    ).
:   [(323)](#footnoteref324)
     
       
    <https://www.ema.europa.eu/en/documents/report/european-medicines-agency-european-commission-dg-health-food-safety-action-plan-paediatrics_en.pdf>
:   [(324)](#footnoteref325)
     
       Article 40 of the Paediatric Regulation.
:   [(325)](#footnoteref326)
     
       In the US, the FDA manages a specific fund to support research in off-patent products.
:   [(326)](#footnoteref327)
     
       Agency’s 10 years report (Section 3.6.1.)
:   [(327)](#footnoteref328)
     
       Idem.
:   [(328)](#footnoteref329)
     
       A discussion forum facilitating regulatory discussions on global development of paediatric medicines. It was set up in 2007 as a joint Agency/FDA venture; in 2009 and 2010, respectively, Japan and Canada joined, followed in 2014 by Australia as an observer.
:   [(329)](#footnoteref330)
     
       Technopolis Study on the economic impact of the Paediatric Regulation, including its rewards and incentives – Final Report, December 2016 (
    [SANTE/2015/D5/023, Section 2.3.1](https://ec.europa.eu/health/sites/health/files/files/paediatrics/docs/paediatrics_10_years_economic_study.pdf)
    ).
:   [(330)](#footnoteref331)
     
       Study on the economic impact of the Paediatric Regulation, including its rewards and incentives (section 2.3.1).
:   [(331)](#footnoteref332)
     
       Estimating cumulative point prevalence of rare diseases: analysis of the Orphanet database, European Journal of Human Genetics, 2019.
:   [(332)](#footnoteref333)
       Only half of all currently authorised orphan medicines have been approved for use in children as well (Section 7 of the Orphan study report (2019)).
:   [(333)](#footnoteref334)
     
       Section 9.1.2 of the Orphan study report (2019).
:   [(334)](#footnoteref335)
     
       Chapter 5.1.4 of this SWD.
:   [(335)](#footnoteref336)
     
       See Section 10 of the Orphan study report (2019).
:   [(336)](#footnoteref337)
     
       A ‘comparator analysis’ involves comparing the results achieved by the Orphan Regulation with those that might realistically have been expected without it. For more details, see Sections 2.2. and 7.3. of the Orphan study report (2019).
:   [(337)](#footnoteref338)
     
       Council recommendation on an action in the field of rare diseases (2009/C 151/ 22) June 2009, 
    https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2009:151:0007:0010:EN:PDF
:   [(338)](#footnoteref339)
    Implementation report on the Commission Communication on Rare Diseases: Europe's challenges [COM(2008) 679 final] and Council Recommendation of 8 June 2009 on an action in the field of rare diseases (2009/C 151/02), COM (2014) 548; 
    <https://ec.europa.eu/health/sites/health/files/rare_diseases/docs/2014_rarediseases_implementationreport_en.pdf>
:   [(339)](#footnoteref340)
      
       
    <http://www.europlanproject.eu/NationalPlans?idMap=1>
:   [(340)](#footnoteref341)
     
       Section 10.1 of the Orphan report study (2019).
:   [(341)](#footnoteref342)
      See Communication/Explanatory Memorandum about Draft Proposal (introductory text and second recital on page 12); the success of the US orphan system had encouraged other countries to follow (p. 2 of the same document).
:   [(342)](#footnoteref343)
     
       At the time, for instance, all designated orphan products in the US were eligible for a federal tax credit equal to 50% of the spending on clinical research (see p. 2 of the Communication/Explanatory Memorandum about Draft Proposal).
:   [(343)](#footnoteref344)
     
       Belgium and France, for instance.
:   [(344)](#footnoteref345)
       Recital 3 on page 12 of the Communication/Explanatory Memorandum.
:   [(345)](#footnoteref346)
     
       Section 10.2 of the Orphan study report (2019).
:   [(346)](#footnoteref347)
     
       EU added value was also recognised in the outcomes of the targeted survey. A majority of academic researchers and experts who participated in the survey agreed with a statement that, at the time when the EU Orphan Regulation was introduced, there was a clear need for concerted EU action beyond the efforts of individual Member States. Representatives of patient and consumer organisations also agreed with this statement (Section 10.2 of Orphan study report (2019).
:   [(347)](#footnoteref348)
     
       Proportionality means that, to achieve its aims, the EU will take only the action it needs to and no more (see Article 5 of the Treaty on European Union).
:   [(348)](#footnoteref349)
     
       Chapter 2.2.2 of this SWD.
:   [(349)](#footnoteref350)
     
       
    <https://ec.europa.eu/smart-regulation/impact/ia_carried_out/docs/ia_2004/sec_2004_1144_en.pdf>
:   [(350)](#footnoteref351)
     
       Extended impact assessment on medicinal products for paediatric use.
:   [(351)](#footnoteref352)
     
       Agency’s 10 years report, section 1.7
:   [(352)](#footnoteref353)
     
       Draft European Parliament and Council Regulation (EC) on medicinal products for paediatric use – DG Enterprise: Extended Impact Assessment (
    [page 14](https://ec.europa.eu/health/sites/health/files/files/paediatrics/docs/extended_impact_assessment_final_3_september_en.pdf)
    ); Final Report of the Study on the economic impact of the Paediatric Regulation, including its rewards and incentives (December 2016); Section 4.4.
:   [(353)](#footnoteref354)
     
       A list of medicine-related incentives and benefits provided by Member States can be found in Section 4.4. (Table 22) of the Final Report of the Study on the economic impact of the Paediatric Regulation, including its rewards and incentives (December 2016).
:   [(354)](#footnoteref355)
     
       Proportionality means that, to achieve its aims, the EU will take only the action it needs to and no more (see Article 5 of the Treaty on European Union).

[Top](#document1)

Annex 1: Procedural information

Lead DG, Decide Planning/CWP references

DG Health and Food Safety led the evaluation of the Orphan and Paediatric Regulations.

Organisation and timing

The inter-service was set up in May 2015 to steer and provide input into the evaluation of the legal framework in the field of Orphan and Paediatric medicinal products. It included representatives from 6 Directorates General: Competition; Industry, Entrepreneurship and SMEs; Health and Food safety; Budget; Research and Innovation; Trade- and from the Legal Service and the Secretariat-General. The group met 11 times during the evaluation process (see Table A.1).

Table A.1: Inter-Service Steering Group meetings

|  |  |
| --- | --- |
| Dates | Topics for discussion |
| 10 June 2015 | First meeting of the ISG on the ‘Paediatric Report’ |
| 3 November 2015 | Second meeting of the ISG on the ‘Paediatric Report’ |
| 20 May 2016 | Third meeting of the ISG on the ‘Paediatric Report’ |
| 8 March 2017 | Fourth meeting of the ISG on the ‘Paediatric Report’ |
| 16 April 2018 | Kick-off meeting for the “Study to support the evaluation of the EU Orphan Drug Regulation” between the Project Steering Group and the contractor |
| 2 July 2018 | Inception meeting on the study of the EU Orphan Drug Regulation |
| 22 November 2018 | Interim meeting for the “Study to support the evaluation of the EU Orphan Drug Regulation” between the Project Steering Group and the contractor |
| 25 March 2019 | Inter-service Steering Group meeting to discuss the Draft Final Report of the “Study to support the evaluation of the EU Orphan Drug Regulation” |
| 30 April 2019 | Inter-service Steering Group to discuss the Final Report of the “Study to support the evaluation of the EU Orphan Drug Regulation” |
| 11 December 2019 | Discussion on the draft final staff working document. |
| 18 December 2019 | Discussion on the final staff working document. |
| 27 March 2020 | Discussion on the revised final staff working document. |

Consultation of the RSB (if applicable)

A meeting with the Regulatory Scrutiny Board took place on 12 February 2020.

Following the negative opinion issued by the RSB on 14 February 2020, the SWD has been revised to follow the recommendations from the RSB, namely:

-The report was shortened and restructured to focus on how these Regulations have contributed to today’s situation for orphan and paediatric medicines.

-The intervention logic was simplified for clear linear dependency and the role of external factors was made more prominent.

-The description of the interventions explains now how the Regulations were expected to deliver. The analysis chapter elaborates on the changes to the policy context, which have taken place since the adoption of the Regulations, and their implications.

-More comparison to the US system is added throughout the document, together with the analysis of consistency measures done by the EMA.

-The cost-benefit for pharmaceutical industry was adjusted and concluded positive (Chapter 5.2 - Efficiency) by including a competitive profit margin of 10% to the benefit of the generic industry (thereby deviating from the outcomes of the contractor’s study where this element was referred to as “normal profits”, but not quantified, resulting de facto in profits being counted as costs).

-More analysis of availability and affordability of medicines across the EU is added together with the influencing role of external factors.

-The conclusions were redrafted to clarify main problems, their magnitudes and identify priorities for policy-makers’ attention.

The revised SWD was resubmitted to the Board on May 12, 2020.

The RSB issued a positive opinion on 16 June 2020 with a few recommendations for improvement. Following the RSB advice given, the SWD has been revised, namely:

-Clarity was added throughout the report (case studies were included, for instance); language for non-experts was simplified, especially in the executive summary.

-Some sections were shortened and relevant information was moved to Annexes (especially from Chapter 5.2 to Annex 3).

-The improved clarity and shortening resulted in a SWD that has the same length in pages as the previous version.

-Additional information from the explanatory memorandum of the Orphan Regulation was added, with the aim to clarify what success was supposed to look like and help the reader judge the achieved results.

-A case study for an orphan paediatric medicine was added to illustrate inefficiencies of the system and a graphic description of the various pharmaceutical incentives was introduced to better illustrate the working of them.

-The role of external factors has been clarified in the intervention logic diagram.

-The conclusions provide clearer lessons learnt regarding the market-based approach of these Regulations.

External expertise

The analysis of the evaluation is based on two independent studies conducted by Technopolis Group and Ecorys for the European Commission. They provided evidence-based answers to 16 evaluation questions, on which the analysis has been based in the light of the 5 Better Regulation criteria: relevance, effectiveness, efficiency, coherence and EU added value.

In addition to the above-mentioned studies the findings of the reports listed below have been carefully considered for the analysis in this staff working document:

Reports from the Commission to the European Parliament and the Council, on the 5 and 10 years of implementation of the Paediatric Regulation
[1](#footnote2)

Reports from the EMA to the Commission on the experience acquitted as a result of the application of the Paediatric Regulation
[2](#footnote3)

The parts relevant to the Paediatric and Orphan Regulations’ incentives were also based on the findings of the study on the economic impact of the supplementary protection certificates, pharmaceutical incentives and rewards in Europe.
[3](#footnote4)
 

Annex 2: Stakeholder consultation

INTRODUCTION

This report provides an overview of the consultation activities carried out in the context of the joint evaluation of the EU Regulation on medicines for rare diseases and the Paediatric Medicines Regulation, the stakeholders that contributed and their opinions. In particular, stakeholder views have been gathered by means of several activities:

·Consultation activities carried out in the context of the study on the economic impact of the paediatric regulation;

·Open public consultation on the Paediatric Regulation;

·Feedback on the Roadmap for the evaluation on medicines for children and rare diseases (medicines for special populations);

·Workshop on “How to better apply the Paediatric Regulation to boost development of medicines for children”;

·Targeted and open public consultations in the context of the study to support the evaluation of the EU Orphan Regulation No 141/2000;

·Conference “Medicines for Rare Diseases and Children: Learning from the Past, Looking to the Future”.

The evaluation’s consultation strategy, aiming at reaching all concerned stakeholders’ groups, was firstly presented in the Roadmap.
[4](#footnote5)
 As foreseen, both the 12-week public consultation and the targeted consultation involving Member States and specific groups took place. The stakeholders which contributed, as identified in the Roadmap, were the Member States (including national medicines’ regulators, payers and HTA bodies), the Agency, patients, industry and NGOs. Both qualitative and quantitative indicators were used to assess the input and to quantify the effect of the regulations’ provisions.

The objectives of each consultation activity are described in the sections below. An overview of the contributing stakeholders as well as a summary of the consultation results are also presented.

  

1.Consultation activities carried out in the context of the study on the economic impact of the paediatric regulation, including its rewards and incentives

Objective

The contractor carried out the study on the Economic impact of the Paediatric Regulation
[5](#footnote6)
, including its rewards and incentives, and also conducted an assessment of the costs and rewards of the Paediatric Regulation. This analysis was based on the results of a surveys of representative stakeholders.

Stakeholders

A first survey was designed to PIP and waiver applicants, inquiring about the specific cost elements related to paediatric drug development. The relevant costs include all of the internal and outsourced costs that have been completed to date (administrative costs of a PIP / waiver application, R&D costs, excluding legal costs of SPC and manufacturing/distribution costs).

The survey additionally asked PIP applicants a set of open-ended questions about the relevance, effectiveness, efficiency, coherence and utility of the paediatric regulation. the replies received were followed up by phone interviews.

Details of the survey strategy are described in Annex A of the "Study on the economic impact of the paediatric regulation, including its rewards and incentives".

In addition to data collected via the survey to industry, the analysis was also built on a two-stage survey (Delphi) to expert stakeholders. The survey questionnaire was sent to stekeholders from across the EU, with 116 people ultimately completing the survey, although some respondents did not answer every question. Details of this survey are provided in Annex D of the economic study. The survey to expert stakeholders was developed based on an exploratory telephone consultations and pilots to uncover issues linked to social and broader economic impacts in the paediatric drug development value chain. The survey collected qualitative and quantitative estimates for the various dimensions of the impact as well as provided a set of open questions to identify further benefits of the Regulation and its impact.

Overview of results

The data on costs and rewards have been used by the contractor for the cost benefit model in the study. The replies to the survey were divided into 5 main categories which correspond to the evaluation criteria: relevance, effectiveness, efficiency, coherence and EU added value.

The most important findings per criteria are presented in the following section.

Relevance

The objectives of the rewards provided by the Regulation are considered relevant or very relevant by most respondents. Some respondents note that the reward incentivised organisations to sponsor and support the development of paediatric medicines, including in rare/orphan disease. However, at the same time, respondents claimed that as a result of the necessary additional costs involved with submitting PIPs, individual organisations may not be able to achieve a positive return on investment.

EFFECTIVENESS

The Regulation is considered effective in delivering on its objectives. Certain indicated that without the Regulation they would not have committed into paediatric medicines development. It was noted that the effectiveness is higher for high-volume products and lower for indications with very limited patient numbers. The complex and rigid regulatory system were instead indicated as main difficulties.

EFFICIENCY

There is consensus amongst survey respondents that the 6-month extension to SPC is the most attractive reward provided by the Regulation. The SPC reward is seen as ‘valuable’ for the completion of an agreed PIP and the associated regulatory procedures, are seen as more efficient. However, the procedure towards an SPC reward is overly complex. The (long) time needed to conduct the necessary paediatric research and the and the limitations for requesting the SPC extensions are seen as problematics.

COHERENCE

The assessment of coherence focuses on whether there are overlaps/complementarities between the rewards and related EU or Member State action. Most of the initiatives and benefits are complementary and there appears to be some overlap. Some EU Member States like the United Kingdom and France are providing national legislation to diminish the off-label use of medicines for children, aimed at facilitating the development of paediatric medicines. In addition, in the area of paediatric (academic and hospital) research there are a number of large consortia which are involved in product development projects. Several organisations support this paediatric research by stimulating international cooperation and connecting existing networks.

EU ADDED VALUE

In terms of the number of medicines that has become available, there is already a visible positive impact of the Paediatric Regulation. However, the impact of the regulation on research quantity and quality in children stemming from PIPs is not yet clear. Several measures could be taken to improve the effects of the Paediatric Regulation. Expanding funding options for research into paediatric medicines, e.g. via ‘Horizon 2020’ or other relevant EU Research funds (e.g. Innovative Medicine Initiative) might provide (also for companies) a framework for investment in paediatric research.

2.Public consultation on the Paediatric Regulation

Objective

On 15 November 2016, the Commission launched an open public consultation on the experience acquired from the application of the Paediatric Regulation.

This consultation was carried out to support the preparation by the Commission of a report on the experience acquired as a result of the application of Articles 36, 37 and 38 of the Regulation.
[6](#footnote7)
 This included an analysis of the economic impact of its rewards and incentives, together with an analysis of the estimated consequences for public health of this Regulation, with a view to proposing any necessary amendments.

The Commission received 75 responses from a variety of stakeholders representing pharmaceutical undertakings, patient organisations, NGOs, as well as public institutions including regulatory agencies and national ministries. Healthcare professions, academia, research networks and other associations also contributed. The replies were qualitatively analysed per theme. There is an overall agreement in the replies by all categories of stakeholders. Specificities are provided below when necessary.

First, the positive impact of the regulation was recognised with the majority of respondents agreeing that specific legislation is and will remain necessary to support the development of evidence-based medicines. At the same time, many respondents(in particular NGOs and patients associations) also mentioned weaknesses of the Regulation, e.g. concerning certain therapeutic areas such as paediatric oncology.

As far as the paediatric needs are concerned, it was recognised that over the last ten years, some therapeutic areas have seen important progress, while in others changes did not materialise (yet). Some respondents also alluded to the challenge to define and agree on paediatric needs, if this is understood as prioritising one therapeutic area over another.

Concerning the availability of paediatric medicines in the EU, some respondents pointed out that authorisation does not automatically equate with availability, while others referred to cost factors or prescription habits of physicians.

Concerning the average costs per paediatric investigation plan, some of the respondents noted the relatively small averages compared to the overall very large sums spent on drug development, while others criticized the use of averages, as potentially misleading in view of the variability of development costs. With regards to the reward system, many considered that in general it functions well, while some pointed to inefficiencies or questioned whether it is sufficient across all therapeutic areas. Concerning the orphan reward, respondents generally supported the separate orphan reward, highlighting its effect for products that are not protected by a patent. At the same time, many industry respondents considered the option to withdraw the orphan status in order to benefit rather from the SPC reward as a legitimate option to choose the most appropriate reward.

Many respondents also agreed on the disappointing uptake of the PUMA concept, with one of the main reasons often being the lack of sufficient incentives to promote the research in off patent paediatric indications, especially pricing pressure for established compounds. On the question whether PUMA should be maintained, some argued that despite the small number of authorised products, it might still prove beneficial to have such a specific marketing authorisation, while others took the view that the concept could be shelved, especially in case alternative methods would be developed to financially support paediatric research into off-patent medicines.

The question on waivers and the ‘mechanism of action’ principle was one of the most debated issues within the consultation. Many respondents (mostly patients organisations, research associations and NGOs) referred to paediatric oncology as an example where mechanism of action based Paediatric Investigation Plan (PIP) could help to better guide drug development. At the same time, some respondents referred to the need to find a fair balance between possibilities to address unmet paediatric needs and the need to ensure a clear and predictable scope of a PIP.

The positive effect of the Paediatric Regulation on paediatric research within the EU was widely recognised by all categories of stakeholders. This also led to a broad increase of available expertise and collaboration between relevant actors, including networks. At the same time, some respondents referred to areas of improvement, particularly with regard to infrastructure support.

|  |
| --- |
| A report summarising the stakeholders’ replies to the OPC was published on the Commission website and can be found at:  <https://ec.europa.eu/health/sites/health/files/files/paediatrics/2016_pc_report_2017/2016_pc_report_2017_summary.pdf> |

3.Feedback on the Roadmap on the Evaluation of the orphan and paediatric legislation

Objective

From 11 December 2017 until 8 January 2018, stakeholders had the opportunity to provide their feedback on the roadmap for the evaluation of the Orphan and Paediatric legislation.

Stakeholders and overview of results

In total 23 replies were received: 4 from business associations, 2 from companies, 2 from public authorities, 5 from NGOs, 3 from academic/research institutions, 5 from EU citizens and 2 from non-EU citizens.

Responses were not divided per evaluation criteria. Any response that differed from the average was included into the summary of responses.

The majority of the replies welcomed the evaluation of the two legislations in order to further explore their effectiveness over the years. However, one stakeholder clearly asked for maintaining the current regulatory framework without any change and supported a more pragmatic implementation. By contrast, one stakeholder openly encouraged the reform of the legislation on the rewards.

In particular, with regards to the orphan reward many industry respondents considered the option to withdraw the orphan status in order to benefit rather from the SPC reward as a legitimate option to choose the most appropriate reward. In addition, on deferrals, it was noted that many companies still perform adult studies first, which often makes deferrals unavoidable. This may change over time, once newer development models become state of the art. Some respondents also highlighted that from a company perspective long deferrals should not necessarily be seen as an advantage, as they may compromise the possibility to obtain the reward.

Three replies urged the Commission to consider the differences between the objectives of the two legislations. Six correspondents asked for more clarifications regarding the evaluation, either concerning the scope of the study either on the methodology that would be used. Also, stakeholders asked for more explanations on the objective behind this evaluation. One reply asked clearly for an impact assessment analysis in order to evaluate the potential consequences of the evaluation. Pricing and reimbursement came up twice as a very important factor which should be further explored and requires more transparency from the industry and the Member States. One stakeholder asked to explore ways to reduce the bureaucratic burden of clinical trials in order to allow for more research in the EU territory.

The Commission was also urged to consider how both Regulations could better incentivise science-driven paediatric development plans based on the disease’s biology and the drug’s mechanism of action. For example, one stakeholder urged Commission to introduce ‘mechanism of action principle’ into the Paediatric Regulation.

Finally, clarifications were asked on the link between the Technopolis study on the Paediatric Regulation and the Technopolis study on the Orphan Regulation.

|  |
| --- |
| The full set of contributions received are published on the Commission website and can be found here:  <https://ec.europa.eu/info/law/better-regulation/initiatives/ares-2017-6059807/feedback_en?p_id=146293> . |

4.Multi-stakeholder workshop on “How to better apply the Paediatric Regulation to boost development of medicines for children”

Objective

On 20 March 2018, the European Commission and the Agency convened a multi-stakeholder workshop to discuss and identify ways to improve the implementation of the Paediatric Regulation.

Stakeholders & overview of results

The workshop brought together around 160 participants from different groups; patients and carers, academics, healthcare professionals, and pharmaceutical industry representatives as well as clinical trial assessors from national competent authorities (NCAs), ethics committees, the Agency including representatives of the Paediatric Committee (PDCO) and the European Commission.

The various suggestions that were brought up during the workshop can be summarised around four main areas. Firstly, it was recognised that there is a need to properly assess disease burden, including the relevance of a condition in the paediatric population, its seriousness, and the availability and suitability of treatments. Central to the discussion was the understanding that multi-stakeholder engagement is key and that a patient-centred approach (rather than drug-centred approach) is needed. It was also deemed important to build on experience with successful models such as the Accelerate Platform3 in the area of paediatric oncology.

Secondly, the properties of a given medicinal product, including its mode of action and pharmacological characteristics in various age groups should be taken into account, alongside other considerations such as whether the treatment is potentially curative or disease-modifying, whether it will impact disease progression or mainly target disease symptoms and its impact on quality of life. Patient representatives, industry and other stakeholders also noted that consideration should be given to whether or not there are other available treatments including non-pharmacological interventions.

Thirdly, several participants insisted on the need to share information and data from research in a transparent fashion and to make it publicly available; such transparency would provide insight on the pipeline of new developments, assist with the design of future trials and help avoid the conduct of unnecessary trials. It was emphasised that standardised terminologies and study methodologies are important in order to permit data merging and avoid fragmentation of data. The importance of registries, like Orphanet,
[7](#footnote8)
 was highlighted, alongside with the timely completion of the PIPs and the better handling of PIP applications.

Finally, participants agreed that a global perspective in identifying paediatric medical needs and determining regulatory requirements is very important.

|  |
| --- |
| A report was published on 30 May 2018 on the website of the European Medicines Agency and can be found at:  <https://www.ema.europa.eu/en/documents/report/how-better-apply-paediatric-legislation-boost-development-medicines-children-report-multi_en.pdf> |

5.Consultation activities carried out in the context of the study to support the evaluation of the EU Orphan Regulation No 141/2000

Objective

In order to gather stakeholders’ views to feed into the evaluation of the EU Orphan Regulation, an online public consultation (OPC) and several targeted consultations were organised with the help of an external contractor. The open public consultation took place between October 2018 and January 2019 via the online platform of the European Commission. The targeted consultations took place between August 2018 and January 2019. They consisted of interviews and online surveys. In response to the targeted surveys additional supporting documentation was received. Also written ad hoc contributions were provided.

The consultation activities aimed to retrieve information mainly on:

·Experiences with and evidence on relevance, effectiveness, efficiency, coherence and EU added value of the EU Orphan Regulation

·Experiences with and evidence on efficiency of the Agency’s procedures pertaining to the implementation of the EU Orphan Regulation

·Experiences with and evidence on issues that affect access to orphan medicines in Europe, both in general and in direct relation to the EU Orphan Regulation

·Experiences regarding the interplay between the Orphan and Paediatric Regulations.

Stakeholders

The stakeholders identified and the consulting strategy, as decided together with the evaluation’s Project Steering Group of the Commission, are presented in the table below:

Table A.2: Stakeholder groups and consultation methods

|  |  |
| --- | --- |
| Stakeholder group | Consultation method |
| Patients living with rare diseases and carers | Online public consultation |
| Health professionals | Online public consultation |
| National public authorities (e.g. ministries of health, public health authorities, HTA agencies) | Interviews, targeted survey V1 |
| Developers of innovative medicines | Interviews, targeted survey V2 |
| Developers of generic / biosimilar medicines | Interviews, targeted survey V3 |
| Patient and consumer organisations | Interviews, targeted survey V4 |
| Academic researchers / experts | Interviews, targeted survey V5 |

To adequately cover the required scope of the study, it was decided to develop and distribute 5 separate versions of the targeted surveys. These respectively aimed at: 1) representatives of national public authorities in EU Member States, 2) sponsors of orphan medicinal products, 3) developers of generic medicines for rare diseases, 4) patient and consumer organisations, and 5) academic researchers and experts.

Online public consultation
[8](#footnote9)
 

The online public consultation was conducted via a survey consisting of open and closed questions about knowledge of and experiences with orphan medicines, policy challenges, experiences with the EU Orphan Regulation, and the availability, affordability and accessibility of orphan medicines, both in general and at member State level. A total of 145 responses was received.

Targeted surveys

A total of 155 responses were received and then further divided in 5 groups: national public authorities, developers of innovative (orphan) medicines, developers of generic medicines, academic researchers/experts and patient and consumer organisations.

In total, 19 EU Member States are represented individually in the survey. Among ‘other’ respondents, 2 represented non-EU Member States (Iceland, Norway) and 2 were from organisations with activities in multiple EU countries.

Interviews

In total, 36 separate interviews were completed. Representatives of the US Food and Drug Administration and of the Pharmaceuticals and Medical Devices Agency in Japan were also interviewed to obtain information necessary for a comparison to the regulatory frameworks for orphan medicines in these two jurisdictions.

Ad hoc contributions

Unsolicited written commentary was received from the Heads of Medicines Agencies Permanent Secretariat (HMA), the European Consumer Organisation (BEUC), and the German Pharmaceutical Industry Association (BPI).

Study findings were presented for discussion and validation at two separate meetings: on 21 February 2019 during a meeting of the Agency’s Committee on Orphan Medicinal Products (COMP) and on 1 April 2019 at a meeting of the Pharmaceutical Committee with national representatives of Member States. During these meetings, oral comments from participants were collected which were fed into the analysis

Overview of results

The replies to both surveys were divided into 5 main categories which correspond to the evaluation criteria: relevance, effectiveness, efficiency, coherence and EU added value. These views have been taken into account when drafting the evaluation SWD.

The most important replies per criteria are presented in the following section.

Relevance

Necessity for an EU Orphan Regulation

Most contributors agreed or strongly agreed that, prior to 2000, there was a need for concerted EU action to stimulate the development of orphan medicines and promote access to such products. However, there were differences on whether this support should include financial support in the form of a time-limited marketed exclusivity.

Availability of and access to orphan medicines in EU Member States

Representatives of national public authorities, patient and consumer organisations, and academic experts all were asked via survey to what extent orphan medicinal products are placed on their national markets directly by marketing authorisation holders. Those with sufficient information to estimate this, mostly suggest national availability falls above 50% or even 75% of all orphan medicines, though in some countries it was reported as below 25%.

Only around half of all respondents felt able to estimate how long it takes, on average, for orphan medicines to reach their national markets after marketing authorisation.

Effectiveness

Role of incentives in promoting development of orphan medicines

Developers were asked about the general importance of the incentives offered by the EU Orphan Regulation, such as the Agency’s fee reductions, the aid for research
[9](#footnote10)
, waivers or the 10-year period of market exclusivity of an orphan product. Survey correspondents deemed all incentives important or highly important, but most had no experience with the ‘aid for research’ incentive. Interviewees also emphasised the importance of the full set of incentives, remarking on how they work together to create conditions conducive to product development.

Efficiency

Strong concerns were expressed by nearly all these stakeholders about the very high prices of some orphan medicines, with expectations of this further increasing, but with frequently limited evidence of effectiveness. It was furthermore noted by several such stakeholders that the balance with the size of the ‘reward’ is almost impossible to assess as they observe a lack of transparency from industry in disclosing R&D costs for development of (orphan) medicines.

Coherence

Coherence and complementarity with other EU interventions

The majority of representatives of national public authorities agreed or strongly agreed that the EU Orphan Regulation is coherent with other EU policies and actions to support development of pharmaceutical products. Most academic researchers were unable to comment on this.

EU Added value

Representatives of national public authorities in Member States indicated that the added value brought by the EU Orphan Regulation resides foremost in the offer of an additional set of incentives
[Error! Reference source not found.](#_Ref10112879)
. Both in comments to the survey and in interviews, some stakeholders expressed that the EU Orphan Regulation has contributed to structuring the national expertise in rare diseases and helped to promote national rare disease plans.

6.Conference on "Medicines for Rare Diseases and Children: Learning from the Past, Looking to the Future”

Objective

The conference entitled “Medicines for Rare Diseases and Children: Learning from the Past, Looking to the Future” which took place on 17 June in Brussels aimed at bringing together stakeholders from different groups for an active discussion based on the preliminary findings of the ongoing study to support the evaluation of the EU Orphan and Paediatric Regulations. The conference brought together some 150 experts from across the EU, representing national governments and health authorities, academia, patient and health professionals’ organisations and the pharmaceutical industry.

Five break-out sessions were organised, during which the following topics were addressed: unmet medical needs, incentives, medicines for children, from R&D to patients and scientific developments.

Stakeholders & overview of results

The results were assessed qualitatively per theme; the most important conclusions of each break-out session are presented below.

Unmet medical needs

The EU Regulation on conditional marketing authorisation provides a definition of unmet medical needs. However, participants questioned whether it is understood in the same way by all involved parties. The value of input from ‘expert patients’ concerning how unmed medical need is exactly defined as well as the quantification of unmet medical need was therefore recognised. It was also remarked that a broader understanding of unmet medical need could serve both paediatric and orphan medicines development. In addition, orphan designation could be granted very early in the development stage – even at the concept stage. This could be combined with compulsory collaboration and information-sharing with respect to pre-competitive elements such as endpoints, medical history etc.

 

Various groups of stakeholders reflected on the interplay between the EU Orphan Regulation and the Paediatric Regulation. In particular, they expressed their concerns on the definition of a condition under the EU Orphan Regulation framework and the granting of PIP waivers, which were thought to negatively impact the development of treatments for children with rare diseases, including cancer.

Incentives

The two Regulations were considered successful in supporting innovation; however, they may not be focused enough as the increase in the numbers of new medicines does not necessarily mean that societal needs are being properly addressed. In addition, the connection between financial reward and a medicine’s development cost may not always be clear. It would be important for any financial reward scheme to incorporate the entire life cycle of a product.

Medicines for children

Participants underlined that, currently, the development of medicines for children is mainly adult-driven; and that the so-called ‘return on investment’ (ROI) is an important factor. While there are new ways of promoting science for children financial aspects come into play.

Another fundamental challenge relates to the lack of knowledge with respect medicines development for children, both in terms of physiology and the development process itself. It was suggested that an overarching, multi-disciplinary R&D strategy should be put in place, supported by appropriate disease registries, with the aim to develop paediatric-only medicines.

From R&D to patient

Many hurdles in translating research findings to benefit patients still exist, such as academia not having sufficient knowledge of regulatory requirements and incentives. Moreover, how to define the most relevant endpoints is also challenging; these issues result in lack of information and uncertainties for other stakeholders, such as patients. An early dialogue between all players involved was suggested, among others, as a possible way to address these hurdles.

Scientific development

Data and evidence generation were considered crucial to increase opportunities for a better understanding and treatment of diseases. Data complexity also needs to be more effectively managed; and existing data should be put to better use and generated for other users.

All relevant views expressed by the stakeholders were taken into consideration when drafting this evaluation.

|  |
| --- |
| A detailed report was published on the Commission website and can be found at:  <https://ec.europa.eu/health/sites/health/files/files/paediatrics/docs/ev_20190617_report_en.pdf> |

Conclusions

The consultation activities provided a wide range of opinions and experience concerning the implementation of the two regulations in terms of what has worked well so far and what has not worked so well, as seen through the eyes of the stakeholders consulted. This information is widely used in the evaluation to complement and triangulate the information obtained from other sources.

The two physical meetings (workshop and conference) with EU stakeholders provided a valuable opportunity to promote their engagement in the evaluation while offering an additional occasion to provide feedback, thus increasing the chances of collecting more complete and representative responses.

The feedback on the roadmap allowed the stakeholders to express concerns and their opinions on the process and the overall exercise of the evaluation. This information has been used by the Commission services during the study on the orphan regulation.

:   [(1)](#footnoteref2)
     
       Better Medicines for Children From Concept to Reality 
    <https://ec.europa.eu/health/sites/health/files/files/paediatrics/2013_com443/paediatric_report-com%282013%29443_en.pdf>

    State of Paediatric Medicines in the EU 10 years of the EU Paediatric Regulation
    <https://ec.europa.eu/health/sites/health/files/files/paediatrics/docs/2017_childrensmedicines_report_en.pdf>
:   [(2)](#footnoteref3)
     
       General report on the experience acquired as a result of the application of the Paediatric Regulation (5-year Report to the European Commission, July 2012)
    [https://ec.europa.eu/health//sites/health/files/files/paediatrics/2012-09\_pediatric\_report-annex1-2\_en.pdf](https://ec.europa.eu/health/sites/health/files/files/paediatrics/2012-09_pediatric_report-annex1-2_en.pdf)
    General report on the experience acquired as a result of the application of the Paediatric Regulation (10-year Report to the European Commission, August 2017)
    <https://ec.europa.eu/health/sites/health/files/files/paediatrics/2016_pc_report_2017/ema_10_year_report_for_consultation.pdf>
:   [(3)](#footnoteref4)
     
       Study on the economic impact of supplementary protection certificates, pharmaceutical incentives and rewards in Europe ( 2018)
    <https://ec.europa.eu/health/sites/health/files/human-use/docs/pharmaceuticals_incentives_study_en.pdf>
:   [(4)](#footnoteref5)
     
    <https://ec.europa.eu/info/law/better-regulation/initiatives/ares-2017-6059807_en>
:   [(5)](#footnoteref6)
     
    <https://ec.europa.eu/health/sites/health/files/files/paediatrics/docs/paediatrics_10_years_economic_study.pdf>
:   [(6)](#footnoteref7)
     See Article 50(3) of the Paediatric Regulation.
:   [(7)](#footnoteref8)
     
    <https://www.orpha.net/consor/cgi-bin/index.php>
:   [(8)](#footnoteref9)
      The replies are publicly available at: 
    [https://ec.europa.eu/info/law/better-regulation/initiatives/ares-2017-6059807/public-consultation\_en#consultation-outcome](https://ec.europa.eu/info/law/better-regulation/initiatives/ares-2017-6059807/public-consultation_en)
:   [(9)](#footnoteref10)
     Aid for research incentive is the possibility for Member States or other programmes to offer research grants or other forms of support to developers of designates orphan medicines.

[Top](#document2)

Annex 3: Methods and analytical models

Orphans

External support study

The support study was conducted by Technopolis Group and Ecorys for the European Commission. The study has drawn from a variety of data sources. Primary data was collected from targeted stakeholder groups using a series of interviews and online administered surveys.

Separately, an online public consultation was performed to solicit input from individuals with a personal experience with rare diseases (patients and carers) and from health care professionals. For more detailed information on the stakeholder and open public consultation, please refer to Annex 2.

The primary data analysis was supported by several secondary data analysis activities.

Literature review

To support the various activities of the study a comprehensive review of peer-reviewed and grey literature was conducted. The methodology followed for this is based on that of systematic literature reviews such as those performed by the Cochrane Collaboration.

A detailed search strategy was developed, using key words, Medical Subject Headings (also known as ‘MeSH terms’) or Index terms that were combined into search strings. A screening of the thus retrieved information was performed. The screening was based on predetermined selection criteria (based on the relevance of the content, i.e. whether there was information that would help answer an evaluation question). Only when the full text was deemed to meet the inclusion criteria by both reviewers (or, in case of disagreement, after review by a third assessor) were articles included.

For peer-reviewed literature, the following data sources were searched:

·PubMed (including MEDLINE)

·Scopus

·The Cochrane Library

Two separate search strategies were used: one to cover the orphan medicinal product landscape globally and another to identify literature related to the impact of the Orphan Regulation. For the first, no restrictions were posed on geography, intervention or impact area.

Grey literature (i.e. literature that has been published outside of traditional commercial channels or academic publishing channels, such as government or business reports, policy documents, theses or conference presentations) was retrieved from the websites of the European Commission (DG RTD and DG SANTE, European Medicines Agency, EFPIA, EuropaBIO, EURORDIS, FDA, OrphaNet, PMDA (Japan), and TGA (Australia).

Additional searches of both peer-reviewed and grey literature were run using Google Scholar.

Portfolio analysis

The portfolio analysis is based on analysis of the data received from the Agency and IQVIA. This comprehensive set of data was cleaned from data entry errors, restructured, according to the orphan designation, and linked to ensure that the contractor was able to run the proposed analyses.

Classification of sponsor types

Sponsors were classified to compare the composition of different types at the time of orphan designation to marketing authorisation. Overall, the following classifications and definitions were used.

Table A.3: Definitions of sponsor types

|  |  |
| --- | --- |
| Sponsor type | Definition |
| Individual | An individual listed without any attribution to a company, university or research facility. |
| SME | A company with fewer than 250 employees or a turnover smaller than €50m and listed on the Agency’s SME Register. |
| SME consultancy | Within the broader category of SME we identified small SME consultancy business as a separate category. |
| Consultancy | Consultancy with more than 250 employees or a turnover of more than €50 mln. |
| Academic | A research institute, university or other type of publicly funded research organisation. |
| Pharma | A biotech or pharmaceutical company with more than 250 employees or a turnover of more than €50 mln. |

Classification by geographical origin of sponsor

An online hand search was conducted for all sponsors to establish where their corporate headquarters are located.

The classification performed distinguished between the following regions: 1) EU/EEA, 2) Europe, non EU/EEA, 3) USA, 4) Canada, 5) Japan, 6) China, 7) India, 8) Australia, and 9) all other.

Classification by type of product

Products that based on the information provided regarding the active substance, were identifiable as proteins (e.g. containing suffixes such as -ase, or -mab or key words such as protein, antibody or immunoglobulin or recombinant), and those listed as ‘protein based therapies’ on http://www/drugbank.ca, were all classified as biological.

Those included fusion products that were produced at least in part through a biological process, as well as cell extracts and cell cultures. Products were classified as advanced therapy medicinal product (ATMP) if the field containing the active substance included any of the words adeno-, cell, gene, immunotherapy, plasmid, tissue vector, or viral, unless there were clear reasons to do otherwise. The classification extends to products designated before 2008, when the Agency first officially introduced the ATMP classification. All other products were classified as small molecules.

Total patient population size in the EU for authorised orphan medicines

To gain insight into the potential reach of the Regulation, as well as understanding the landscape in which the Regulation is situated, the contractor calculated the potential patient population size in Europe. They took into account the number of unique conditions for which an orphan medicine had been authorised at some point in time; even though it may have been withdrawn later. This led to a subset of 110 unique orphan conditions, each specifying a certain prevalence rate as X/10.000.

Next, the contractor extracted data on the EU population size from the Eurobarometer to match the population size to the year of the most recent designation and thus most recent prevalence rate. It then applied the following formula to attain the potential patient population in the EU per designation: prevalence rate of designation (most recent year) \* population size of the EU (the year of recorded prevalence rate)/10,000.

Share of on-patent medicinal products among orphan medicines

To assess the extent of ‘overlap’ between intellectual property rights and other regulatory protections on authorised orphan medicines, the contractor used data from MPA Business Services, which was linked to the data of the Agency. MPA Business Services looked into any major patents and/or SPCs that were on the active substance prior to, during and post the marketing authorisation. This was compiled into a dataset of 105 orphan medicines for which they were able to trace patents and/or SPCs. The contractor excluded patents on formulation and/or process. As a reference for protection in the EU, it selected four countries to check if they had any protections on the active substance. These four countries were Germany, France, UK and Italy (it was deemed a reasonable assumption that, if there would be a patent on the active substance, it would probably be encountered in at least one of these four countries).

Allocation of designated and authorised orphan medicines by therapeutic area

To calculate the mean prevalence for conditions covered by all designations and by authorised orphan medicines, products were grouped by the main level ATC code. Subsequently, a regular division was done of the sum of the prevalence by the frequency of designations/OMPs.

Economic analysis

The IQVIA-database containing information on medicine sales was an important data source for the support study. Analyses of this database provided, amongst other things, input for the assessment of the economic value of the market reward and for the societal costs analysis.

IQVIA-database integrates national audits of healthcare markets into a globally consistent view of the pharmaceutical market, virtually tracking products in hundreds of therapeutic classes and providing estimated product volumes and revenues through retail and non-retail channels.

The research team (contractor) had access to revenue and volume data for the period 2008 (first quarter) to 2017 (third quarter) for the geographical area ‘Europe’.

For the analysis, information on the following three subsets of medicines was abstracted from the database:

·EU orphan medicinal products and their generics

·Orphan-like products and their generics

·Non-orphan products

1.1. EU orphan medicinal products

The IQVIA database did not provide an identifier for orphan medicinal product as such. Therefore, orphan medicines that received MA in EU were identified based on the active substance and the (local and international) product name. A list of medicines with MAs in the EU was obtained from Orphanet Report Series (July 2018)
[1](#footnote2)
 and matched to the list of product names (both local and international) in the IQVIA-database. The list was also cross-checked with the information provided by the Agency. A list was then extracted for the identified matches, based on the International Non-Proprietary Names (INN) together with the way the products are administered. It is further assumed that products, which have the same combination of active substances and way of administration are generic products for this orphan medicine.

1.2. Orphan-like products

As a second subset, a group of “orphan-like” medicinal products were identified. Orphan-like products are products that (i) acquired an orphan designation in the US before the year 2000 and were marketed in the US, and (ii) at the same time were marketed in the EU but did not receive an orphan designation in the EU.

The EU Orphan Regulation entered into force in 2000. Therefore, prior to 2000 manufacturers could only obtain an orphan designation and marketing authorisation in the US. It is assumed that these orphan-like medicinal products have ‘orphan’ characteristics, such as (potentially) low sales volume and use in the treatment of somewhat rare diseases.
[2](#footnote3)
 The identification of the group of orphan-like products offers a possibility for comparison with the orphan medicines in the EU. The steps followed to identify these products in the IQVIA-database are similar to the steps described above for orphan medicines.

1.3. Non-orphan medicines

Non-orphan medicines were identified separately in IQVIA database, after orphan medicines and orphan-like products were filtered from the data, by matching the complete list of IQVIA data with previously made lists (of orphan medicines and orphan-like products). The remaining list was regarded as containing only non-orphan medicines.

1.4. Calculation of the economic value of market exclusivity reward

As part of the study, the economic value of the market exclusivity reward was estimated. Two dimensions were important for this analysis:

I)The monetary impact of the reward for society as whole: due to the longer period of market protection (associated with the orphan market exclusivity reward) and the delayed generic entry into the market, society is unable to benefit from increased competition and lower prices for the used medicines.

II)The actual comparator situation: the situation without EU Orphan Regulation, i.e. the situation before the EU Orphan Regulation came into force and in which no specific market exclusivity reward in the EEA was available.

A group of 16 orphan medicines was selected for further analysis. This group was characterised by the fact that (i) the market exclusivity period has ended and that (ii) there is at least two years of sales data available in the IQVIA-database after the end of the exclusivity period. This period of (at least) two years was chosen to ensure that any generic competition could be observed and that there was sufficient time for the market to reach a new equilibrium. The calculation of the economic value of the reward is based on (i) the actual development of the revenues of the originator company; (ii) the applicable comparator situation and (iii) the market dynamics after the expiry of the exclusivity rights.

For the purpose of the analysis of the economic value of the market exclusivity, it was assumed that, in the case of a generic entry, the price of branded and generic products was expected to converge, and a new equilibrium price was reached (see Figure B.0). 

Figure B.0: Illustration of calculation of the economic value of market exclusivity

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_06002.jpg)

Source: Orphan Study (2019)

The new equilibrium price
[3](#footnote4)
, after the expiry of all forms of protection (patent and SPC protection, data exclusivity and market protection and market exclusivity for orphan medicinal products) is seen as the price level that is sufficient for both generic developers and originator companies to cover the cost for production and distribution, as well as a normal profit margin. The difference between this new equilibrium price and the initial price for the reference product can be seen as the compensation for R&D costs.
[4](#footnote5)

For this analysis, 16 orphan medicines were identified for which the period of market exclusivity had ended and where there were at least two years of IQVIA-data available after the end of the exclusivity period. In 2016, in total nine products were free from patent or regulatory protection and, in theory, susceptible to generic competition. No generic entry was observed in five of these nine cases. One product was still under market exclusivity in the US. Although this does not preclude generic entry in the EU, such generic entry was still not visible. 

For the remaining four orphan medicines, including the orphan medicine with an expired patent protection in 2016, generic entry was observed. In three of these cases, average annual turnover of the orphan medicine was well above €10 million, only in one case was it below €10 million. For all four products, it was possible to determine a new equilibrium price, based on the price realised by competitors. The economic value of market exclusivity reward for this limited sample of products was on average 30% of total turnover.
[5](#footnote6)

1.4.1.Assessment of the market value of patent protection of non-orphan medicines

Similar to the analysis described above, it was analysed to what extent the economic value can be calculated for protection, in this case patent/SPC protection, of non-orphan medicines. This analysis helps to assess the calculated economic value of market exclusivity for orphan medicines, as non-orphan medicines have a similar possibility of patent/SPC protection as orphan medicines do, but cannot receive the additional protection offered by market exclusivity. It can thus act as a control group.

A selection of products was made with a patent/SPC expiry date between 01-01-2011 and 09-01-2015; the selection was made such that years of revenue of generics and branded products before the patent/SPC expiry as well as after the patent/SPC expiry date were observed.

The average price of branded and generic products was calculated by dividing revenues by the volume of standard units that were sold within a quarter.

The equilibrium price was calculated per market and per quarter, by making the assumption that the equilibrium price of a market (market is a combination of ID product and country) equals the average price of generic products in the third quarter of 2017

The counterfactual revenues
[6](#footnote7)
 were calculated by multiplying the standard units per market for generic and branded products with the equilibrium price.

The economic value is calculated per quarter and per market for branded and generic products, by subtracting the counterfactual revenues per market from the actual revenues.

The relative value of the patent is calculated, as a percentage of the revenues, for branded and generic products

This analysis comprised 342 products that are marketed in the EEA. In 105 out of these 342 cases generic entry was observed (31%). The products with generic entry account for 55% of total revenues for this group, implying that average revenues for such products are higher than revenues for products without competition. The average premium for the 105 products with competition was 41%.

1.4.2.Assessment of societal costs and health impacts

The analysis of societal costs and health impacts of the Orphan Regulation follows the methodology of a cost-benefit analysis (CBA), but is different from a CBA in the sense that the health benefits are not expressed in monetary values, but in terms of quality adjusted life years (QALYs).

Societal costs and health impacts were assessed by comparing the “situation with the EU Orphan Regulation” to the most likely (though hypothetical) historic “situation without the EU Regulation” (comparator situation). The analysis is essentially backward looking: costs and health impacts relate to the years 2000 up to and including 2017. This implies that any costs or health impacts generated by the EU Orphan Regulation in 2018 and beyond are not taken into account.

The evaluation has, as far as possible, been carried out in accordance with EU CBA guidelines.
[7](#footnote8)

The main steps in the analysis were:

1.
   Establishment of the impact of the EU Orphan Regulation (i.e. the difference between the situation with EU Orphan Regulation in terms of availability of orphan medicines and the comparator situation). This estimate was based on analyses of the IQVIA-database;

2.
   Translation of the impact on accessibility into extra sales volumes and extra use of orphan medicines in the EU, resulting in extra turnover for industry. This extra turnover can be directly attributed to the EU Orphan Regulation. For this step, sales data for orphan medicines in the EU, as derived from the IQVIA database, as well as the results of the analysis of the economic value of the market exclusivity reward were used;

3.
   Assessment of the impact of extra use of orphan medicines on health care costs, based on available literature.

4.
   Analysis of the health impact on patients with rare diseases due to the treatment with the extra orphan medicines, using data from HTA reports.

5.
   Analysis concerning the division of health care costs between public and private financing sources.

6.
   Assessing the impact of extra use of orphan medicines on non-health costs of disease, based on literature review.

Below the various steps are described in more detail.

Step 1: establishing the impact (comparator situation)

Societal costs and health impacts can be assessed by comparing two situations: (1) the situation with the EU Orphan Regulation and (2) the situation without the EU Orphan Regulation. The situation with the EU Orphan Regulation is the situation that actually took place, as evidenced by marketing authorisations, sales data. Since the situation without the EU Orphan Regulation is hypothetical and did not take place, an appropriate “counterfactual” or “comparator” situation needs to be constructed.

As the econometric analyses necessary to come to a counterfactual situation that satisfies the requirements in the Better Regulation Toolbox were not possible, a comparator situation was established. This was done by assessing the most likely impact of the EU Orphan Regulation, relative to an extrapolated expected baseline in the hypothetical absence of the Regulation. This baseline was defined ex post as no ex ante impact assessment was conducted at the time the Regulation was introduced. Neither the interviews carried out, nor the survey results provide firm evidence of the size of such impacts. Therefore, various quantitative analyses were conducted to assess the most likely size of these impacts.

In our analysis, we assessed four types of (potential) impacts of the EU Orphan Regulation:

1.
   Development of new orphan medicines, as a result of the four incentives provided by the EU Orphan Regulation. This analysis focussed on the impact that the EU Orphan Regulation has had on research, development and marketing of new medicines for rare diseases. These new orphan medicines would not have been developed if the incentives would not have been available;

2.
   Faster introduction of orphan medicines in the EU, mainly due to the market exclusivity reward. This impact relates to the group of orphan medicines that would still have been developed without the EU Orphan Regulation, so excluding the impact as described in the previous point;

3.
   Wider availability of orphan medicines in the EU, due to the central marketing authorisation. This impact similarly only relates to the group of orphan medicines that would still have been developed even without the EU Orphan Regulation;

4.
   Higher sales prices of orphan medicines during the period of the market exclusivity reward. As shown in part 4, the market reward provided by the EU Orphan Regulation extends the period in which orphan medicines are protected from competition, thereby giving the opportunity to producers to realise non-competitive prices during this period.

èDevelopment of new orphan medicines

The interviews and surveys carried out in the context of this study indicate that market parties are of the opinion that the EU Orphan Regulation has indeed stimulated the development of orphan medicines. New products have been developed and brought to the marked that otherwise would not have become available. However, the interviews and survey data do not reveal what part of the 131 orphan medicines that effectively became available during 2000-2017 can be attributed to the rewards provided by the EU Orphan Regulation. As part of the assessment of effectiveness, the available data was analysed to come up with a best estimate of this impact.

Ideally, the analysis would have used company data on R&D costs, production, marketing and distribution costs, pricing and revenues from individual products. Such information could show how these factors influence the decisions of companies to start or continue the development process of new orphan medicines, and how the rewards (public research, protocol assistance, fee waivers, market exclusivity) influence these decisions. Unfortunately, such information is scarce and not sufficiently available in the public domain to model the decision-making process.

Therefore, this study analysed the trend in development of new (orphan medicines) medicines as evidenced by the marketing authorisations in the EEA. This analysis is a basic statistical analysis of the number of marketing authorisations for orphan medicines as compared to those for non-orphan products.

The reasoning behind this analysis is as follows. The impact of the EU Orphan Regulation in stimulating development was not yet visible in the marketing authorisations in the first few years after it came into force, as development of orphan medicines takes substantial time. However, the impact would become more and more visible over time as the EU Orphan Regulation is likely to have stimulated new development, resulting in new marketing authorisation. Assuming a development time of 10 years or more
[8](#footnote9)
, it may be expected that the impact of the EU Regulation on development decisions for new products has become noticeable only (well) after 2000. Decisions for development of products that were introduced in the early years are not likely to have been influenced by the rewards of the EU Orphan Regulation.

For this trend analysis, the following data were used on marketing authorisations for orphan medicines.

Table A.4: Number of marketing authorisations for orphan and non-orphan medicines in EEA

|  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
| Year | Orphan medicines | Non-orphan medicines | Year | orphan medicines | Non-orphan medicines |
| 2000 | 0 | 42 | 2009 | 9 | 108 |
| 2001 | 3 | 29 | 2010 | 4 | 47 |
| 2002 | 4 | 35 | 2011 | 6 | 81 |
| 2003 | 5 | 19 | 2012 | 10 | 47 |
| 2004 | 6 | 28 | 2013 | 7 | 72 |
| 2005 | 4 | 20 | 2014 | 14 | 67 |
| 2006 | 9 | 42 | 2015 | 13 | 80 |
| 2007 | 13 | 45 | 2016 | 15 | 66 |
| 2008 | 6 | 60 | 2017 | 14 | 78 |

Source: Agency data

The pattern in new marketing authorisations for orphan medicines is upwards but fluctuates. The upward trend can be seen from the average numbers of marketing authorisations in the three periods of six years, being 3.7 in 2000-2005, 7.8 in 2006-2011 and 12.2 in 2012-2017.

Part of this increase may be attributable to the EU Orphan Regulation, but part of this may also be due to a general trend in development of medicines. This trend has been approximated by the number of positive opinions by the Agency on non-orphan medicines in the same periods.

Table A.5: Average number of new marketing authorisations

|  |  |  |  |  |
| --- | --- | --- | --- | --- |
| 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: analysis Agency data

Comparing these numbers, it can be concluded that the growth in marketing authorisations for orphan medicinal products in 2006-2011 was in line with the ‘market trend’. From 2012 onwards, the growth has been stronger than this trend. Given the lead time involved in developing (orphan) medicines, this could well reflect the stimulating effect of the EU Orphan Regulation. Using the above data, the extra development of orphan medicinal products in 2012-2017 is assessed as follows:

·If development of orphan medicines would have been in line with non-orphan medicines (“the market”), the average number of marketing authorisation for orphan medicinal products would have been 107% x 7.8 = 8.4;

·The extra development is assessed as the difference between actual and expected average number, i.e. 12.2-8.4 = 3.8 products per year;

·This gives a total extra volume of 22.8 orphan medicinal products during these 6 years (i.e. 6 x 3.8=22.8);

·As some products have been withdrawn after authorisation, a correction is needed of 131 / 142 = 92%. This results on extra development of 22.8 x 92%= 21 orphan medicinal products (rounded).

Additional analyses using linear or exponential trends in development of these products result in slightly different levels of impact, with 18 to 24 new orphan medicines being developed as a direct result of the EU Orphan Regulation.

Taking an impact of 21 newly developed orphan medicines as a result of the EU Orphan Regulation implies that 21 of the 131 orphan medicines would not have been available without the regulation, while the other 110 would otherwise still have been available. This means a relative impact of almost 20% (21/110 = 19%).
[9](#footnote10)

As this statistical analysis does not take into account the decision-making variables, available information was used to check the plausibility of the finding. This check is based on the impact of the market reward on the expected sales and return on investment, and therefore on the decision to invest. It follows the reasoning that the extra protection derived from the market exclusivity reward increases the (expected) revenues from an R&D investment. Higher expected revenues imply a higher expected return on investment, and therefore a higher probability that a particular R&D project will be started or continued. This, in turn, will result in a higher probability of a successful development and market introduction.

The extra protection provided by the market exclusivity reward of the EU Orphan Regulation has been used as the defining factor in this analysis.

Among 105
[10](#footnote11)
 authorised orphan medicines analysed, 74 (70%) were protected by a primary
[11](#footnote12)
 patent or an SPC at the time the market exclusivity went into effect (Table 6). This indicates that the majority of newly authorised orphan medicines are new active substances that still benefit from substantial patent protection.

Of the 74 products protected by a primary patent or SPC at the start of the market exclusivity, 51 (69%) were still protected after the expiry of any market exclusivity
[12](#footnote13)
, with an average duration of 3.5 years beyond the market exclusivity.
[13](#footnote14)
 For these products, the market exclusivity had no impact on prolonging the period of protection.
[14](#footnote15)

For the 23 products (31% of 74 products) for which the protection offered by a primary patent or SPC expired during the (first) market exclusivity period, the average duration of the additional protection offered by market exclusivity was 2 years and 3 months. For this set of products, the market exclusivity was the only remaining form of protection in the period after the patent/SPC ended, but this period was shorter than the 10 (or 12) years.

A little less than a third of analysed products was not protected by any primary patent or SPC at the start of the market exclusivity period. For this sub-set of products, the market exclusivity was the only remaining form of protection against competition throughout the entire 10 years duration (or 12 years, in the case of a paediatric extension to the exclusivity period). A third of the products without a major patent or SPC at the start of the market exclusivity is a biological, the other two-thirds are small molecules.

When averaged over the entire set of analysed orphan medicines, thus including products without any primary patent or SPC protection at the start of the market exclusivity period, the average additional protection offered by the market exclusivity was calculated at 3.4 years.
[15](#footnote16)
 

These 3.4 years imply an extension of the period in which the product is protected from competition, on top of protection provided by patents / SPCs. It should be noted also that the protection offered by market exclusivity is different from that offered by patents or SPCs. Whereas the latter protect only against products with the same active substance and for the same indication (generic or biosimilar products), market exclusivity protects more broadly against all products that are considered ‘similar’. Moreover, even if a sponsor develops a product that is not similar to an existing orphan medicine that is under market exclusivity, it will need to demonstrate significant benefit over the existing product before it could be authorised as an orphan medicine. The value of this added layer of protection over that offered by a patent of SPC could, however, not be established.

This extra protection is on top of the protection provided by patents / SPCs. The relative size of this extra protection clearly differs per situation. The effective duration of the protection by patent/SPC may vary per situation and can be less than 20 years. Using an average effective protection period by patents/SPCs of 15 to 20 years, the additional protection period realised by the market exclusivity reward can be estimated at ranging from (3.4/20=) 17% up to (3.4/15=) 23 %.
[16](#footnote17)

This additional protection implies that during this period, extra revenues can be generated for the newly developed orphan medicine (compared to a situation without the EU Orphan Regulation). The size of these extra revenues depends on (a) the market on which the orphan medicines is introduced, and (b) the price policy applied by the producer. Also, here a variety of situations can apply. For the purpose of illustration, assume that the product is introduced at the same time in major markets such as EU and US and a same price level would be achieved, the EU market protection may result in 50 to 60% extra revenues if relative pharmaceutical market sizes or relative populations are taken as the basis.
[17](#footnote18)
 Using these values, the extra revenues due to the market exclusivity reward would amount to 50% x 17%=8.5% to 60% x 34% = 20.4%.

In summary, these data suggest that the market exclusivity reward may result in a 10 to 20% increase in revenue potential for an average orphan medicine. The extra potential is higher for orphan medicines that benefit from the full 10 years extra protection, or lower if the market exclusivity period overlaps with the patent / SPC protection.

A higher revenue potential is likely to increase the attractiveness of a development process, and thus may result in higher probability for positive decisions and thereby on higher development results. The relation between such a decision and revenue potential is however not known. Nevertheless, given the higher revenue potential for an average orphan medicine of 10 to 20%, the impact found in the trend analysis (20% extra development) is deemed plausible.

In summary, it is assessed that the average number of additional orphan medicines having been developed as a direct result of the EU Orphan Regulation amounts to 21 (out of the total of 131). There is, however, quite some uncertainty around this estimate. Therefore, in the reference analysis an impact of 21 orphan medicines is used, while sensitivity analyses have been carried out with a lower estimate of 18 extra orphan medicines and a higher estimate of 24 extra orphan medicines.

èFaster availability of orphan medicines in the EU market

Given the combination of rewards (fee waiver, protocol assistance, market exclusivity), the EU Orphan Regulation may not only have stimulated new development of orphan medicines, but may also be expected to have stimulated that orphan medicines which would also have been developed without the regulation (within or outside Europe) became faster available in the EU market.

To assess this potential impact of the EU Orphan Regulation, the following analyses were carried out on the three sub-sets of medicines identified from the IQVIA-database:

·For orphan medicines, the time between the marketing authorisation date in the EEA and appearance in the first EU market was calculated. Subsequently, it was assessed in how many EU Member States the product was available exactly three years after the marketing authorisation date.

·For orphan-likes a similar assessment was made by calculating the time between the marketing authorisation date in the US and the appearance in the first EU market. Subsequently, it was assessed in how many EU Member States the product was available exactly three years after the marketing authorisation date.

In this context, it should be noted that it is likely that there is a “survivor bias” in the group of orphan-likes as defined from the IQVIA database, due to the fact that only those products that were at least selling in the first quarter of 2008 are visible in the IQVIA database. Orphan-likes that left the EU market(s) prior to 2008, could not be included. The analysis thus only includes the “survivors” which are likely to have reached the first EEA/EU market earlier and have been launched in more EEA/EU markets. Moreover, all orphan-likes were sold throughout the period 2008-2016. Given this survivor bias, the found impact is a conservative estimate.

A second remark on the comparison of finding for the orphan-likes and orphan medicines is that the orphan-like products were introduced before 2000, while the orphan medicines were introduced after 2000. The difference may thus partly be caused by a difference in timing. For this reason, the analysis for the non-orphan medicines group was carried out.

In this context, it is important to use a common comparison basis for the two groups and take the various expansions of the EU into account. We therefore limited the analysis to the ‘old’ EU-12 Member States, as they form a uniform and consistent group for the period before 1995 and the period after 1995.

Similar to the analysis for orphan-likes, for newly developed non-orphan products, the development in the lead time between international product launch date and the appearance in the first EU market was analysed over a longer period of time (1990-2016). Also for this group, it was assessed in how many EU Member States the product was available three years after the international product launch date. This analysis was used to assess the general trend over time in the “time to market” and spread of availability.

The results of these analyses are shown in Table A.6.

Table A.6: Time to EU market and availability of various types of medicine

|  |  |  |  |
| --- | --- | --- | --- |
|  | Orphan medicines | Orphan-likes | Non-orphan medicines |
| Before 2000 | | | |
| Time to market |  | 30.2 m | 15.9 m |
| Number of EU12 MS reached after three years |  | 3.7 MS | 2.9 MS |
| After 2000 | | | |
| Time to market | 1.1 m |  | 5.2 m |
| Number of EU12 MS reached after three years | 5.7 MS |  | 4.2 MS |

Source: analysis IQVIA data

The analysis of IQVIA data shows that the average time to EU market for orphan-likes introduced in the US before 2000 (based on 70 products that actually reached the EU market) was 30.2 months.

The analysis for orphan medicines with market entry after 2000 shows that the time difference between market entry in US and EU was on average 1.1 month. The difference in time to the EU market between the two groups would thus indicate a much shorter time to the EU market for orphan medicines as compared to orphan-likes, of 29 months. However, this difference cannot be attributed to the EU Orphan Regulation only, as there may have been an overall trend of faster access of medicines to the EU market.

The analysis of the development in the lead time to EU market for non-orphan medicines in the same time period shows that it has indeed decreased, by (15.9 – 5.2=) 10.7 months between 1990-2000 and 2010-2018, or a reduction of 68%.

This means that, even without the EU Orphan Regulation, the time to the EU market for orphan-likes may have been reduced, with 68% of 30.2 months (20.3 months), to 9.9 months. The impact of the EU Orphan Regulation is thus assessed to be the difference between the hypothetical time to market of 9.9 months and the observed time of 1.1 months, thus equal to 9 months (rounded).

Based on this analysis it is concluded that for medicines for patients with rare diseases the average time to reach the EU market has become shorter since the EU Orphan Regulation came into effect, by 9 months.

èWider availability of medicines in EU market

In addition to stimulating faster availability, the EU Orphan Regulation may also be expected to have stimulated more widely availability of orphan medicines which would also have been developed without the Regulation (within or outside Europe) in the EEA/EU market. With respect to the wider availability, the analysis shows that three years after marketing authorisation in the US market, the orphan-likes were on the market in on average 3.7 of the EU12 markets, while orphan medicines were generally available in on average 5.7 EU12 markets after three years. So, three years after market introduction orphan medicines were available in 2 more Member States (out of 12).

A similar exercise based on the international product launch dates for non-orphan medicines shows that the typical market coverage for other medicines has also increased, from 2.9 to 4.2 Member States (of EU12) after three years, or by 45% in the same period. If we adjust the geographical extension evident among orphan medicines in light of the underlying trend of improving market availability for all medicines, we arrive at an expected market coverage of 145% x 3.7 = 5.36 MS. As the actual spread shows 5.7 Member States, the additional impact of the EU Orphan Regulation can be estimated 0.34 additional Member States of the EU12 (or 3%).

This finding needs to be translated to the EU28 level. In doing so, two observations are relevant:
[18](#footnote19)

·The potential size of the markets based on population (the EU28 being approximately 33% larger than EU12);
[19](#footnote20)

·The availability of orphan medicines which is generally lower in EU16 as compared to EU12, as can be seen from data presented in Chapter 5. Based on actual spread of orphan medicines, it is calculated that availability in the EU16 is generally at 65% of the level of the EU12.
[20](#footnote21)

Taking this into account, the impact of the EU Orphan Regulation on the geographic spread of orphan medicines after three years can be estimated at 3% for the EU12 (or 11.5 million inhabitants) + 3% \* 65% for EU16 (or 2.5 million inhabitants). This translates to an average impact for EU28 of 2.7%, or 14 million inhabitants of EU28. This equals the population of Belgium and Lithuania.

èHigher sales prices of orphan medicines during the period of the market exclusivity reward

A fourth potential impact of the EU Orphan Regulation concerns the potential higher sales revenues as a result of the longer period of market protection through the market exclusivity reward. For this impact, the result of the economic valuation of the market reward is relevant. That analysis shows that, for the four orphan medicines for which the approach could be applied the economic value is estimated at 12 to 54% of the total sales revenues realised for the orphan medicines (average 30%).

However, the reward is on top of other protections, meaning that the effective extra protection varies from 0 to 10 years at orphan medicine level, with an average of 3.4 years for the whole group of orphan medicines. The impact of the EU Orphan Regulation on sales is thus assessed to be that all orphan medicines that received a marketing authorisation realise extra revenues from orphan medicine sales during the last 3.4 years of their market exclusivity period. This benefit relates to 64 orphan medicines (active and expired) during the period 2000-2017.
[21](#footnote22)

This assessment implicitly assumes that even though not all orphan medicines experience generic entry, there is still additional value realised due to the market protection, as sponsors set their prices not knowing beforehand whether competition will arise. This was deemed to be a reasonable assumption, even though the methodology used does not allow to assess this assumption for situations in which no competition has arisen. An alternative assumption, however, would be that competition only emerges for those products with a relatively high profit margin. In that case the extra reward would only be realised by a part of the orphan medicines.

In the sensitivity analysis
[22](#footnote23)
, it was assessed to what extent the result is affected if the extra revenues are only calculated for part of the orphan medicines (i.e. for 44% of the relevant orphan medicines as found in our analysis of 16 orphan medicines).

Step 2: translation of the impact on accessibility of orphan medicines

The next step in the CBA involved the translation of the impact into higher accessibility of orphan medicines in 2000-2017 in the EU market. Note that the first three impacts described under step 1 (establishing the impact) also resulted in higher accessibility (and higher sales volumes) of orphan medicines.

In order to translate the combined accessibility effect of these three impacts into sales, the average annual sales revenues of active orphan medicines
[23](#footnote24)
 during 2008-2016 has been used, estimated at € 67 million (in current prices).

The fourth impact described above does not result in higher accessibility/ sales of orphan medicines, but has the effect of higher prices and thus higher revenues for the industry without affecting the accessibility of orphan medicines.

Step 3: assessment of the impact of extra use of orphan medicines on health care costs

The higher use and higher prices of orphan medicines that can be attributed to the EU Orphan Regulation have resulted in higher treatment costs for patients, which in turn affects total health care costs. The exact impact on health care costs differs per type of rare disease, and because of differences in the additional requirements of the treatment, as well as the savings in health care costs for alternative treatments. This information is to a certain extent available from HTA reports on orphan medicines.

In order to assess this impact on health care costs, as well as to assess the health impact for patients suffering from rare diseases, available HTA reports for orphan medicines were screened. A review was carried out to assess the availability of this type of information within the HTA reports for orphan medicines, as available in the public database of the University of York Centre for Reviews and Dissemination and a list of HTA reports supplied by EMA.

For a total of 50 orphan medicines that received marketing authorisation in the EEA a HTA report was found. However, not all of these reports proved useful to establish the impact on health costs and the health impact for patients (
[Table](#_Ref14022344)
 provides an overview of the available information in the identified HTA reports).

Table A.7: Overview of HTA reports with economic information

|  |  |
| --- | --- |
| Contents of reviewed HTA reports | No. of reports |
| Limited /no economic information | 10 |
| No information on cost effectiveness | 8 |
| Insufficient information given (e.g. ICER given, but no treatment cost) | 5 |
| Information on ICER and cost of treatment, but no health impact / patient | 14 |
| Information on ICER and health impact per patient (in QALY) | 8 |
| Information on ICER, health impact per patient and cost of treatment | 5 |
| Total | 50 |

Source: elaboration by Ecorys. ICER stands for ‘Incremental Cost Effectiveness Ratio’, which is the ratio of the change in the cost of a therapeutic intervention (i.e. use of the orphan medicine) compared to the alternative/current treatment.

The review of HTA reports shows that only a small minority of these reports contains full economic information, such as costs of treatment with the orphan medicine per patient (per year), costs for the alternative (comparator) treatment of the patients suffering from the rare disease and the health impact for patients.

A larger number of reports contains conclusions on the Incremental Cost Effectiveness Ratio (ICER) analysis, which relates the (discounted) additional costs for the health system to the number of quality adjusted life years (QALYs) gained.
[24](#footnote25)
 From the list of 50 reports, a selection of 32 reports has been made which could be used for the assessment of health impact of use of orphan medicines (see table below). The basis for assessment of the total impact on health costs was not strong enough, though.

Table A.8: List of 32 orphan medicines used in the evaluation of costs and health benefits at Regulation level

|  |  |
| --- | --- |
| OMP | Source |
| Adcetris | <https://www.nice.org.uk/guidance/ta478/documents/final-appraisal-determination-document> |
| Arzerra | <https://www.nice.org.uk/guidance/ta202/resources/chronic-lymphocytic-leukaemia-ofatumumab-final-appraisal-determination3> |
| Blincyto | <https://www.nice.org.uk/guidance/ta450/documents/final-appraisal-determination-document> |
| Bosulif | <https://www.nice.org.uk/guidance/ta401/documents/final-appraisal-determination-document> |
| Bronchitol | <https://www.nice.org.uk/guidance/ta266/documents/cystic-fibrosis-mannitol-final-appraisal-determinaton3> |
| Cyramza | <https://www.nice.org.uk/guidance/ta378/documents/final-appraisal-determination-document> |
| Esbriet | <https://www.nice.org.uk/guidance/ta504/documents/final-appraisal-determination-document> |
| Exjade | NHS Worcestershire, DEFERASIROX IN THE TREATMENT OF TRANSFUSIONAL IRON OVERLOAD IN THALASSAEMIA MAJOR AND OTHER ANAEMIAS |
| Fabrazyme | https://www.ncbi.nlm.nih.gov/books/NBK62284/ |
| Farydak | <https://www.nice.org.uk/guidance/ta380/documents/final-appraisal-determination-document> |
| Glivec | <https://www.nice.org.uk/guidance/ta70/resources/guidance-on-the-use-of-imatinib-for-chronic-myeloid-leukaemia-pdf-2294751800005> |
| Holoclar | <https://www.nice.org.uk/guidance/ta467/documents/final-appraisal-determination-document> |
| Iclusig | <https://www.nice.org.uk/guidance/ta451/documents/final-appraisal-determination-document> |
| Imbruvica | <https://www.nice.org.uk/guidance/ta502/documents/final-appraisal-determination-document> |
| Imnovid | <https://www.nice.org.uk/guidance/ta427/documents/final-appraisal-determination-document> |
| Jakavi | <https://www.nice.org.uk/guidance/ta386/documents/final-appraisal-determination-document> |
| Kalydeco | <https://www.nice.org.uk/guidance/ta398/documents/committee-papers-2> |
| Kyprolis | <https://www.nice.org.uk/guidance/ta457/documents/final-appraisal-determination-document> |
| Lartruvo | <https://www.nice.org.uk/guidance/ta465/documents/final-appraisal-determination-document> |
| Lenvima | <https://www.nice.org.uk/guidance/gid-ta10101/documents/assessment-report> |
| Lynparza | <https://www.nice.org.uk/guidance/ta381/documents/final-appraisal-determination-document> |
| Ninlaro | <https://www.nice.org.uk/guidance/ta505/documents/final-appraisal-determination-document> |
| Nplate | <https://www.nice.org.uk/guidance/ta221/resources/romiplostim-for-the-treatment-of-chronic-immune-idiopathic-thrombocytopenic-purpura-pdf-82600305088453> |
| Ocaliva | <https://www.nice.org.uk/guidance/ta443/documents/final-appraisal-determination-document> |
| Ofev | <https://www.nice.org.uk/guidance/ta379/documents/final-appraisal-determination-document> |
| Revlimid | <https://www.nice.org.uk/guidance/ta322/documents/myelodysplastic-syndrome-deletion-5q-lenalidomide-id480-final-appraisal-determination-document2> |
| Revolade | <https://www.nice.org.uk/guidance/ta293/documents/thrombocytopenic-purpura-eltrombopag-rev-ta205-final-appraisal-determination3> |
| Somavert | NHS Worcestershire, THE USE OF PEGVISOMANT (SOMAVERT®▼) IN THE TREATMENT OF ACROMEGALY |
| Spinraza | <https://www.zorginstituutnederland.nl/publicaties/adviezen/2018/02/07/pakketadvies-nusinersen-spinraza-voor-de-behandeling-van-spinale-musculaire-atrofie-sma> |
| Sprycel | <https://www.nice.org.uk/guidance/ta426/resources/dasatinib-nilotinib-and-imatinib-for-untreated-chronic-myeloid-leukaemia-pdf-82604667051205> |
| Strimvelis | <https://www.nice.org.uk/guidance/hst7/documents/final-evaluation-determination-document> |
| Ventavis | <https://www.nice.org.uk/guidance/gid-tag382/documents/schering-health-care-ltd2> |

Due to the limited availability of data in the HTA reports, the impact on total health care costs other could not be assessed with sufficient reliability. Evidence at orphan medicine level suggests that the total impact on health care costs could either be higher than the costs of orphan medicines, or lower than the costs of orphan medicines, but it was not possible to make an assessment at the level of the whole group orphan medicines. Therefore, it has been assumed that the impact of the EU Orphan Regulation on health care costs equals the extra sales revenues generated by industry due to the higher accessibility and higher prices (all four impacts) as calculated in step 2.

In addition to the health care costs related to treatment with the orphan medicines, there may be a future effect on health care costs, which is not shown in the HTA reports. For instance, if treatment with orphan medicines is successful in combatting the rare disease, the cured patient may contract another disease later in life. This effect could not be taken into account, which means a potential underestimation of the health care costs.

Step 4: assessing health benefits

Using the estimation of extra health care costs due the use of orphan medicines (as described in step 3), the information on the ICERs can be used to assess the health impact on patients suffering from rare diseases.

The health benefits are expressed in terms of the number of QALYs realised by patients. There is much debate on the extent to which such benefits can be expressed in monetary terms and, if so, what value should be applied. Given these discussions and the diverging views on the applicable value, no value has been applied in the CUA. Instead, the absolute number of QALYs is presented as the health impact, which will be related to the total societal costs.

In order to calculate the health impact in terms of QALYs, the extra health care costs incurred are translated into QALYs by using information on the ICERs from HTA reports.

As indicated, ICERs were available for 32 orphan medicines. This group includes reports for 5 orphan medicines that were prematurely withdrawn and 3 orphan medicines for which no sales have been recorded in 2008-2016. The following overview excludes information from these eight reports. The ICERs for the remaining 24 products differ considerably across orphan medicines, ranging from €23,000 / QALY to nearly €1 million / QALY. The table below gives a summary (the average ICER for this group is €110,000; the median being between €55,000 and €59,000).

The ‘weighted average ICER’ for the individual years 2008-2016 was €54,000.
[25](#footnote26)
 However, this number may be an underestimation, as the group of orphan medicines contains medicines that have multiple indications, including indications for non-rare diseases.
[26](#footnote27)
 Given the overall conservative nature of the assessment, the cost-effectiveness of the Orphan Regulation for society can be deemed acceptable when compared to ICER thresholds in use internationally.
[27](#footnote28)

Table A.9: Overview of ICER of Orphan Medicinal Products that received Marketing Authorisation

|  |  |
| --- | --- |
| ICER | Number of orphan medicines |
| < €40,000 per QALY | 6 |
| €40,000 to €80,000 per QALY | 11 |
| €80,000 to €120,000 per QALY | 4 |
| > €120,000 per QALY | 3 |
| TOTAL | 24 |

In calculating the average ICER (€110,000), each of the 24 orphan medicines is given the same weight. However, some orphan medicines are more widely used than others, which implies that the realised cost effectiveness may be different from this average. To investigate this, a weighted average was estimated for the individual years 2008-2016. This was done by taking only the ICERs the active orphan medicines for the individual years and subsequently using the turnover of the individual orphan medicines as the relative weights. This estimation resulted in a weighted average annual value in the range of €48,000 to €60,000 per QALY; the average over the years being €54,000.
[28](#footnote29)
 

The weighted average ICER is substantially lower than the non-weighted average ICER presented above. This implies that, while many orphan medicines are generally expected to deliver health improvements at relatively high costs, those that are actually reimbursed are generally more cost effective. It should be noted, however, that the applied method of weighing has a disadvantage in that it uses total sales of a product, including sales of products relating to non-orphan indications. Hence, the presented weighted average ICER may be an underestimation as high sales of products with multiple indications may distort the average.

The above finding, that in practice use of the cost effective orphan medicines is higher than those of less cost effective medicines, is in line with a recent paper by Berdud, Drummond and Towse (2018). They estimate the average ICER for orphan drugs appraised by SMC and NICE to be around £70,000, while the average ICER of (7) orphan drugs with positive recommendations by both organisations is assessed to be substantially lower, at around £45,000, or approximately €60,000.

In order to assess the health impact of the EU Orphan Regulation, a wide range has been applied for the ICER (€54,000 to €110,000). The are several reasons for this. First, the above analysis shows that there is a wide variation in the results of the different approaches, each having disadvantages. Second, almost all the publicly available HTA reports relate to the situation in the United Kingdom (UK). This situation may not be representative for the situation in other EU28 Member States. For instance, the cost difference between treatment with orphan medicine and the comparator treatment in other Member States may be quite different from that in the UK for various reasons: differences in orphan medicine pricing between Member States, differences in applied comparator treatments (notably as a result of differences in labour costs). Third, for many orphan medicines no HTA report containing an analysis of the ICER could be found. It is therefore not known to what extent the available ICERs are representative for the whole group of orphan medicines that are being used in the EU.

Given these observations there is sufficient reason to use a relatively wide range for the ICER in the CUA, in particular as this variable is an important driver for the outcome of the analysis.

Step 5: financing of health costs

Part of the additional health care costs are reimbursed from collective sources (either government budgets, collective health insurance systems or otherwise). Healthcare systems across the EU Member States are organised and financed in different ways.

Eurostat reports on healthcare expenditures and financing at regular intervals. For instance, the online publication Healthcare expenditure and statistics of March 2018
[29](#footnote30)
 presents the healthcare expenditures by financing scheme for all Member States (except Malta). It shows that household out-of-pocket payments are an important source of health care funding in many Member States, accounting for nearly 7% of total expenditures in France to almost 50% in Bulgaria (the average for EU being 21%).
[30](#footnote31)
 In addition, voluntary health insurance schemes are used to finance health care costs. Taking these two sources of financing together, the private share in expenses can be estimated to range from 16% in Germany to 57% in Cyprus (EU average being 27%). The remainder is financed from either government budget or compulsory insurance or savings schemes.

In addition, in this study’s survey of national public authorities, it was found that:

§In the vast majority of responding Member States (17 of 20, or 85%), the reimbursement mechanism for orphan medicines is the same as for non-orphan medicines;

§In the majority of Member States (15 out of 20, or 75%), financing of orphan medicines occurs through the national health service. In a minority of cases (6 out of 20, or 30%) financing is also partly derived from the health insurance system;

§None of the responding Member States has a separate fund for financing of orphan medicines, nor is the voluntary insurance involved;

§For six Member States (30%), out-of-pocket payments for orphan medicines are also recorded.

Based on this, it can be concluded that only a small proportion of costs related to orphan medicines is financed from out-of-pocket expenses by patients, most likely less than 5% of the total. The reasoning for this is as follows: in 30% of the Member States out-of-pocket payments is a source of financing of costs of orphan medicines. On average such payments cover 21% of costs of the health care system. The approximate share of out-of-pocket payments could thus be 30% x 21% = 6%. As treatment with orphan medicine is costly, it is very likely that private contributions are capped through various cost exemption schemes and are far less than the average contribution, so less than 6%. For the present analysis, a level of 50% is assumed, so 50% x 6% = 3%.

Consequently in the cost-benefit analysis a 97/3 division has been used between public and private financing.

Step 6: impact on other costs of disease

The societal costs of a disease are wider than those borne by the health system. Examples of non-health care costs of a disease are the use of social services, the costs of involvement of (professional or informal) carers outside the health system and productivity losses resulting from unplanned absences from work or early retirement by patients. Some of these costs are borne by the patients and their relatives, other costs are borne by others in society or by the government.

The level of non-health care costs depends very much on the type of disease, including characteristics such as typical patient groups (children, adults, elderly people) and the severity of the disease (life threatening or not). In addition, the impact of the orphan medicine on the level of such costs may differ from that of the alternative (comparator) treatment. For instance: the impact on non-health care costs may be quite different for an orphan medicine that has the effect of curing a disease, as compared to an orphan medicine that has the effect of reducing the burden of the disease.

Although several studies are available on the societal costs of rare diseases, there is limited information available on the impact of treatment with orphan medicines on such costs. HTA reports normally do not report on the impacts beyond the health system.

This implies that any wider social impact cannot be established at the level of the EU Orphan Regulation.

2.Costs and benefits per stakeholder group

This section of Annex 3 presents the costs and benefits for individual stakeholder groups, based on the results from the six steps described above.

2.1. Industry

The impact of the EU Orphan Regulation has resulted in the following effects for industry:

1.Extra R&D costs due to extra development of orphan medicines

Firstly, the industry has incurred higher costs due to the extra development of orphan medicines. These additional costs for industry have been calculated by using the number of newly developed orphan medicines (input for baseline analysis: 21 orphan medicines) and the range of R&D costs found for orphan medicines (range €479m to €725m; input for baseline CBA the average of this range: €602m). These cost estimates are net of subsidies received from governments and include already the cost of capital for the industry, using 11%.

As the R&D costs can potentially be spread over worldwide sales, not all of this investment needs to be allocated to the EU market. According to the turnover data presented in the main report, the average share of EU in worldwide sales of medicines for rare diseases is estimated at 21%. As this average may not be representative for newly developed orphan medicines, a more conservative approach is taken in the CUA by allocating 60% to the EU market, based on the relative population sizes of US and EU. Given these assumptions the total additional R&D costs for industry in 2000-2017 have been estimated at 21 x € 602 m x 60% = € 7.6 billion in nominal terms.

These extra development costs have been incurred by industry in the years up to the market introduction of the additional products. In order to assess the discounted value of the extra development costs, the costs have been phased in the 10 years before the market introduction of the 21 orphan medicines. The resulting present value of this stream of costs is estimated at € 11.0 billion.

2.Extra sales revenues due to sales of extra developed orphan medicines

As these 21 orphan medicines are developed due to the EU Orphan Regulation, industry has realised additional turnover in relation to these newly developed products. Using the average additional turnover of active orphan medicines, additional turnover is assessed at 21 x € 67m = € 1.4 billion per year.

The additional turnover has been taken into account for the years after market introduction of the respective orphan medicines, up to and including the year 2017. As explained, it is assumed that the impact of the Regulation has been that new products stimulated by the regulation have been introduced in the EEA/EU market from 2010 onwards. This means that at the end of the period taken into account (2000-2017) these products had been on the market for less than 10 years. Given the timing of the introduction of orphan medicines, the average number of years after introduction of these 21 orphan medicines is assessed at 4.6 years.
[31](#footnote32)
 Total additional turnover for additionally developed new orphan medicines during 2000-2017 is thus estimated at 4.6 x €1.4 = € 6.5 billion.

The present value of this additional turnover (in 2018 prices) is estimated at € 8.5 billion.

3.Extra sales revenues due to faster and wider availability of the other orphan medicines

Industry not only realised extra sales in the EU because of additional newly developed orphan medicines, but also because of the faster market introduction and the wider spread of orphan medicines after initial market entry. The extra sales due to the 9 months faster entry on the EU market are estimated by multiplying the relevant number of orphan medicines (110) by 9 months turnover (9/12 x € 67 million = € 50 million), resulting in a total value of € 5.5 billion in the years 2000-2017 (nominal value).

The wider spread of orphan medicines after introduction was estimated at 2.7% of EU population. This additional coverage 2.7% of total estimated turnover in the years 2000-2017 for the 110 products and amounts to € 1.8 billion (nominal value).

The nominal value of the combined additional sales revenues for these 110 orphan medicines due to faster and wider arability is thus estimated at € 7.3 billion (€ 10.6 billion in present value terms)

4.Extra production costs due to extra sales

The extra sales realised by industry means that extra costs have been incurred or manufacturing, distribution and marketing of the medicines. These extra costs have been assessed on the basis of the insights from the analyses presented about the calculation of the economic value of the market exclusivity reward. In this analysis, it was concluded that during the period in which products are protected from competition, a higher prices can be realised, yielding around 30% of sales revenues. This means that the other 70% of revenues can be assumed to represent the cost items mentioned above.
[32](#footnote33)
 Therefore, it has been assumed that in order to realise the extra sales, including those of extra developed orphan medicines, the industry has incurred extra costs at 70% of the extra revenues generated.

Given that extra revenues, as described above amount to €13.7 billion (€ 6.5 billion for newly developed products, € 5.5 billion due to faster access, € 1.7 billion to wider availability), the extra production cost (including normal profit) incurred during 2000-2017 are assessed at €9.7 billion (70% of €13.7 billion) in nominal value terms (€13.4 billion in present value terms).

5.Extra revenues due to higher prices

As described, on average the industry obtained an extension of the period in which orphan medicines are shielded from competition from similar medicinal products of on average 3.4 years. During this period, extra revenues are generated due to higher prices. These extra revenues are taken into account only for those (64) products which reached years 6 to 10 of the market exclusivity period in 2000-2017. As argued above, the benefits have been taken into account for all 64 products in the reference case analysis. The value of this extra turnover can be assessed by taking 30% of € 67 million during at maximum 3.4 years for 64 products. As not all 64 products were at the end of their market exclusivity period by December 2017, the effective average duration was 2.6 years. This results in extra revenues for industry at € 3.3 billion (€ 4.6 billion in present value).

6.Protocol assistance, fee waiver

The sector has directly benefitted from the fee waiver and protocol assistance rewards under the EU Orphan Regulation. The costs for EMA associated with these rewards amounted to € 0.1 billion over the years 2000-2017 (present value € 0.2 billion).

[Table](#_Ref2695925)
 (below) summarises the costs and benefits for industry, based on the assessed impact of the EU Orphan Regulation and using the average estimates. It shows that the costs for industry were higher than its benefits, at around € 0.5 billion.

Various sensitivity analyses
[33](#footnote34)
 have been carried out using alternative assumptions for the various inputs used. If only one variable is changed, the following net benefit (or net cost) results:

·Number of newly developed orphan medicines 24 (instead of 21): net cost € 1.9m;

·Higher R&D costs for newly developed orphan medicines (€725m instead of €602m): net cost € 2.7m;

·Number of newly developed orphan medicines 18 (instead of 21): net benefit € 0.9m;

·Lower R&D costs for newly developed orphan medicines (€725m instead of €602m): net benefit € 1.7m;

·Market exclusivity reward for only 44% of orphan medicinal products (instead of for all): net cost € 6.3m;

·Wider spread of orphan medicines 5% (instead of 2.7%): net benefit € 0.0m.

The upper and lower estimates for inputs in the analysis have also been combined. The table presents the results of a combination of the upper and lower estimates which given the most extreme outcome for industry. The “pessimistic” estimate combines the higher development costs, the higher (number of newly developed orphan medicines, the lower value for market exclusivity and a market exclusivity reward for only part (44%) of the orphan medicines. The “optimistic” estimate combines the values at the other end of the uncertainty range. The results of the sensitivity analyses are given as a range in the lower line of the table.

The general conclusion from the sensitivity analysis is that no robust conclusion can be drawn as to whether industry has experienced a net benefit or a net cost due to the EU Orphan Regulation in 2000-2017. In interpreting this conclusion, it should be kept in mind that the R&D costs already include a provision for the cost of capital used in the development process, based on a remuneration of 11%. It further reflects that investment for new orphan medicines have been made that have only been on the market for a limited number of years and are still within the period of market exclusivity. There is thus potential for industry to increase net benefits in the years after 2017, even if no new orphan medicines would be developed.

Table A.10: Industry Costs and Benefits, due to the Orphan Regulation, 2000-2017 (discounted value 2018, prices 2018, in € billions)

|  |  |  |
| --- | --- | --- |
| Effect | Costs | Benefits |
| R&D costs associated with the additional orphan medicines (EU part) | -/- €11.0b |  |
| Sales revenues of additional orphan medicines in EU |  | €19.1b |
| Extra costs of manufacturing, marketing, distribution in EU including extra “normal profit” | -/- €13.4b [34](#footnote35) |  |
| Extra revenues due to ME reward |  | €4.6b |
| Cost saving due to protocol assistance and fee waivers |  | €0.2b |
| Total | -/- €24.4b | €23.9b |
| NET BENEFIT (COST) | (€ 0.6b) |  |
| Range Net Benefits (minimum – maximum) a) | -/- €11b to +€11b | |

a) In the minimum scenario the higher R&D costs are combined with low effects on orphan medicine development and R&D compensation. In the maximum scenario opposite assumptions are used.

2.2. Health care sector

The impact of the EU Orphan Regulation on the health care sector is two-fold.

First, due to the additional use of orphan medicines the costs of treating patients have increased with the costs of the orphan medicines. There may be additional impacts on health care costs (additional costs of treatment with orphan medicines, savings on costs of alternative treatments), but such impacts could not be assessed.

Second, the health care sector will be compensated for these higher costs, from public and private sources. The revenues have thus increased, by the same amount as costs have risen.

This results in the following costs and benefits due to the EU Orphan Regulation for the health sector.

Table A.11: Costs and Benefits due to the Orphan Regulation for the health sector, 2000-2017 (discounted value 2018, prices 2018, € billions)

|  |  |  |
| --- | --- | --- |
| Effect | Costs | Benefits |
| Extra costs due to treatment with orphan medicines | -/- €23.7b |  |
| Additional extra costs due to new treatment | NDA a) |  |
| Savings in costs of alternative treatment |  | NDA a) |
| Public and private financing |  | €23.7b |
| TOTAL | -/-€23.7b | €23.7b |
| NET BENEFIT |  | €0.0 |

a): NDA: not sufficient data available to assess this effect

The total extra costs have been estimated at nearly €24b. The range of uncertainty for this estimate is smaller than for industry. Using the same combinations of assumptions in the as for industry, the sensitivity analysis shows a range of possible outcomes from a net cost of €20b to € 27b.

2.3. Governments

The stakeholder group, ‘governments and public organisations,’ contains various types of governmental organisations, including national governments, the EMA, the European Commission and public or semi-public bodies that finance the health system. This stakeholder group has experienced various types of costs due to implementation of the EU Orphan Regulation. Some are directly related to the Orphan Regulation, while others are related to the impact of the EU Orphan Regulation as assessed above, e.g. the extra health care expenses.

The direct costs are:

§EMA/COMP costs: the additional costs resulting from the tasks that EMA executes in relation to the Orphan Regulation, as well as the cost borne by the EEA Member States and other organisations in relation to the meetings of the various committees discussing applications for orphan designations and marketing authorisations. Annual costs for EMA and national governments have been assessed based on the approximate number of staff (in full time equivalents) involved in the various activities relating to the EU Orphan Regulation.

§Research subsidies: the EU and various national governments have provided subsidies for research to stimulate the development of orphan medicines. These subsidies are seen as fully additional costs – these costs are assumed not to have been made without the EU Orphan Regulation. This may be an overstatement, as some of these public R&D programmes would have been supporting research on rare diseases even if the EU Orphan Regulation had not been implemented. However, with the very limited information that is available, we have not been able to assess the extent to which these additional R&D expenditures would have been incurred in a situation without the EU Orphan Regulation.

§Fee waiver and protocol assistance: this is an integral part of the support provided by the EMA in line with its mandate to implement the EU Orphan Regulation; the costs of this assistance, which are incurred by the EMA, are fully financed by the EU.

The more indirect costs relate to the public share in the expenditures on health care system.

[Table A.12](#_Ref2698763)
[:](#_Ref2698763)
 shows the estimated additional costs for governments due to the Orphan Regulation. The net costs have been estimated at € 24 billion. The results are sensitive to the assumption regarding the additional development of orphan medicines and the faster/wider availability of orphan medicines. In case lower or higher estimates are used for these variables, total additional costs range between € 22 and € 27 billion.

Table A.12: Costs and Benefits due to the Orphan Regulation for governments, 2000-2017 (discounted value 2018, prices 2018, € billions)

|  |  |  |
| --- | --- | --- |
| Effect | Costs | Benefits |
| Administrative costs EMA, national authorities | -/- €0.02b |  |
| Aid for research | -/- €1.1b |  |
| Fee waivers, protocol assistance | -/- €0.2b |  |
| Health care financing | -/- €23.0b |  |
| TOTAL | -/- €24.3b | €0.0b |

2.4. Patients (and others)

The fourth stakeholder group concerns the patients suffering from rare diseases. It potentially also includes the circle of persons associated with those patients (carers, relatives, etc.) and others in society, but the impact on their costs and benefits could not be assessed – the CUA therefore focusses on health-related costs and benefits for patients.

The various cost and benefits items for this group relate to:

·Private payments for health care costs: as indicated above it has been assessed that almost all additional health care costs relating to treatment with orphan medicines are financed from public sources. The private contribution by patients is assessed at 3% of additional health care costs.

·Health benefits due to treatment with orphan medicines: these have been assessed on the basis of the extra availability (use) of orphan medicines in the EU due to the EU Orphan Regulation. The benefits have been assessed by applying the ICER (€54,000 to €110,000) to the additional sales volume (€ 23.7b).

·The non-health costs of a rare disease. As explained, the impact of additional use of orphan medicines on non-health costs of rare diseases could not be assessed.

Based on the extra health care costs estimated and the midpoint of the above ICER range, the additional health impact due to the Regulation is estimated to be 210,000-to 440,000 QALYs.

This resulted in the following overview of costs and health benefits for the stakeholder group patients:

Table A.13: Costs and Benefits due to the Orphan Regulation for patients, 2000-2017 (discounted value in 2018; prices 2018, € billion)

|  |  |  |
| --- | --- | --- |
| Effect | Costs | Benefits |
| Private contribution to health care costs | -/- €0.7 |  |
| Change in non-health costs of disease | NDA a) |  |
| Health benefits |  | 210,000-440,000 QALYs |
| TOTAL | -/- €0.7 |  |

a): NDA: not sufficient data available to assess this effect

For this stakeholder group as well, the results are sensitive to the impact of the EU Orphan Regulation in terms of generating new orphan medicines and the faster and wider availability of orphan medicines. The results are, however, most sensitive to the ICER applied, as can be seen from the range for health benefits shown in 
[Table](#_Ref14100322)
 above.

2.5. Society

This section presents an overview of total costs and (health) benefits to society resulting from the EU Orphan Regulation over the years 2000-2017. As with the individual stakeholder presentations, the overviews uses constant prices 2018, while discounting has been applied.

Table A.14: Costs and benefits associated with the Orphan Regulation 2000-2017 (discounted value 2018, prices 2018, € billion)

|  |  |  |  |  |
| --- | --- | --- | --- | --- |
| Effect | Patients | Industry | Governments | TOTAL |
| COSTS |  |  |  |  |
| Aid for research |  |  | -/- €1.1b | -/- €1.1b |
| Fee waiver, protocol assistance |  | + €0.2b | -/- €0.2b | €0b |
| Administration |  |  | -/- €0.02b | -/- €0.02b |
| R&D costs new orphan medicines |  | -/- €11.0b |  | -/-€ 11.0b |
| Extra costs manufacturing, marketing, distribution orphan medicine, “normal profit” |  | -/- €13.4b |  | -/- €13.4b |
| Additional impact on health costs | NDA |  | NDA | NDA |
| Extra health care cost financing | -/- €0.7b |  | -/- €23.0b | -/- €23.7b |
| BENEFITS |  |  |  |  |
| Extra sales revenues |  | €23.7b |  | €23.7b |
| Change in non-health costs of disease | NDA |  | NDA | NDA |
| NET BENEFITS | -/- €0.7b | -/- €0.5b | -/- €24.3b | -/- €25.5b |
| ICER | € 54,000-€ 110,000 per QALY | | | |
| Health impact | 210,000-440,000 QALYs | | | |
| Net societal cost per QALY | €58,000-€118,000 | | | |

a): NDA: not sufficient data available to assess this effect

This overview shows that the extra health care expenses by governments and patients as a result of the EU Orphan Regulation in 2000-2017 are estimated at nearly €24 billion. Total costs to society have been estimated to be slightly higher, at €25.5 billion. The extra health impact is estimated at 0.2- 0.4 million Quality Adjusted Life Years of patients suffering from rare diseases.

It should be emphasised that some important elements of societal costs and benefits could not be assessed with reasonable levels of robustness. These are indicated with “NDA”.

3.Sensitivity analysis

The above calculations use the most likely estimates, representing averages for the whole group of orphan medicines. As noted, there are uncertainty ranges around these averages. Applying the minimum and maximum levels would give different levels of societal costs and benefits.

The most important driver of this result is the ICER applied, as this ratio translates the extra costs for the health care system to the health impact. The impact on the result is substantial because the total costs to society as calculated above are close to the additional health care costs. The sensitivity to the ICER is already shown in the tables above.

Other inputs that are important for the outcome of the analysis relate to the impact of the Regulation and the discount rate used. The table below shows the result in terms of societal cost per QALY in case various alternative assumptions are applied. Apart from the ICER value, the estimate of societal costs per QALY is most sensitive for the assumption regarding the relative importance of sales in the EU market for the (newly developed) orphan medicines.

Table A.15: Societal cost per QALY gained as a result of the Orphan Regulation in various scenarios (in Euro)

|  |  |  |
| --- | --- | --- |
| Sensitivity analyses | Societal cost per QALY | |
| Baseline analysis | €58,000 – €118,000 | |
| Baseline analysis, monopoly rent only for medicines with generic competition (44% of the total group) | €52,000 – €106,000 | |
| Baseline analysis, extra spread as a result of Regulation 5% (instead of 2.7%) | €57,000- €116,000 | |
| Baseline and Lower (479 m) / higher (725 m) R&D costs per orphan medicine | €53,000 -€107,000 | €63,000 - -€128,000 |
| Baseline and Lower (18) / higher (24) number of orphan medicines developed extra | €55,000- -€112,000 | €61,000- €124,000 |
| Baseline and turnover in EU market as share in worldwide turnover lower (21%) / higher (100%) | €42,000 - -€85,000 | €75,000 - €152,000 |
| Baseline and lower (1%) / higher discount rate (5%) | €56,000 - -€114,000 | €60,000 - -€122,000 |

The results in this table relate to the period 2000-2017. However, as the orphan medicines are still available (and new orphan medicines have been registered since December 2017) the various costs and benefits will continue in the future. Even if no additional orphan medicines were to receive marketing authorisation over the next years, the costs and benefits for the industry, health system, government and patients would continue to be incurred because of the use of previously developed orphan medicines.

Non quantifiable factors

The above quantitative analysis only takes into account those factors for which a quantitative assessment could be made. Important to note is that various other factors are also of relevance, even though their quantitative impact could not be established. The following table describes the most important of those factors for which no credible quantification could be made, including a qualitative assessment of the impact on the above presented outcome.

Table A.16: Assumptions and non-quantified factors and their impact on the CUA

|  |  |
| --- | --- |
| Factor / assumption | Impact on outcome of CUA |
| No supply side efficiency gains for industry taken into account | The assessment of both the development of new orphan medicines and production costs, does not take into account that larger industries may realise efficiency gains due to scale, nor efficiency gains due to technological advancement (e.g. improvement of genome technology). This may lead to overestimation of the costs, as well as an overestimation of the impact of the Regulation in terms of development of new orphan medicines. |
| Survivor bias in orphan-like comparison group | The effect of the EU Orphan Regulation on the time to market and geographic spread may be estimated conservatively. The health impact may have been underestimated accordingly. |
| Additional protection from market exclusivity compared to patent | By only quantifying the effect of a longer protection period (i.e. 3.4 years), the economic value of the market reward may have been underestimated, as the additional protection of the market exclusivity from similar products is not taken into account. This implies that the benefit for industry may have been underestimated, as well as the societal cost per QALY. |
| Well established use not included in modelling | The analysis assumes that all newly developed orphan medicines concern medicines which were not available previously. In case of marketing authorisation on the basis of well-established use the costs and health impacts may be overstated. |
| The analysis is limited to 2000-2017 | The medicines that are developed due to the Regulation will continue to generate health impacts. A longer time period may show higher revenues for industry, but also higher additional health care costs and a higher health impact. As the development costs are fully taken, but health impacts continue after 2017, total societal costs per QALY could be overestimated. |
| Impact on health care costs restricted to use of orphan medicines | The effect on health costs may be smaller or larger, depending on the total costs of treatment and the saved costs of comparator treatment. This implies uncertainty on the additional health costs and the additional health impact |
| Indirect economic benefits are not quantified | There may be more benefits to society than shown above, but also more costs to society. The net effect of this on societal cost per QALY is not clear. |
| Health care expenses and health impacts calculated are realised over a longer period than the period of analysis | The health care expenses and the health care impact included in the HTA reports represent the long term impact of use of orphan medicines. In case orphan medicines prolong life substantially the expenses and impacts may extend be well beyond the timeframe of the analysis. As both costs and impacts are discounted, this may have an impact on the result of the analysis, in particular when costs are made upfront and health impacts cover a long period, well beyond the period used in the analysis. Due to this there may be an overestimation of the health impact for some of the orphan medicines. |

Paediatrics

External support study

The study (‘Study on the economic impact of the Paediatric Regulation, including its rewards and incentives
[35](#footnote36)
) was conducted by Technopolis Group and Ecorys for the European Commission. The study has drawn from a variety of data sources, including from targeted stakeholder groups using a series of interviews, literature reviews and databases searches. Its aim was to provide a review of the economic impacts of the Paediatric Regulation since it entered into force until the end of 2015.

1. Regulatory cost to industry

Cost estimates are based on a consultation of PIP and waiver applicants by means of a survey questionnaire and follow-up interviews. Further details of the survey can be found in Annex A of the economic study. The survey was sent to all PIP/waiver applicants that have made 3 or more PIP or waiver applications and, in addition, participants of the EU Framework Programme projects that submitted a PIP. The request to provide information on specific PIPs was thus sent to 78 companies that submitted an estimated 870 PIP/waiver applications. Note that the total number of PIP/waiver applications requested per company was capped at a maximum of 10 for practical reasons, resulting in a target sample population of 514 applications, representing 40% of the total population of 1,297 applications between 2007-2015.

The cost analysis is based on data collected from 26 organisations which includes 19 companies and 7 Framework Programme participants. Company data is collected with a response rate of 24%, which is considered satisfactory due to the difficulty for companies to retrospectively collect information on specific PIP costs incurred by different teams of staff across the company and due to the confidential nature of such information. The 26 organisations that provided data voluntarily include several EFPIA member companies, one non-profit organization and six small and medium-sized companies (SMEs).

In total, data was collected on 36 waiver applications from 11 organisations (not all organisations submitted a waiver application) and on 85 PIPs from 24 organisations (two organisations only submitted waiver applications). Figure B.1 presents a breakdown of the sample of PIPs according to their stage at the time of data collection. All of the PIPs had completed the initial application phase. Only four of the 85 PIPs in our sample had not yet started the R&D stage. The majority, 50 PIPs, were ongoing, 14 PIPs were discontinued and 17 PIPs had received a final compliance check. As presented in Figure B.2, 11 of the PIPs in the sample correspond to medicinal product marketed in at least one EU member state. This represents a deliberate oversampling of PIPs that have received the final compliance check and/or have been put on the market. The reason for this sampling was to gain information on PIPs that have more complete data on late R&D phases. Cost information was then estimated by analysing data obtained for the sample and using this data to gross up figures to characterise the entire population.

Figure B.1: Distribution of PIPs by stage

Figure B.2: Distribution of PIPs by paediatric product stage

1.1The cost of compliance with the Paediatric regulation

The total cost of the Paediatric Regulation incurred to industry is estimated to be €2,106m per year or €16,848m for the years between 2008-2015. This estimate includes €2,103m PIP-related compliance costs and €3.6m costs for waiver applications.

The total cost of the PIPs is estimated based on an average of 107 first PIP decisions per year for the period 2008-2015 (see Table A 16). The estimated average incurred costs per PIP is, based on our sample population, €19,608k which comprises of around €728k for the administrative costs incurred in relation to filing an initial application and for subsequent modifications of a PIP, and €18,879k for the R&D costs (4%:96%). R&D costs may include costs related to:

·In-vitro studies and animal studies

·Development of a paediatric formulation

·Phase II paediatric clinical trials - studies conducted to evaluate the efficacy and safety of the medicine

·Phase III paediatric clinical trials - studies conducted after the efficacy is demonstrated and prior to the approval of the drug

·Other R&D costs

The sample data suggests that an average of 2.9 clinical studies were agreed as part of the PIPs and this implies an average estimated cost per study of €6,831k.

Table A.16: Overview of the total costs of developing and executing PIPs

|  |  |
| --- | --- |
|  | Estimated annual costs |
| Total administrative and R&D costs of PIPs for the industry per year (2008-2015) | €2,103m |
| Average cost per PIP | €19,608k |
| Average administrative cost per PIP | €728k |
| Average R&D cost per PIP | €18,879k |

Aggregation is based on an average of 107,3 fist PIP decisions in 2008-2015 (858 fist PIP decisions in 2008-2015 in total)

The total cost of the waiver application is estimated based on a calculated average number of 50.4 waiver decisions per year for the period 2008-2015. The average cost of the waiver application is €70k, which is about 10% of the estimated average cost of a PIP application. The cost of waiver applications, as reported by companies, comprises of labour costs for literature searches, expert discussions, regulatory and administrative activities. Some waivers were reported to have incurred costs for additional studies (e.g. pre-clinical studies) and some waivers were not accepted in the first instance and there were subsequent costs linked to appeals. All costs reported by companies for waivers were included in the calculations.

1.1.1Variation in costs by study phase

Figure B.3 presents a breakdown of the total estimated costs to industry by cost category. It is clear that the R&D costs are the largest component of executing a PIP and that there is considerable variation in the estimated cost for each of the R&D phases.

The annual administrative costs linked to PIPs are estimated to be €78m and this comprises of the preparation of the initial application, modification and reporting, and other administrative costs. The preparation of an initial application costs on average €0.4m (Table A.17). Note that this average cost estimate, and the other average cost estimates presented in this section, are often incurred over multiple years. As presented in Table A.17, all PIPs incur some administrative costs, even when the PIP is discontinued. Note that only 55% of the PIPs in our sample was reported to incur additional administrative costs in relation to annual reporting requirements or PIP modifications. In the event that a PIP was discontinued, 29% of the PIPs incur these additional administrative costs.

In-vitro and animal studies are estimated to cost industry €28m each year. 40% of the PIPs include such in-vitro and/or animal studies. On average, the cost of in-vitro and animal studies is €0.8m. If the PIP is discontinued, around 36% of those have already incurred this type of cost before termination.

The total development cost of paediatric formulations is estimated to be €77m per year. 47% of the PIPs incur this type of cost and 29% of the PIPs that are discontinued incur this type of cost. On average, the cost of the development of paediatric formulations, if any cost is incurred, is €1.6m.

Figure B.3: Estimated costs incurred in relation to the Paediatric Regulation broken down to the component, per year, per millions of euro.

Table A.17 Estimated costs of a PIP broken down by stages, in millions of euro

|  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  | Average | Median | Standard deviation | N of PIPs incurring cost | N of PIPs incurring cost if PIP is discontinued |
| Preparation of the initial PIP application | €0.4 | €0.1 | 0.7 | 100% | 100% |
| Annual reporting and further PIP modifications | €0.1 | <€0.1 | 0.3 | 55% | 29% |
| Other administrative costs | €0.2 | - | 0.5 | 42% | 21% |
| In-vitro studies and animal studies | €0.8 | €0.5 | 0.9 | 40% | 36% |
| Development of a paediatric formulation | €1.6 | €0.9 | 1.7 | 47% | 29% |
| Phase II paediatric clinical trials | €7.3 | €1.7 | 14.3 | 48% | 21% |
| Phase III paediatric clinical trials | €15.7 | €1.5 | 22.4 | 72% | 36% |
| Other R&D costs | €14.4 | €1.2 | 22.1 | 44% | 21% |

The combined annual cost of phase II and phase III clinical trials to industry is €1,243m: €341m for phase II clinical trials and €902m for phase III clinical trials. Note again that not all PIPs include costs for a given PIP category (or stage). As indicated in Table 3, only 48% of the PIPs have incurred or are expected to incur phase II R&D trial costs and 72% have incurred or are expected to incur phase III R&D trial costs. In some cases, there may be no clear distinction between phase II and phase III costs and some survey respondents have included costs under either phase II or phase III. However, for 38% of the PIPs, data on both phase II and phase III costs is provided. On average, cost for a phase II paediatric trial is €7.3m (median €1.7m) and average cost for a phase III paediatric trial amount to €15.7m (median €1.5m). The standard deviation of the larger cost estimates, as that for phase III paediatric clinical trials, is substantially higher – indicating that there is a high variation between costs incurred and, as expected, some of the more extreme values include very high cost estimates. As described in the next section, there are a number of factors that drive the cost of a PIP stage.

An additional estimated €676m is incurred by industry each year in relation to ‘other’ types of R&D costs. 44% of the PIPs for which we have collected cost data included such ‘other’ costs. On average, the other types of cost amount to €14.4m (median €1.2m). We are not able to fully separate the lower cost elements from the higher cost elements. However, the cost data that falls below the median [with range of approximately €7k-€1,000k] are in relation to observational studies, the preparation of study outlines, medical writing for clinical plan including data and database management, coordination activities and transaction costs, extrapolation studies and literature study to support extrapolation, other cross-functional paediatric project costs, pharmacokinetics and pharmacodynamics (PK/PD) studies, and bioavailability, modelling. Cost data that is above the median [with range of approximately €1m-€74m] are related to sponsor management costs, pharmacokinetics and pharmacodynamics (PK/PD) studies, pharmacogenomics (PGx) analysis, bioavailability, modelling and simulation studies, and costs related to supporting phase II and III trials.

1.1.2Attrition

It should be noted that a considerable proportion of PIPs are discontinued and this represents costs incurred by the industry for activities that will not bring any potential reward or revenue to the company. Moreover, discontinued PIPs also place undue burden on paediatric patients involved in associated clinical trials. According to a study of PIPs in the EMA database between 2007-2010, 21% of agreed PIPs were subsequently abandoned because of discontinuation of the adult development programme for the product.3

The total estimated administrative and R&D costs of PIPs that are already discontinued (16% of the PIPs in our sample) amounts to €144m per year, 7% of total estimated costs. This is likely to be an underestimation of the total cost incurred in relation to discontinued PIPs because several of the PIPs that have been labelled as ‘ongoing’ may be discontinued at a later stage in the execution of the PIP.

Any costs associated with waiver applications, albeit much smaller, can likewise be considered as sunk costs to industry – incurred in compliance with the Paediatric Regulation.

1.1.3Data limitations

In order to produce a cost estimate for the industry, organisations were asked to include only the fraction of their costs that was specifically related to the PIP and to exclude costs related to adult drug development from that of paediatric drug development. Many of the clinical trials however are mixed trials and organisations may have had difficulty to completely separate out costs (even though no such difficulty was reported to the study team). This means that all costs reported are considered ‘incurred’ to comply with the Paediatric 22

Regulation. Without the Paediatric Regulation, costs would not have been incurred unless an organisation would have voluntarily committed to invest in medicine development for children.

Note that incurred costs presented in this study remain cost estimates based on self-reporting by organisations that voluntarily engaged with the study and provided cost data input. These estimates were provided as best point estimates, however, some of these costs may be overestimations or underestimations. Based on an analysis of industries’ practice of pricing drugs, e.g. for (US) Medicare recipients, Angell argues that pharmaceutical companies tend to overestimate (R&D) costs.

As discussed in the next section, there are a large number of potential cost drivers, however, our survey questionnaire was not able to capture all potentially relevant cost components, and further, data supplied by organisations does not allow for a uniform coverage of all dimensions, allowing a robust analysis of every dimension. Despite these limitations, we have been able to extrapolate total cost incurred by industry using the PIP as the unit of reference (and with data obtained on both completed and incomplete phases). Nevertheless, our cost estimates remain subject to possible overestimation or underestimation, e.g. if sample data is not fully representative. In particular, our average and median cost estimates for the ‘other cost’ category is based on reported incurred costs, sometimes in relation to an ongoing PIP. As a result, there is potential for underestimation in this category.

The cost estimate reflects the costs industry incurred during the years 2008-2015. The cost estimate may not be an accurate reflection of costs that industry will incur in the future as a result of the Paediatric Regulation. During the years 2008-2015, on average, there were 107 decisions on initial PIP applications. Note that since 2012 onwards, the number of initial PIP decisions is stabilising at around 90 per year. This means that projected annual cost to industry, based on the current estimations, is 84% of the cost figures presented above. Similarly, there is a decreasing trend in the number of modifications per PIP and this will reduce somewhat the administrative costs of the PIP (EMA 10-year report). Likewise, organisational learning (both for industry and EMA) may contribute to more efficient/less costly PIP procedures over time.

Other cost items which represent significant costs to industry, related to providing medicine to children, but were out of scope for the current study to assess the compliance cost to industry of evaluating and developing paediatric medicine are the following:

·Cost of long-term safety and efficacy monitoring after marketing authorisation.

·Legal costs of SPC extension (reward) after a positive compliance check.

·Obtaining marketing authorisation for the paediatric medicine.

·Marketing costs of authorised paediatric medicine.

·Manufacturing and distribution costs of authorised paediatric medicine.

1.2
   Costs drivers

Number of modifications to the PIP

Olski et al. (2011)
[36](#footnote37)
 investigated the modifications proposed by the Paediatric Committee (PDCO) of the European Medicines Agency to the PIP applications submitted by companies from 2007 to 2009. Of the 257 PIP applications that had been submitted at the time, the PDCO requested major modifications to 38%. These requests included the development of age-appropriate formulations (11%), expansion of the scope of clinical programmes (6%), addition of a phase II/III study (17%) and the inclusion of additional age groups (13%), generally younger ones.

It is possible that engaging with the Scientific Advice Working Party (SAWP) to request free scientific advice may decrease future PIP costs. Based on our survey results, for 8% of PIPs (7 of 85) scientific advice was thought to have decreased the overall PIP costs – reduction in studies that had been initially planned or benefit of clearer development plan. However, for 7% of PIPs (6 of 85) scientific advice was thought to have increased overall PIP costs – since additional studies were suggested. Other PIPs in our sample were seen not to have benefitted from scientific advice, possibly because no scientific advice was sought. According to EMA’s 10-year report, there has been an increase in scientific advice sought by companies.

Nevertheless, even if a PIP has been agreed, a PIP applicant may request modifications of the PIP at a later stage, eg to reduce sample size of paediatric subjects in the clinical trial.
[37](#footnote38)
 Survey respondents reported that the number of modifications to the PIP was seen as a burden and often delayed the execution of the PIP significantly (and possibly also the launch of the associated adult drug) and thus the burden and costs associated can extend beyond the administrative costs involved with requesting a modification. Despite these considerations, many PIPs have been modified once or more, however, according to EMA’s 10-year report, the number of modifications is decreasing over time, possibly as a result of organisations’ learning curve.

Number of clinical studies

The number of clinical studies that are part of a PIP differ considerably across the PIPs sampled. Based on the survey data, the average number of clinical studies that are agreed upon is 2.9. This is slightly higher than the average number of exclusively paediatric trials per PIP which is 2.4 (Draft 10-year report, EMA/EudraCT). However, only around 18% of the PIPs in our sample involved 3 clinical studies. Just over half of the PIPs involved only one or two clinical studies. Two of the PIPs in the sample did not involve a clinical study (only e.g. a literature review). The highest number of clinical studies that was reported as part of a PIP is 13 (see Figure B.4).

Note that there is considerable variation in cost between the different R&D stages, ie phase II and phase III are considerably more expensive than in-vitro/animal studies and the development of a paediatric formulation. However, in our sample, not all PIPs incurred costs (or expecting to incur costs) in all categories/stages. It is clear that those PIPs that will involve multiple stages, and include phase II and phase III trials, will be more expensive.

In relation to the number of clinical studies that are part of a PIP, there are also important differences in the number of sites and the locations of sites and associated wage differentials.

Figure B.4: Distribution of PIPs (as percentage of all PIPs) by the number of clinical studies agreed upon

Number of paediatric subjects involved in the clinical trials

The survey collected data on the number of paediatric trial subjects that were involved in phase II and phase III studies, recognising this can be an important cost driver. If a phase had not started, the number of paediatric trial subjects was reported as zero and if the phase was ongoing the number of paediatric trial subjects include the number of patients that had been involved up to that date. The data summary is presented in Table A.18. We also note that in some instances, costs had already been accruing before paediatric trial subjects were enrolled. We understand this to be in relation to preparatory costs of screening as well as difficulties to recruit subjects. For example, the target age of paediatric subjects and the conditions for participation in paediatric trials play a role in recruitment and drive costs.

In our sample, on average, 66 [0-900] paediatric trial subjects participated in phase II clinical trials and, on average, 154 [0-2,000] paediatric trial subjects participated in phase III clinical trials. If the phase was completed, on average, 43 [1-154] paediatric trial subjects participated in phase II clinical trials and, on average, 292 [18-2,000] paediatric trial subjects participated in phase III clinical trials. Note that the median of paediatric trial subjects that participated in completed phases is similar to the median calculated for the overall sample. Moreover, it was found that the majority of paediatric trial subjects are located in the EU.

Table A.18: Number of children involved in Phase II and Phase III clinical trials

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_06003.jpg)

Table A.19 presents a breakdown of the average estimated cost per subject. These calculations are based on values of individual PIPs and using data on both completed and incomplete R&D phases. This yields an average cost per subject of €377k and a median cost estimate of €77k for phase II; for phase III, we calculate an average cost of €244k and likewise a median cost estimate of €77k. The median estimates may be considered a more helpful indication of cost per subject.
[38](#footnote39)
 We however recognise that the sample dataset underlying our cost estimate per subject for phase II and phase III trials involves large variations and thus significant uncertainties remain in these cost estimates.

Table A.19: estimated cost per paediatric subject recruited in a clinical trial

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_06004.jpg)

Duration of a PIP

The average planned duration of a PIP, from the date of initial application to the planned completion date, is 7 years [0-23] (calculation based on EMA data) with a considerable variation between the expected duration of PIPs – as illustrated in Figure B.5. It is also expected that the average duration of PIPs that are discontinued, based on the date of submission up to the point that they are discontinued, will be lower than 7 years.

Figure B.5: Distribution curve of the planned duration of PIPs in years

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_06005.jpg)

Moreover, an analysis of the average duration of PIPs sorted by the initial submission year shows that the PIPs filed in the initial years of the Regulation, especially in 2008, had a lower than average expected duration. It may well be that those PIPs were less burdensome (in cost and time) as many of these products had generated significant clinical data, and probably originate under Article 8. It should be noted that because only a relatively smaller number of PIPs were submitted in the first years following the enactment of the Paediatric Regulation, it is likely that the overall effect on estimated cost to industry is small.

Therapeutic areas

The cost of filing and executing a PIP is also related to the therapeutic area. For example, it will be more challenging to recruit clinical trial subjects for some indications in certain therapeutic areas than others, resulting in a notable difference in the average number of paediatric subjects involved in the trial. Details of the costs per therapeutic areas are given in section 2.2.4.5 of the economic study. However it should be noted that those cost figures are merely indicative as it relies on a small number of observations and cost drivers other than the therapeutic area may be at play.

Collaboration with networks

Based on the survey results, 18% of PIPs involved a collaboration with a research network. This included informal networks and consultations with paediatricians and formal networks such as the European Paediatric Formulation Initiative (EUPFI), the Task-force in Europe for Drug Development for the Young (TEDDY), the Medicines for Children Research Network (MCRN), and the Innovative Therapies for Children with Cancer (ITCC). In some cases, there may have been a monetary benefit from engaging in research collaborations. It is likely that collaborations with academic partners not only help to drive more effective paediatric research but also test drugs within the paediatric population at a lower cost.

1.3Comparison of costs under the US legislation

The US has a different approach than that of the European Union to engaging with the pharmaceutical industry. The US recognised the need for a paediatric exclusivity provision in the FDA Modernization Act in 1997. Later, the Pharmaceuticals for Children Act (BPCA, 2002) and Pediatric Research Equity Act (PREA, 2003) came to represent a two-tier system and the major cornerstones of the paediatric medicine development in the US. The FDA Safety and Innovation Act (FDASIA) made BPCA and PREA permanent in 2012. While PREA authorises the FDA to require paediatric assessments (triggered by a new drug application, or new indication, active ingredient, dosage form, etc and hence mandatory), BPCA provides a financial incentive to companies to voluntarily conduct paediatric studies under a paediatric Written Request (WR), often initiated by the sponsor.

The WR considers public health benefits, availability of other medicinal products for the same indication, as well as the actual feasibility of the study design. Note that the initial Pediatric Study Plan (iPSP) is only required in PREA after the completion of adult Phase II trials. In addition, FDASIA also introduced the (transferable) Priority Review Voucher Program for rare paediatric disease indications. The US Government Accountability Office (GAO) published a report in March 2016 and concluded that since innovative medicinal product development typically takes 10 years before regulatory submission can take place, it may be too early to see the results of its effectiveness.
[39](#footnote40)

There are two prominent studies published in the US that calculate the costs of paediatric clinical trials for the pharmaceutical industry (Li et al. 2007
[40](#footnote41)
; Baker-Smith et al. 2008
[41](#footnote42)
).

Li et al. (2007) selected one drug from each of the following therapeutic areas: cancer, central nervous system, cardiovascular system, psychiatry, endocrinology, gastro-intestinal system, infectious diseases and an ‘other’ category (based on EMA therapeutic area classifications). The costs for paediatric clinical trials were estimated separately for each drug. This estimation was based on detailed information regarding the clinical trials in the final study reports which were submitted to the FDA, and included investigative site costs, contract research organization costs, pharmaceutical company costs, and core laboratory costs in relation to adult/mixed trials. The clinical trials for which costs were assessed included 13 to 1,088 patients, took 6 to 64 months and were conducted on 1 to 118 sites, most of them in the US. Additional details of the trials considered in the estimations included the pre-study preparation and recruitment, data processing, analysis, reporting and drug distribution as well as initiation visits, monitoring, management and close-out of sites. The cost estimation of these factors was based on three separate global cost and procedure benchmarking databases and an internal pricing tool of a laboratory service for those clinical studies that needed core laboratory services. Li et al. provided a ‘low’ and a ‘high’ estimate, with the authors stating that, according to their experience, the high estimate is more likely to be accurate in the context of paediatric clinical trials. Note that this approach differs from the approach taken in the current study where product-specific incurred costs were estimated by the sponsors of the trials.

Li et al. concluded that the costs for pharmacokinetic studies range between $655,139 to $7.1m (median $894,941) and between $655,829 to $21m (median $2.3m), respectively, and the costs for an efficacy study range between $1.8m to $12.9m (median $6.5m) – see also Table 8 for adjusted cost estimates. This resulted in a range of costs for a WR between $5.1m and $43.8m (median $12.3m), which included 1 to 8 clinical trials per request. After adjusting for macro-economic changes this amounts to a cost per WR between €5.6m and €47.9m (median €13.5m). Based on the data presented in the study of Li et al., we calculate that the median cost per enrolled subject is €42.7k, which is lower than the median costs presented in this study in relation to phase II and phase III R&D trials, which is € 77k.

Some of the authors of the first study conducted a second analysis, focussing on nine drugs for the same indication, hypertension (cardiovascular diseases), in order to achieve a general estimate of paediatric trial costs for drugs with this clinical indication (Baker-Smith et al. 2008). From 1997 to 2004, the FDA received final study reports for 12 antihypertensive drugs, and the authors included in their sample all of those drugs which had a completed final study report (24 in total) and were comparable in their clinical trial design, being all orally administered. 75% of the studies were conducted in children, the remaining 25%, which are bioequivalence/bioavailability studies, were conducted in adults. The authors estimated the costs and cash-outflows with the same method as in their first study, providing low and high estimates for each clinical trial. As in the previous study, the costs included investigative site costs, contract research organization costs, pharmaceutical company costs, and core laboratory costs. Not included were the costs of formulation changes, marketing costs and distribution costs. The clinical trials for this sample of drugs included 16 to 441 patients over 6 to 50 months and were conducted on 1 to 78 mostly US sites.

Estimated adjusted-costs per WR for these nine range from €4.2m to €15.5m (median €6.6m), which includes the cost of bioequivalence/bioavailability studies. 41% to 73% of costs of clinical trials were related to coordination (linked that the cost incurred by a coordinating centre), including the cost of site management and project management. The adjusted-median cost for efficacy and safety clinical trials, similar to phase II trials, is lower for the study of Bakker-Smith et al (€4.7m) which looks at hypertension than the adjusted-median costs presented in Li et al. (€7.1m), which covers a range of drugs. Both figures are higher than the estimated median costs for phase II R&D trials that is presented in this study (€1.7m). Median costs for efficacy and safety clinical trials and pharmacokinetic studies per subject (see Table 8) are roughly less than half of the median cost estimates presented in this study in relation to phase II and phase III trials (€77k).

The recalculation of the financial cost data per trial from the sample dataset and present the results along with the study of Li et al. The cost elements of phase II, phase III and other R&D costs were then aggregated to reflect the overall R&D cost related to paediatric drug development and adjust this cost estimate for inflation and exchange rates. This average cost estimate was then compared with the average cost estimate of presented earlier in the current study. Figure B.6 presents an overview of the adjusted cost data of Li et al. in various therapeutic areas. Whilst the average costs presented in the current study are intended to reflect average cost to industry, it should be noted that the data from Li et al. is not intended to be representative of the industry. The adjusted average cost estimate based on the data of Li et al. amounts to €21m, higher than our €18m cost estimate for phase II, phase III and ‘other’ R&D costs. It should be noted the high variation in costs related to paediatric investigation for different drugs: ranging from €6m to €48m. However, when the US and EU cost estimates are compared per study, the variations become less pronounced (Figure B.7). The average cost of a paediatric study according to Li et al is €7m, with individual therapeutic areas ranging from €3m to €11m, while the calculated cost per study is €6m in the current study.

Figure B.6: Estimated costs of paediatric investigations 

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_06006.jpg)

Figure B.7: Estimated costs of a paediatric study

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_06007.jpg)

1.4Comparison of R&D costs of paediatric trials with adult population trials

Two studies specified particularities of paediatric clinical trials, which are likely to lead to higher costs for these trials compared to the ones with adult patients (Mathis & Rodriguez 2009
[42](#footnote43)
; Upadhyaya et al. 2009
[43](#footnote44)
). These included the limited number of patients available for trials, since the physiological changes in children require conducting separate studies for different age groups and to assess the patients’ unique growth and development regularly during clinical trials. One industry survey respondent remarked that “the many scientific, ethical and practical complexities involved have traditionally made paediatric studies more challenging, costly and time-intensive than those conducted in adults”.

This suggests that cost per trial subject is likely to be higher for paediatric studies. In this section we compare the average cost estimates presented in this study with that available in the literature looking at the cost involved in adult/mixed trials.

DiMasi et al. (2016)
[44](#footnote45)
 provided estimates for industry ‘out-of-pocket’ clinical period costs for investigational compounds. The result shows that the average cost of paediatric phase II and phase III clinical trials are only a small fraction (14% for phase II and 7% for phase III) of the cost estimates published by DiMasi et al. One possible explanation for the cost differential is that adult clinical trials may involve a relatively larger number of trial subjects. Also, clinical trials for adult population is more likely to involve double blind placebo controlled confirmatory studies, which, depending on the therapeutic area, may differ in size and scope. Additional analysis of available evidence is needed to compare the costs per subject of paediatric trials with those of adult population trials. More details can be found in section 2.4 od the economic strudy.

2. Analysis of the economic value of the rewards/incentives

The assessment of the economic value of the reward is based on the following key assumption. As a result of the market exclusivity extension, there is a delay in the shift from the (higher) monopoly prices to the (lower) competitive market prices. This delay in the change of price is calculated to represent the economic value of the rewards.

The standard economic theory states that in a competitive market situation, the price of a product equals the marginal costs of that product. The main explanation for this equilibrium is that, due to the price pressure from other competitors, it is not possible for a company to charge a relatively higher price without losing market share. In a situation of market exclusivity competitive market pressure is absent (or very small) and the monopolist is able to charge above the marginal cost price. This higher price corresponds, in comparison with the competitive market situation, with a lower quantity of product sales. This model is presented in Table A.20.

Table A.20: Monopoly vs competitive situation

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_06008.jpg)

A monopolist benefits from a higher price but, because prices are relatively higher, forgoes some opportunity to sell. The ‘surplus’ is represented by rectangle A (profit for the company) and triangle C (loss for the company) in the figure above. As a result of the monopoly price and quantity, consumers lose a ‘surplus’ of rectangle A and triangle B in the figure.

·Rectangle A represents the profit accrued by the monopolist and the loss for the (potential) consumer.

·Triangle B and C represent the deadweight loss from monopoly power and loss to society: even if the monopoly profits are regulated to zero, the surplus for the society as a whole is lower than in a competitive situation.
[45](#footnote46)

The standard economic theory as described above is used to capture the impact from the Paediatric Regulation on pharmaceutical companies and on the healthcare system. In this case, the market is first represented by a monopolist that has exclusivity rights and then shifts towards a competitive market situation as a result of generic entry. In the situation of the Paediatric Regulation, the granted exclusivity rights prolong the monopolistic market situation.

In order to assess the ‘economic value’ of the rewards, two dimensions need to be taken into account.

·The rewards compensate the originator companies with a longer period of protection from the introduction of competing generic medicines and policies which favour the prescription of generic medicines.

·Because the introduction of generic medicines is delayed, society does not benefit from increased competition and lower prices for the duration of the exclusivity extension.

Figure B.8: Calculation of the economic value

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_06009.jpg)

Figure B.8 shows the actual revenue development of an originator product with a reward. The revenue starts to drop at the moment the exclusivity right ends (vertical line at t=0) and a generic producer enters the market. At a certain moment (t=5) the market reaches a new equilibrium. Without the additional reward the generic producer can enter the market earlier and the revenue drop of the originator will start (six month) earlier. In combination with the actual revenue development of the originator company, the shaded area represents the ‘economic value’. This is a temporary ‘benefit’ for the originator company and a temporary ‘loss’ for the society. In line with the approach of DG COMP (2009), we shift the actual curve (“Originator – actual development”) six month to the left (“Originator – hypothetical development”) and estimate the difference between the two curves.

Note that this is a simplified model for illustration purposes. In reality, there are several other factors which influence the economic value of the reward which may affect the revenue/price drop curves across EU Member States.

·When interpreting national sales data from comparative perspective, it is important to account for the proportion of patients on treatment and the manufacturer price. The originator company may follow a different pricing strategy by anticipating the moment the exclusivity right expires and lower the price gradually or keep the price stable for a longer period if there is still no generic product.

·The economic value of the reward can also be influenced by the availability of competing (generic) products which function as an alternative or substitute. If there is no generic medicine available, the revenues of the originator product may remain stable after the expiration of the exclusivity right. This factor also relates to the existence of clinical guidelines and the willingness of patients to switch between different brands of medicines. A recommendation on using a particular drug is very likely to have a positive effect on the sales of the drug. The results from the interviews conducted in this study confirm that in some Member States patients want to continue using the (branded) medicines they are familiar with, despite a substantial price difference. If this is the case, the pressure on the originator company to lower the price is limited.

·Finally, national (reimbursement) policies and regulation are important factors that influence prices. European countries use different approaches regarding the pricing of generics. Some countries (e.g. France) use prescriptive pricing (regulated prices), other countries (e.g. Sweden, Netherlands) apply free pricing36. Different approaches to the pricing of generics among European countries can lead to substantial variation between originator and generic prices37. Also, countries may emphasise the prescription of generic products through national policies (e.g. Sweden38). Beside that there exist incentives to keep the originator price high in certain countries, due to the fact that other countries use those prices as a reference price in determining the reimbursement price they pay.

Details of the calculations are provided in Annex 3.

2.1
   The six months SPC extension

The analysis is based on IMS Health data provided by the European Commission for period between 2008-2014 (the last available data point is the 3rd quarter of 2014). The scope and limitations of the dataset are described in Appendix C of the economic study. The analysis in this report covers products which (i) received a SPC extension in the period between 2007-2012 and (ii) lost their exclusivity before the third quarter of 2014. This choice for this period is related to the need to have enough observations in the data after the loss of the exclusivity. The data available for the study covered 14 products which received the SPC extension in this period. However, five products received the reward but were still under protection in the third quarter of 2014. For one product, available data did not allow to make a distinction between protected and non-protected products with an SPC extension. See section 3.2 and Appendix C of the economic study for a detailed description. The remaining eight products are used in the analysis. The analysis also builds on interviews with pharmaceutical industry.

Over the period 2007-2015 the SCP reward was granted to 32 different medicinal products. In total there were 311 extensions, as not all medicinal products received the six-month extension in each Member State. The data available for the study included 14 products but for the analysis only used eight products were included. Products are excluded from the data analysis due to patent expiry after 2015 and in one case a product was excluded from the data analysis due to differentiation issues; the SPC product could not be isolated from the non-SPC products.

In terms of the geographical spread of the SPC extensions, there is a clear distinction between the Member States who joined the EU after 2003 (EU-13) and the other Member States (EU-15). The countries with the highest number of SPCs are located in West and North Europe (EU-15). According to interviewees, this relates to original design of the patents in the EU-15 Member States: SPC extensions fit better with the patents granted in these Member States. See Figure B.9.

Figure B.9: Geographical spread of the SPC in the EU (2007-2015)

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_06010.jpg)

2.1.1
   Generic entry

Details of the analysis are provided in section 3.2.2 of the economic study.

Generic entry - the analysis conducted shows that for all eight products there exists generic entry. The number of entrants varies between products and countries. The largest numbers of entrants can be found in countries such as France, Germany, and Italy. However, other countries, like The Netherlands, Ireland, and especially Sweden, also show a substantial number of generic entrants, although their number varies across the different drugs.

Time to enter –the data shows that the average time it takes a generic producer to enter the market with a generic product (after the loss of exclusivity) is relatively short. Again, there exist substantial differences between countries and products. For all products there is generic entry in the first quarter in at least five countries. In Germany, Italy, Ireland, the Netherlands, Sweden and the UK market entry is visible for nearly all products (with a very few exceptions) in the first quarter after the loss of exclusivity.

2.1.2
   The envisaged price change

In a competitive market, the pressure of generic entry is expected to lower the prices of branded products after the loss of exclusivity. The change in price level prior and after the loss of exclusivity was assessed45 (if possible: 1-4 years after the loss of exclusivity). Please note that again there exist significant differences between countries and products.

The data analysis shows that the price drop of branded products often starts in the first quarter after the loss of exclusivity. However, this price drop is often relatively limited (up to 10-20%). During the first and second year (after the loss of exclusivity) the branded prices decrease further, but with larger differences between products and countries. For example, in the Netherlands the price drop after two years varies from 42-60%, while in Germany this varies between 4 and 24%. When the branded prices are weighted for the sold volumes, the price drops in the end are often substantial (in some cases up to > 95%). The underlying data shows that branded products often keep a higher price than the generic competitor but that the sold volumes of branded products are very low.

For most of the selected products, the starting price of the generic entrant after the loss of exclusivity is significantly lower than the price of the branded products. Italy is an example of a rather aggressive generic pricing strategy: in the first quarter after the loss of exclusivity the generic prices are 30-40% of the original branded price (relative price reduction of 60-70%). At the end of the data period (Q3/2014), a lot of generic prices are 10-30% of the original branded price.

2.1.3
   The level of generic penetration

The loss of the exclusivity results in the entry of relatively cheap generic products and (often) in a substantial drop in the prices of branded products. As can be expected, the generic entry will also have an influence on the market share of the originator product. In the data analysis, we assessed the level of generic penetration: the relative share of generic products in the total volume (branded and generic products) in the period after the loss of exclusivity.

The findings show that the level of market penetration of generic products differs per country and per product. In some cases, the share of generic products in the total volume is above 70-90% (e.g. Sweden and the Netherlands), while in other cases the level of generic penetration is much lower (e.g. Belgium and Italy). There seem to be two main explanations for these differences. First, the national policies in relation to the prescription and reimbursement of generic products differ. In the interviews conducted it was confirmed that, especially in Sweden and the Netherlands, the use of generic products is lobbied for after the loss of exclusivity. For Italy, several interviewees indicated that the ‘push’ towards generic drugs is much softer and that patients often have a preference for the branded product they are familiar with. Second, the generic penetration seems to be related to the price strategy of both the generic and the originator product. Details on the substitution effect due to generic entry can be found in section 3.2.5 of the economic study.

2.1.4
   Economic value of the SPC extension

Details of the calculations and of the limitations are provides in sections 3.2.6-3.2.8 and in Annex 3 of the economic study; Figure B.10 shows the economic value per product.

Figure B.10: Economic value per product

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_06011.jpg)

However, due to limitations in the availability of data and in the data itself, it was not possible to calculate for all countries and products the ‘full’ economic value of the reward.

The available data were used to make an extrapolation in order to assess the (magnitude of the) ‘full’ economic value of the reward. This extrapolation is based on assumptions and that the actual economic value may differ from our estimations. The extrapolation is done in two steps.

·The first step is to estimate the economic value of the reward for the countries that are missing in the current set of eight products. Although in these countries an SPC-extension was granted, the dataset available for the study did not include data on these countries. Based on the ‘revenue and economic value per capita
[46](#footnote47)
, the 6-month revenue and the economic value for the missing countries was estimated
[47](#footnote48)
. The new estimated economic value, €628m, increased with 22% compared to the original estimated economic value of €517m.

·The second step in the extrapolation is to include the (four) products for which the period of exclusive rights, including the SPC-extension period, ended within the research period taken into account (December 2015), which is after the date of the dataset available for the study (third quarter 2014). Drug D, for which the data did not allow to make a distinction between protected and non-protected products with an SPC extension, was also included. Based on the total population in the specific countries associated with the specific year in which the patent expires and ‘revenue and economic value per capita’ of the eight products in our dataset, we made an estimation of the 6-month revenue and the economic value of the SPC reward for the products. Based on this second step in the extrapolation, the adjusted economic value, €926m, increased with 79% in comparison to the original estimated economic value of €517m. Please note that the therapeutic areas of autoimmune diseases, diabetes mellitus and antipsychotics are not covered in the original set of eight products, which increases the uncertainty of the extrapolation.

With regard to estimating the economic value, a number of specific considerations need to be made:

·It is important to emphasise that the analysis is to some extent determined (and limited to) by the type and quality of the data that is available. As the steps for the extrapolation of the data show, the dataset available for the study is not including data on all products and /or countries which - in an ideal situation - would have been part of our dataset. The need to use assumptions results in uncertainty about the estimations. This margin of error in (especially) the extrapolation is strengthened by the fact that individual medicines often differ significantly in terms of strategic (pricing) behaviour of the originator and generic company and underlying market dynamics.

·Further, it is uncertain to what extent the available data is reflecting a fully realistic situation. The list prices for example (as used in the IMS Health database), are hardly used in practice. In some countries additional margins are added on top of the list prices for service providers, such as for example pharmacists. At the same time, pharmaceutical companies may negotiate reimbursement prices with national health authorities and health insurances, which may result in a discount on the prices of the medicines. Despite these opposite price dynamics, we expect that the list price as presented in the IMS Health database is an underestimation of the ‘real’ price which at the end is paid by the health care payer. This would imply that also the calculated economic value of the SPC reward is an underestimation of the actual economic value. Uncertainty also exists in relation to the reported volumes in the IMS Health dataset. For some products and/or countries the dataset (only) contained hospital or retail data. This implies that in reality the volumes (and also the revenues) are higher than the reported values in the dataset and that the calculated economic value of the SPC-reward is an underestimation of the actual economic value. Within the scope of this study (and the available dataset), it was not possible to assess the magnitude of these (presumed) underestimations.

·A third consideration is that a substantial share of the economic value of the SPC-reward lies in the future. The research shows that a lot of SPC-extensions are granted in the last couple of years, but (due to the fact that the product is still under protection) not ‘effectuated’ yet. Especially in 2015 a lot of decisions on SPC-extensions are taken, which will materialize in the upcoming years.

·A final consideration is that the estimated size of the SPC-reward (i.e. the estimated economic value) does not always have a direct link to the ‘efforts’ (investments, R&D, etc.) the pharmaceutical companies made during the 2008-2014 period. The SPC-reward is linked to a specific product, while efforts and investments of pharmaceutical companies are often spread over a broad portfolio of products, activities and investments.

2.2
   The Orphan reward

Until mid-2016, four orphan-designated products have successfully fulfilled the requirements of article 37 of the Regulation, thereby becoming eligible for the orphan reward.

The data available for these four products is limited in scope and ‘quality’. This is mainly due to the fact that all four products are still under protection (no generic entry).

Due to the fact that the four products are still under protection, it is not possible to estimate the economic value of the orphan reward. At the same time, a projection of the current data towards the moment of loss of exclusivity in the future is unreliable. This is mainly related to the data availability and the uncertainty about the effects of generic entry (ie, will there be generic entry? what will be the effect on the prices?).

2.3
   The PUMA reward

Until mid-2016 only 2 PUMAs received a positive opinion from the EMA’s Committee for Medicinal Products for Human use (CHMP).

While it is not possible to have a meaningful calculation of the value of the PUMA reward, the economic study develops in section 3.4.1 a methodology which could be used when more products will be authorised and information will become available.

3
   Direct and indirect benefits

In addition to data collected via the survey to industry, the analysis builds on a two-stage survey (Delphi) to expert stakeholders. The survey questionnaire was sent to experts from across the EU, with 116 people ultimately completing the survey (Phase I Delphi), although some respondents did not answer every question. The background and paediatric sub-speciality of Phase I and Phase II participants are presented in Appendix D. The survey to expert stakeholders was developed based on an exploratory telephone consultations and pilots to uncover issues linked to social and broader economic impacts in the paediatric drug development value chain. The survey collected qualitative and quantitative estimates for the various dimensions of the impact as well as provided a set of open questions to identify further benefits of the Regulation and their impact channels.

The design of the survey questions builds on the evidence gathered via the systematic literature review and the secondary data analysis. This provided an outline of potential benefits/impact drivers of the Paediatric Regulation. The focus of the social impact analysis is to estimate to what extent better treatment (due to more effective medicinal products) reduces the costs of paediatric healthcare treatment due to shorter periods of hospitalisation or fewer adverse drug reactions (ADRs). This may lead to significant reductions in paediatric healthcare expenditure and increased overall savings from reduced child morbidity and mortality. We consider possible monetary and non-monetary impacts. We focus on the following dimensions:

·Availability of and access to medicines result in better treatments and better QoL for children

·Reduction of child-health expenditure, savings from reduced morbidity/ mortality, increased school attendance, and decreased time taken off by parents for caring for their children and adverse drug events

To estimate the monetary value of social savings from improved medical treatment of children as a result of the Paediatric Regulation is very difficult. Vernon et al
[48](#footnote49)
 use US data on discounted life-years, then authors calculate value-added life-years. It is assumed that if off-labelling would have been on-labelling, this would have resulted in a 1% reduction of mortality. The authors then calculate the value of this reduction in mortality using discounted life year valuations. Therefore, using data on hospitalisation and mortality rates in the EU one could refine the model. It should be noted that life year calculations differ across countries. The 
[EuroVaQ project](http://research.ncl.ac.uk/eurovaq/EuroVaQ_Final_Publishable_Report_and_Appendices.pdf)
 looking at the European Value of a Quality Adjusted Life Year provides a starting point on computing life year valuations across the EU. 

An economic assessment of the second-degree effects of the Regulation, notably, on the research framework created, activities of specialised research centres and CROs, public-private funding created for paediatric medicine, new research knowledge established, and networks formed. A good example is the European Network of Paediatric Research that aims at fostering high-quality paediatric research; helping with the recruitment of patients for paediatric clinical trials; and enabling collaboration between stakeholders.

3.1literature review

One of the chief aims of the 2007 EU Paediatric Regulation is protecting the health of children by improving the availability of medicines and dosage information for children. The regulation also intends to stimulate research into paediatric medicines. Thus, the regulation is directly linked to societal impacts such as improved health of children, decreased disease burden and costs to national health systems. Greater availability of published data on the efficacy and safety of medicines will potentially lead to better use of medicines in children.
[49](#footnote50)
 For instance, benefits are expected from new paediatric indications, inclusion of special (class) warnings, specification of dose regimens, timely development of paediatric friendly formulations, and better quality of the clinical evidence.
[50](#footnote51)

One of the direct consequences of the new regulatory requirements such as PIPs, even for authorised medicinal products that are currently protected by patents, is the development of formulations and dosages more appropriate for paediatric age groups.
[51](#footnote52)
 However, of all the approved PIPs, only 26% and 35% of medicines included trials in young infants and neonates, respectively (Hoppu et al. 2012). Moreover, some authors also argue
[52](#footnote53)
 that PIP decisions can lead to the recruitment of vulnerable children to questionable studies. A similar observation has been made with regard to the PREA in the US. For instance, the necessity of 4 proton pump inhibitor trials for gastrointestinal reflux disease in children has been questioned as there are differences of opinion among clinicians regarding the condition and its diagnosis.
[53](#footnote54)

Between 2007 to 2011, the PDCO made decisions about 682 PIPs; 29 PIPs were completed. Of these, 24 led to new paediatric indications and 77 new formulations. 5 PIPs were completed but did not support the drug’s use in children.
[54](#footnote55)
 Similarly, in the US, the BPCA led to 200 labelling changes and 48 instances of new/enhanced paediatric safety information following paediatric clinical trials.
[55](#footnote56)

In terms of drugs for rare diseases i.e. orphan drugs, the Regulation did not result in significantly more market authorisations for orphan drugs with a paediatric indication (58% before and 64% after 2007), but did increase the time required to achieve market authorisation.
[56](#footnote57)

Another explicit goal of Paediatric Regulation is the reduction in off-label use of drugs. A study from Denmark by Haslund-Krog et al showed that PIPs covered only a small proportion of the drugs that were being used off-label.
[57](#footnote58)
 In Finland, the new legislation has a minor or no impact on off-label use in paediatric inpatients in specialised care: 51% of off-label prescriptions in 2011 vs. 22% in 2001, for new-borns; 21% vs. 5%, for less than two-year-old children; and 24% vs. 3%, for children.
[58](#footnote59)
 These results show that the needs of neonates and children are not yet being fully met by the Regulation. In fact, out of 682 PIPs at the end of 2011, only 110 involved neonates (Turner et al. 2014).

In Europe, the Paediatric Regulation has also led to the creation of a European network of Paediatric Research at the European Medicines Agency (Enpr-EMA). This consists of national and European networks and centres for paediatric research. However, once the initial support for these networks decreased, most networks have not been able to secure sustainable income because enough trials have not been forthcoming or planned trials have been deferred (Hoppu et al. 2012).

A study of the Utah Medicaid Program in the US estimated that a 6-month extension of patent exclusivity cost $2.2m over 18 months following the original expiry date and if extrapolated to the entire US population, the cost was estimated at $430.2m.
[59](#footnote60)
 Moreover, only a minority of these drugs were prescribed to paediatric patients. Furthermore, the BPCA’s contribution was estimated to be 3.6m life years gained over the 1997-2009 period; using $100,000 per life-year, this yields $360 billion gross economic benefits according to Vernon et al. 2012 (for more discussion, see Appendix E.1.1).

While there have been more paediatric clinical trials (about 4 times more) over the last decade,
[60](#footnote61)
 which have greatly contributed to knowledge regarding paediatric medicinal products, certain areas of paediatric pharmacology are still under-explored, such as rare conditions and neonates (see: Turner et al. 2014).

:   [(1)](#footnoteref2)
     
       Available at 
    <https://www.orpha.net/orphacom/cahiers/docs/GB/list_of_orphan_drugs_in_europe.pdf>
    , last accessed in August 2018.
:   [(2)](#footnoteref3)
     
       Under the US Orphan Drug Act a rare disease was defined as one that affects fewer than 200,000 people in the US (approx. 7 in 10,000). This is slightly different from the definition under the EU Orphan Regulation. See also Chapter 2 of the main report.
:   [(3)](#footnoteref4)
     
       It is expected that, after the protection expiry, the originator price will drop to the level of the generic price. If this is not the case, we see the generic price as the new equilibrium price.
:   [(4)](#footnoteref5)
     
       The methodology used assumes that after entry of a generic competitor the market reaches a new equilibrium, in which there is no longer room for overcompensation. However, this is not necessarily the case, as prices may remain high compared to production costs, even after a single generic producer has entered the market; the two market participants may charge duopoly prices. This will be true particularly in small markets where the number of generic entrants can be expected to be low, as is often the case for orphan medicines.
:   [(5)](#footnoteref6)
     
       For detailed calculations see Section 2.1. in Annex 3.
:   [(6)](#footnoteref7)
     
       The counterfactual revenues are the revenues that would be realised in the market if the standard units had been sold at the equilibrium price.
:   [(7)](#footnoteref8)
     
       See European Commission, Better Regulation Toolbox, Tool 52, Methods to Assess Costs and Benefits. 2017; European Commission, Guide to Cost-Benefit Analysis of Investment Projects, December 2014.
:   [(8)](#footnoteref9)
      See e.g. EFPIA (2017), The Pharmaceutical Industry in Figures, Key data 2017: “by the time a medicinal product reaches the market, an average of 12-13 years will have elapsed since the first synthesis of the new active substance.”
:   [(9)](#footnoteref10)
     
       This method assumes that all extra development (i.e. above the normal market trend) can be attributed to the EU Orphan Regulation. However, there may have been other developments stimulating the development of orphan medicines, such as supply side efficiencies (e.g. technological advances in genome analyses). There might thus be some overestimation of the impact (not a conservative, but rather a ’liberal’ assessment of the impact).
:   [(10)](#footnoteref11)
     
       Not all tradenames of the 142 authorised orphan medicines could be definitively connected to the correct active substance on which a primary patent was filed in the patent information database that was used for this analysis. However, the sample of 105 appears sufficiently representative to allow for extrapolation of the findings to the larger dataset.
:   [(11)](#footnoteref12)
     
       For this analysis, only primary composition patents were considered. Further medical use patents, process patents or formulation patents were not taken into account. Whilst such ‘secondary’ patents do in fact delay generic entry as well, they are generally viewed as offering a ‘weaker’ protection and their impact on deterring generic entry thus is more limited.
:   [(12)](#footnoteref13)
     
       Our analysis accounts for the effect of multiple (partially) consecutive periods of market exclusivity in case a product has been authorised for more than one orphan condition. In interviews, sponsors have suggested that – due to the possibility for off-label use – enforcement of the market exclusivity for second and further orphan designations is challenged. As this claim could not be validated, we have interpreted the existence of any market exclusivity on the products, irrespective of the orphan indication, as conferring additional protection. As the number of products to which this situation applies is anyways limited, and the market exclusivity periods tend to be relatively close together, the effect of this assumption on the overall result is small.
:   [(13)](#footnoteref14)
     
       Calculation based on the time of expiry of the primary patent/SPC relative to the expiry of the (last) period of market exclusivity, and averaged over all 51 products for which the primary patent/SPC expired after any market exclusivity.
:   [(14)](#footnoteref15)
     
       However, as noted in other sections of this report as well, the market exclusivity still represented an additional layer of protection against similar products and as such cannot be said to have had no impact at all.
:   [(15)](#footnoteref16)
     
       This estimate is based on the following summation: 31 products with the full 10 years of market exclusivity extending beyond any patent/SPC (=31x10), 51 products with market exclusivity fully within the period of patent/SPC protection (=51x0), 23 products with an average period of market exclusivity after expiry of patent/SPC of 2.25 years (=23x2.25). Divided over all 104 products, this gives an average duration of the market exclusivity beyond the primary patent/SPC of 3.4 years.
:   [(16)](#footnoteref17)
     
       In this calculation, it is assumed that the level of protection from competition derived from market exclusivity is equal to the protection derived from patents/SPCs. This may be an underestimation of the effective protection as the market exclusivity reward may give a stronger protection as it concerns “similar” products.
:   [(17)](#footnoteref18)
     The EU share in the combined population of EU and US is approximately 60% (rounded), while its share in the total pharmaceutical market is roughly 50% (based on sales data for 2014 as published by EFPIA).
:   [(18)](#footnoteref19)
     
       The corrections are made to translate the finding for EU12 to the level of EU28. It reflects the situation that population of the EU16 member states is generally smaller than that of EU12 member states, which gives a smaller patient basis. It also reflects that situation that in EU16 there are fewer orphan medicines on the market. Both factors make that the impact for EU28 is smaller in relative terms than for EU12. In the calculation the impact in % terms is used to calculate the effect. The translation of this percentage in number of Member States is only for illustration purposes. In interpreting this number one should envisage a (hypothetical) average EU Member State with 18.3 million inhabitants.
:   [(19)](#footnoteref20)
     The calculation is based on the population data per 1.1.2017 as published by Eurostat. 
    <https://ec.europa.eu/eurostat/documents/2995521/9063738/3-10072018-BP-EN.pdf/ccdfc838-d909-4fd8-b3f9-db0d65ea457f>
:   [(20)](#footnoteref21)
     
       Present accessibility in the eight EU-12 countries is 93,25 orphan medicines; in the 12 EU-16 member states it is 60,75 orphan medicines. The ratio thus becomes 60,75/93,25=65%. However, as accessibility in EU16 will increase over time, using present day accessibility results in a somewhat conservative estimate of the impact.
:   [(21)](#footnoteref22)
     
       The other orphan medicines had not yet reached the 6.56 years of market exclusivity at the end of 2017.
:   [(22)](#footnoteref23)
     
       Included at the end of this Annex 3.
:   [(23)](#footnoteref24)
     
       Active orphan medicines are those for which the market exclusivity period had not yet expired and which were not withdrawn.
:   [(24)](#footnoteref25)
       For more information on QALY see for instance: MacKillop & Sheard, 2018, Quantifying life: Understanding the history of Quality-Adjusted Life-Years (QALYs), Social Science and Medicine, volume 211.
:   [(25)](#footnoteref26)
     
       Weighted by their EU sales revenues: orphan medicines with higher sales revenues in the EU have a higher weight than those with lower sales revenues. The fact that the weighted ICER for these 24 orphan medicines is much lower than the unweighted (average) ICER of €110,000 per QALY reflects the higher sales revenues for orphan medicines with a lower ICER.
:   [(26)](#footnoteref27)
     
       Section 8.2.5. of Orphan study report (2019).
:   [(27)](#footnoteref28)
       See for instance the threshold of 80.000 per QALY in the Netherlands (
    <https://kce.fgov.be/sites/default/files/atoms/files/d20081027396.pdf>
    ).
:   [(28)](#footnoteref29)
     
       The share of these orphan medicines in total turnover of active orphan medicines ranges from 35-60% in these years, as reported in the IQVIA database.
:   [(29)](#footnoteref30)
     
       European Commission, see: 
    <https://ec.europa.eu/eurostat/statistics-explained/pdfscache/37773.pdf>
:   [(30)](#footnoteref31)
     
       The report describes the average division of health care costs between private and public payers. It shows substantial variation between the EU Member States in the division of healthcare expenditures between public and private payers. For orphan medicine related expenditures the division may, of course, be different, as this concerns marginal expenditures for in some cases very costly treatments.
:   [(31)](#footnoteref32)
     
       The introduction of the 21 new orphan products is assumed to be distributed over the years 2008-2017 as follows: 1,29 - 1,93 - 0,86 - 1,29 - 2,14 - 1,50 – 3,00 - 2,79 - 3,21 – 3,00 It is assumed that product are introduced at the beginning of the year.
:   [(32)](#footnoteref33)
     
       The analysis about the calculation of the economic value of the market exclusivity implies that generic competition resulted in a price drop for the four products analysed of on average 30% as compared to the price set during the market exclusivity reward. A competitive profit margin of 10% was assumed (and added to the cost-benefit analysis as a benefit) of the ‘net’ turnover (i.e. turnover minus the orphan exclusivity share). Please refer to Annex 4 for the consolidated table cost-benefit for pharmaceutical industry.
:   [(33)](#footnoteref34)
     
       See also end of this Annex 3.
:   [(34)](#footnoteref35)
     
       As explained in Chapter 4.1 (Data gathering, methodology and analysis) Chapter 5.2 (Efficiency), the European Commission did not agree with the conclusion of the cost-benefit analysis for pharmaceutical industry. This cost-benefit has been further refined by adding a competitive profit margin of 10%.
:   [(35)](#footnoteref36)
     
    <https://ec.europa.eu/health/sites/health/files/files/paediatrics/docs/paediatrics_10_years_economic_study.pdf>
:   [(36)](#footnoteref37)
     
       Olski, T.M. et al., 2011. Three years of paediatric regulation in the European Union. European Journal of Clinical Pharmacology, 67(3), pp.245–252.
:   [(37)](#footnoteref38)
     
       Article 22 of the Regulation states: “If, following the decision agreeing the paediatric investigation plan, the applicant encounters such difficulties with its implementation as to render the plan unworkable or no longer appropriate, the applicant may propose changes or request a deferral or a waiver, based on detailed grounds, to the Paediatric Committee.”
:   [(38)](#footnoteref39)
     
       The average cost estimates calculated using data on both completed and incomplete R&D phases are significantly higher than estimates that can be calculated using data on completed phases only: for phase II, the average number of subjects is 43, the average estimated cost of the trial is € 7.3m, and thus the average cost per subject is €170k. For phase III, the average number of subjects is 292, the average estimate cost of the trial is €15.7m and the average cost per subject is only €54k.
:   [(39)](#footnoteref40)
     
       GAO-16-319. United States Government Accountability Office: Report to Congressional Committees. RARE DISEASES: Too Early to Gauge Effectiveness of FDA’s Pediatric Voucher Program. March 2016.
:   [(40)](#footnoteref41)
     
       Li, J.S. et al., 2007. Economic Return of Clinical Trials Performed Under the Pediatric Exclusivity Program. JAMA, 297(5), pp.480–488. Available at: 
    <http://jama.jamanetwork.com/article.aspx?doi=10.1001/jama.297.5.480>
     .
:   [(41)](#footnoteref42)
     
       Baker-Smith, C.M. et al., 2008. The economic returns of paediatric clinical trials of antihypertensive drugs. American Heart Journal, 156(4), pp.682–688.
:   [(42)](#footnoteref43)
     
       Mathis, L. & Rodriguez, W., 2009. Drug therapy in pediatrics: A developing field. Dermatologic Therapy, 22(3), pp.257–261.
:   [(43)](#footnoteref44)
     
       Upadhyaya, H.P., Gault, L. & Allen, A.J., 2009. Challenges and Opportunities in Bringing New Medications to Market for Pediatric Patients. Journal of the American Academy of Child & Adolescent Psychiatry, 48(11), pp.1056–1059.
:   [(44)](#footnoteref45)
     
       DiMasi, J., Grabowski, H., and Hansen, R. (2016). Innovation in the pharmaceutical industry: new estimates of R&D costs. Journal of Health Economics, 47.
:   [(45)](#footnoteref46)
     
       Pindyck, R.S. and Rubinfield, D.L., ‘Microeconomics’, 5th edition, 2001, section 10.4.
:   [(46)](#footnoteref47)
     
       The economic value per capita is based on the calculated economic value per product and country, divided by the total population in the specific countries associated with the specific year in which the patent expires. The population is based on Eurostat-data.
:   [(47)](#footnoteref48)
     
       For the missing countries, the economic value is calculated by multiplying the average ‘economic value per capita’ with the population size.
:   [(48)](#footnoteref49)
     
       Vernon, J.A. et al., 2012. Measuring the patient health, societal and economic benefits of US paediatric therapeutics legislation - Technical Appendix. Pediatric Drugs, 14(5), pp.283–294.
:   [(49)](#footnoteref50)
     
       Hoppu, K. et al., 2012. The status of paediatric medicines initiatives around the world-what has happened and what has not? European Journal of Clinical Pharmacology, 68(1), pp.1–10.
:   [(50)](#footnoteref51)
     
       Stoyanova-Beninska, V. V. et al., 2011. The EU paediatric regulation:. Effects on paediatric psychopharmacology in Europe. European Neuropsychopharmacology, 21(8), pp.565–570.
:   [(51)](#footnoteref52)
     
       Challis, J., 2011. The impact of the Paediatric Regulation on existing medicinal products. Regulatory Rapporteur, 8(10), pp.4–7 and Olski, T.M. et al., 2011. Three years of paediatric regulation in the European Union. European Journal of Clinical Pharmacology, 67(3), pp.245–252.
:   [(52)](#footnoteref53)
     
       Rose, K., 2014. European union pediatric legislation jeopardizes worldwide, timely future advances in the care of children with cancer. Clinical Therapeutics, 36(2), pp.163–177. Available at: http://dx.doi.org/10.1016/j.clinthera.2014.01.009; Rose, K. & Kopp, M.V., 2015. Paediatric investigation plans for specific immunotherapy: Questionable contributions to childhood health. Paediatric Allergy and Immunology, 26(8), pp.695–701. Available at: http://doi.wiley.com/10.1111/pai.12500; Rose, K. & Walson, P.D., 2015. The contributions of the European Medicines Agency and its paediatric committee to the fight against childhood leukaemia. Risk Management and Healthcare Policy, 8, pp.185–205.
:   [(53)](#footnoteref54)
     
       Kuehn, B.M., 2012. Laws Boost Paediatric Clinical Trials, But Report Finds Room for Improvement. Jama, 307(16), p.1681.
:   [(54)](#footnoteref55)
     
       Turner, M.A. et al., 2014. Paediatric drug development: The impact of evolving regulations. Advanced Drug Delivery Reviews, 73, pp.2–13
:   [(55)](#footnoteref56)
     
       Mathis, L. & Rodriguez, W., 2009. Drug therapy in paediatrics: A developing field. Dermatologic Therapy, 22(3), pp.257–261.
:   [(56)](#footnoteref57)
     
       Kreeftmeijer-Vegter, A.R. et al., 2014. The influence of the European paediatric regulation on marketing authorisation of orphan drugs for children. Orphanet journal of rare diseases, 9(1), p.120.
:   [(57)](#footnoteref58)
     
       Haslund-Krog, S. et al., 2014. The impact of legislation on drug substances used off-label in paediatric wards-a nationwide study. European journal of clinical pharmacology, 70(4), pp.445–52.
:   [(58)](#footnoteref59)
     
       Lindell-Osuagwu, L. et al., 2014. Prescribing for off-label use and unauthorized medicines in three paediatric wards in Finland, the status before and after the European Union Paediatric Regulation. Journal of Clinical Pharmacy and Therapeutics, 39(2), pp.144–153.
:   [(59)](#footnoteref60)
     
       Nelson, R.E. et al., 2011. Patent extension policy for paediatric indications: An evaluation of the impact within three drug classes in a state medicaid programme. Applied Health Economics and Health Policy, 9(3), pp.171–181.
:   [(60)](#footnoteref61)
     
       Pansieri, C. et al., 2014. Neonatal drug trials: impact of EU and US paediatric regulations. Archives of Disease in Childhood - Fetal and Neonatal Edition, 99(5), p.F438.

[Top](#document3)

3.1Results of the Delphi Survey

Table A.21: Development of clinical trials within the paediatric population

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_01002.jpg)

For this first question, the survey revealed a broadly positive view overall of the EU Paediatric Regulation’s effect on medicines development. A majority of survey respondents stated that the Paediatric Regulation had led to a situation where all European medicines in development consider clinical trials within the paediatric population. 54% of respondents judged the EU Paediatric Regulation to have had a positive or highly positive effect on companies’ behaviour already (2015) in respect to their consideration of clinical trials within paediatric populations for all medicines development in Europe. Around 15% of respondents recorded a negative view about this statement, suggesting the regulation has yet to create a situation where all medicines in development will consider paediatric clinical trials.

The survey found that a larger majority expect the regulation will have had an important and positive effect on European medicines development by 2020. Over 70% of respondents signalled a positive view of the likely situation at the end of 2020. Positive developments referred to include the initiation of early consultation of clinicians by sponsors to better consider patients’ needs and improvements in the data on dosing, safety, and efficacy in children. The swing in positive votes between 2015 and 2020 is largely driven by the switching of votes from neutrals to positives.

The proportion of sceptics was largely unchanged: around 14% of survey respondents view the likely situation at the end of 2020 negatively as compared with around 15% for 2015. Respondents provided additional comments in which they expressed reservations about progress and notable concerns included the following:

·Relatively small number of marketing authorisations of paediatric medicines, to date

·Slow progress in certain therapeutic areas e.g. oncology, psychiatry as well as in neonatology

·Concerns over the PIP waivers granted

·Scarce (EU) funding provision to sustain future paediatric medicine developments

·Continued use of off-label medicines for children

·Concerns over long delays in the process and deferrals

Table A.22: Increase in research, awareness and information

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_01003.jpg)

Survey respondents were asked to what extent they agree with four statements. 69% of the respondents agree or strongly agree that the number of paediatric research projects is increased. 16% of the respondents disagree or strongly disagree with this statement, one of whom went on to write that there has not been enough progress, and to list several studies in support of that position. One of the references included a study by Van Riet et al. (2016)152 that analysed the availability of licenced paediatric drugs and the development of new indications or new routes of administration for the paediatric population. This study concludes that “further research in some areas of paediatric drug development is required in order to ensure that paediatric drugs are age-appropriate and of the required standards, e.g. safety of excipients, acceptability testing”. 65% of the respondents agree or strongly agree with the statement that more quality information is available on approved medicines for their use in paediatric population (i.e. product label and summary of product characteristics). 15% of the survey respondents disagree with this statement. 87% agree that the awareness of health professionals has increased as regards the need to better evaluate medicines in the paediatric population. A small minority, 7% of the respondents, disagrees with this statement.

A wider range of international paediatric networks (e.g. TEDDY, PENTA, PRINTO) and research consortia have been established in Europe, some with the support from the European Commission (EC) and following the introduction of the Paediatric Regulation. GRiP (Global Research in Paediatrics) and SMART (Small Medicines Advanced Research and Training) are developing training programmes to increase the quality and the methodological level of paediatric clinical research. As a result, public-private partnerships have been able to mobilise the scientific and clinical community to devise clinical development plans that are acceptable to regulators and conduct clinical studies.

There is no consensus as to whether the awareness of the general population has increased as regards the need to perform more paediatric clinical research or the related need for increased participation in paediatric clinical trials. 47% of respondents judged that the awareness of the general population has increased, following the introduction of the regulation. For example, one respondent noted that the regulation had made it easier to explain the importance of allowing children to participate in clinical trials. A significant minority (27%) of respondents disagreed. Several respondents went on to write that awareness of these issues outside of the pharmaceutical industry remains poor. One contributor wrote that more time is needed to see any substantive effect of the regulation on the increased awareness among the general population, simply as a result of the long development phase, deferrals, modifications to PIPs etc., (only a small proportion of paediatric products have labelling changes as a result of the regulation).

Several other respondents argued that the impact on awareness would have been greater if more (EC) support had been devoted to communications campaigns. Respondents referenced several papers that explain the importance of communication, including an earlier study by the RCPCH (2012) highlighting the practical challenge faced by those wishing to increase volumes of paediatric research due to the general difficulties of engaging patients and other members of the public in trials in part because of a limited appreciation of the importance of such work.
[1](#footnote2)

Table A.23: Changes in the evaluation, testing and approval of paediatric medicine

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_01004.jpg)

Question 3 invited respondents to estimate the effect of the regulation on the number of medicines being tested through clinical trials in the paediatric population, and to indicate extent of any such change. The overall results are encouraging, with 84% of respondents indicating that there had been a measurable increase in the numbers of medicines tested within paediatric populations in the period since the implementation of the regulation, with more than a third suggesting the regulation had led to an increase of 20% or more. Respondents felt that without the regulation, the paediatric studies, agreed as part of a PIP, would not have taken place. 16% of respondents reported no observable change. One respondent noted that a number of waivers had been granted. Another respondent argued that while the European Clinical Trials Database (EudraCT) shows there has been an increase in paediatric clinical trials, it may not in whole be the result of the Paediatric Regulation as the increase mirrors a wider trend of increasing numbers of adult and mixed clinical trials.

Table A.24: Number of tested medicine available for approved use in children

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_01005.jpg)

The survey asked people to indicate if, as a result of the introduction of the Paediatric Regulation, the number of tested medicines available for approved use in children had increased. The majority of survey respondents indicated that there was an increase (67%) and 43% of respondents estimated that the increase was in the range 5-10%. In addition, respondents flagged the fact that many PIPs are still ongoing, and some have been deferred, and that more medicines would be approved in the near future. For example, in oncology or psychopharmacology, a substantial proportion of the drugs that are used to treat children are still used off-label and, in particular in this therapeutic area, there may not be sufficient research/support for research.

A study by David C. Radley et al. (2006) found that 73% of off-label use had little or no scientific support.
[2](#footnote3)
 A 2009 study by Alicia Bazzano et al. found that 62% of U.S. paediatric visits from 2001-2004 included off-label prescribing, with younger children at higher risk of receiving off-label prescriptions.
[3](#footnote4)

Table A.25: Number of approved medicine prescribed for children

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_01006.jpg)

On the question of prescription, a small majority of respondents, 58%, indicated that medical practitioners are increasingly prescribing approved medicines according to their licensed indication for children, as a result of the Paediatric Regulation. The majority of respondents that reported an increase in prescriptions, estimated the scale of that increase was in the range of 5-10%. Several contributors went on to provide written comments noting the large volume of PIPs that are yet to achieve marketing authorisation and the natural time lag that this creates, with only limited numbers of new or newly indicated medicines available to be prescribed. Survey respondents also noted that paediatric drug development had been swifter in some therapeutic areas, e.g. antibiotics, and less swift in others, e.g. oncology and tuberculosis. Respondents also noted that paediatric drug development for infants and neonates is particularly slow (lagging); and that many medicines have not yet been tested and are currently often used off-label.

Table A.26: Changes in research capacity, funding and collaboration

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_01007.jpg)

Respondents were asked to indicate the extent to which they agreed with each of three statements about paediatric research: Increased paediatric research capacity is available in the public and/or private sectors; Increased public and/or private research funding is available for paediatric research; and More extensive and sustainable research collaboration is available across private and public sector (i.e. leading to knowledge sharing, co-investment, or product development partnerships).

The survey revealed a broadly positive view about improving research capacity (60% in agreement) and research collaboration (65%), with a somewhat more neutral view expressed about any improving trend in paediatric research funding in the period since the introduction of the regulation. A substantial proportion of the respondents are neutral (neither agree not disagree) and a slightly smaller proportion disagree/strongly disagree (18%, 28% and 18%) with these statements. Survey respondents provided several arguments that explain the lack of consensus around the statements:

·Capacity building: several respondents argued that developments had been very positive and that, as a result of the regulation, institutions had been able to build bigger teams working with clinical trials in children. However, other respondents wrote that the expansion in research capacity had been patchy and looked very different across therapeutic areas and institutions. It was argued that (in some cases) capacity building was considered only after the regulation came into force and that as no specific funding was available for infrastructure development, one inevitably saw rather uneven progress.

·Research funding: one contributor argued that when the paediatric legislation came into force, there was an increase in funding and paediatric research collaboration but that this increase in funding had been interrupted and industry continues to focus on adult drug development and less on paediatric drug development, where financial returns are less interesting.
[4](#footnote5)
 Other contributors noted that there is substantial variation in the support for paediatric drug development across national governments. Several others remarked on the shortcomings of the Commission’s main research instruments, FP7 and Horizon 2020, stating that the funding instruments were poorly adapted to the needs of clinical trials in children.

·Collaboration: In some therapeutic areas the regulation is thought to have increased multi-stakeholder dialogue and cooperation, e.g. on childhood cancer drug development but in other therapeutic areas collaboration was reported to be poor still with no new networks for collaboration having been established. Also, it was suggested that the regulation had led to more industry-led research, while having had little or no effect on the volume of collaborative research (public private) or investigator-led research (public, academic).

  

Table A.27: Changes in the treatment of the paediatric population

 
![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_01008.jpg)

Survey respondents were asked to reflect on whether the introduction of the Paediatric Regulation had led to an improvement in the treatment of the paediatric population on one or more of three dimensions: i.e. less toxic medicines; more efficacious medicines; increases in the numbers of children and young people treated with the right medicines at the right time and with the right dosages. Regarding the replacing of existing treatments for a paediatric condition (either by treatment with less toxicity or enhanced efficacy), close to half of the respondents stated that the regulation had led to an increase (47%, 51%). While 68% stated that there had been an increase in the number of children treated with the right medicine at the right time with the right dose.

In all three cases, most respondents opted for an increase of around 5%-10% in the numbers of ‘correct’ treatments. Several respondents wrote stating they had difficulty in attributing changes in treatment to the Paediatric Regulation alone, while others acknowledged that there had been some limited progress, involving quite small steps so far as regards to efficacy and toxicity in general but more progress around specific treatments such as anti-rheumatic, immunosuppressive drugs and anti HIV drugs.

Others noted that the regulation has begun to make a difference, however, the rather complex and involved development process inevitably slows the rate of progress and arguably reduces the absolute potential for change:

·The need for certain drugs and for age-appropriateness of drug forms and formulations still exist. To date, only a small percentage (24 out of 135, about 18% of the total for 20072013 according to one survey respondent) of active substances included in the Priority Lists of off-patent drugs issued are subject of an agreed paediatric development in a PIP”158.

·A very low number of PUMAs are granted, i.e. only 2.

·Paediatric off-label use has not been reduced.

:   [(1)](#footnoteref2)
     
       
    <https://www.rcpch.ac.uk/sites/default/files/Turning_the_Tide_Full_Report_2012.pdf>
:   [(2)](#footnoteref3)
     
       David C. Radley; Stan N. Finkelstein; Randall S. Stafford (2006). Off-label Prescribing Among Office-Based Physicians. Archives of Internal Medicine 166 (9): 1021–1026.
:   [(3)](#footnoteref4)
     
       Alicia Bazzano MD MPH; Rita Mangione-Smith MD; Matthias Schonlau PhD; Marika Suttorp MS; Robert Brook MD ScD (2009). Off-label prescribing to children in the United States outpatient setting. Ambulatory Pediatrics 9.
:   [(4)](#footnoteref5)
     
       The RCPCH (2012) Turning the Tide report finds that only 5% of research funding is spent on child health research.

[Top](#document4)

Table A.28: Health and wellbeing of children and cost of care

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_04002.jpg)

This question invited respondents to judge the effect of the regulation on several wider issues, from child morbidity to the costs of care. These wider effects are difficult to identify and measure in any definitive sense, and so we invited people simply to provide an indication of the direction of any changes they had observed in their own area of expertise and which they would feel confident in attributing to the introduction of the regulation. Survey respondents were asked to indicate any observed change (as a result of the Paediatric Regulation) on: adverse drug reactions (ADRs), the number of episodes, child morbidity, the number of hospital bed days due to ADRs, and on the cost of care.

As expected, people found the five questions difficult to answer, however, around 60% of all respondents did provide answers. For each impact type, 40-70% of respondents indicated that they had observed no significant change. While most people had not yet observed any meaningful changes, there was a significant minority of respondents that judged the regulation to have had a positive impact on these different dimensions (i.e. reduction in the value of these indicators). Almost 40% of respondents indicated they had seen improvements in child morbidity in their field, which they would attribute to the regulation.

Around 30% of respondents had observed improvements in other impact types, from the incidence of ADRs to the number of related hospital bed days. 20% of the survey respondents find that the number of episodes due to new treatment of children has increased
[1](#footnote2)
 and 35% of the survey respondents indicated that the cost of care had increased due to new clinical practices / prescriptions. New products developed for paediatric use can be relatively more expensive, e.g. there can be cost increases related to the licencing of new medicines. In addition to inviting respondents to indicate the broad direction of travel, the survey asked people to estimate the degree of change they had observed, see Table 24. On child morbidity, 29% of the respondents judged morbidity had improved by 5-10%, 4% argued that it had improved by 10-20% and 6% argued it had decreased by 20% or more. The cost of care was the one dimension where a large minority (35%) indicated there had been a negative impact, with the new treatments and treatment regimens leading to an increase in costs, possibly leading to issues of accessibility.

  

Table A.29: Long-term benefits

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_04003.jpg)

This question invited respondents to go one step further in considering wider socio-economic impacts. In addition to estimating the impact of the Paediatric Regulation on Health and wellbeing of children and the cost of care, respondents were asked to indicate if, in the longterm, the regulation would have a measurable benefit on:

·Children’s school attendance

·Time cares need to take off work to care for children

·Quality-adjusted life years for children

·Mortality rates of children with life-threatening illnesses

The majority of respondents, i.e. 60%, 57%, 78%, and 69% respectively, expect there will be measureable benefits. The remainder of respondents are either unclear about the impact or judge there will be no measurable benefits (9%-14%). Some of the respondents that answered negatively are of the opinion that there are no better treatments on the market at this point in time, and for this reason there can be no measurable improvements in these wider areas.

Another respondent questioned the degree to which long-term benefits attributable to the Regulation will be measurable, while arguing that there will be desirable benefits of many kinds, in terms of more age-appropriate formulations, the facilitation of easier, more precise dosing, and the availability of paediatric dosing information. Amongst those that were positive with regards to measuring longer-term benefits, several noted that there have been benefits already in disease areas that will eventually have a positive impact e.g. mortality. It was also noted that developments in the treatment of neonates will take another 10-20 years to flow through to measurable impacts, and that such developments are dependent on, amongst other, continued funding.

Various other benefits were mentioned, and these are listed below:

·Benefits to patients and consumer groups

o Greater awareness on paediatric needs and the importance of testing drugs in the paediatric population

o Greater awareness in the level of health literacy of the general population - Involvement of the paediatric population in early discussions on drug development –

oIncrease in evidence based prescriptions / dosing information –

oAvailability of more age-appropriate formulations

oSocial benefit in pursuing better medicine for children and access to licensed medication

oOpportunity for greater awareness about the costs of medical care

oEarly access to new treatments and medications via clinical trials which may also e.g. lead to shortened disease profiles, shorter hospital / treatment periods, better health, and a decrease of health care costs

·Benefits to industry

oChange of culture, more inclusive focus on developing new and improved medicine for the paediatric population

oIncrease in competiveness within the European market producing benefits to taxpayers and patients, e.g. the EU market is becoming more attractive for FDI because the Paediatric Regulation offers a stable regulatory framework; opportunities for commercial clinical trial investment and attracts research from outside the EU

·Increase in jobs and growth as a result of the increased investment in R&D

3.1Results from the industry survey

The survey to industry asked to indicate the wider benefits of the Paediatric Regulation. In response, one survey participants noted that, “despite modest achievements so far in terms of rewards, the societal benefits from the Paediatric Regulation cannot be underestimated”.

·Several survey respondents remarked that the regulation has provided access to new and improved medicine. Some respondents referred to an improvement of the quality of care provided to the patients and others referred to better health in children. Moreover, respondents referred to the development of more age appropriate formulation as well as a reduction in off-label use.

·Several survey respondents find that the regulation generated new training, research capacities and knowledge to industry, eg about PK/correct dosing, safety and efficacy of medicines in children.

·Several survey respondents find that the regulation generated new knowledge for prescribers, and has led eg to basing paediatric dosing more on scientific studies, better information on the importance of well tested / approved medications for children and the importance of correct dosing. Other comments included the increase in documentation of error rates in diluting for off-label use and the increase in more updated product information. One respondent finds that the regulation led to the development of dissemination/communication strategies that have addressed laymen and the healthcare professionals’ community as well.

·Several respondents commented in the fact that the regulation has improved networks:

oIncrease in the involvement of researchers from academia or public research institutions in paediatric drug development programmes

oIntegration of patients and families into the design and conduct of research and trials increasing their awareness and competence

oSetup of public-private collaborations sharing of ideas, business, opportunities and innovation

oDevelopment of collaborations with clinicians enquiring other pharmaceutical and clinical developments

oCreation of new research networks

oSome survey respondents remarked that the Paediatric Regulation evoked a change in culture. One respondent reported a significant shift in mind-set within pharmaceutical companies and noted that the regulation helped encourage paediatric development become a more integral part of the overall development of medicines in Europe. Another respondent remarked that the regulation put the paediatric issues at the core of the European agenda and another remarked that it has become an integral part of the overall development of medicines in Europe.

4Cost benefit model

A generic socio-economic cost benefit analysis (CBA) is a systematic overview, analysis and summary of all impacts (both financial and non-financial) of a (policy) measure, which are deemed relevant for decision making. The aim of a CBA is to determine whether a measure is desirable, i.e. whether from the point of view of the respective decision making person or body the expected benefits exceed those of the expected costs involved – be it at the level of a private organisation, a public body, or society. In cases where alternative paths of action are available, it will also help to identify the most advantageous alternative In the healthcare system, this can be done from different perspectives, taking into account those costs and benefits that impact on a particular entity: the private perspective of a given stakeholder, the patient’s perspective, the healthcare system perspective or the social welfare perspective, in which also external costs and benefits are taken into account and transfers (e.g. taxes) are left out. In all perspectives the CBA method calculates the net present value (NPV) of current and future socio-economic cost and benefits of a specific intervention, a project, or a policy and its implementation strategy and measures.

The CBA can be applied - in principle - to any context and policy decision situation, be it in the public arena or a commercial context. It will depend on the decision-maker's perspective which benefits and costs, measured in which fashion, and based on which assumptions, expectations, extrapolations should enter into the overall "equation". It is this feature which allows to test assumptions or expectations and their likely impact, and to choose from alternative application scenarios and options which have the highest likelihood to achieve a particular policy objective.

There are very little literature or grey reports available discussing the issue of the potential socio-economic return on the extra monopoly rent reaped by pharmaceutical companies holding a market authorisation for a medicine which was awarded an extra 6-month SPC after successful execution of a PIP. These extra costs accrue to the healthcare system and to each individual patient concerned – either directly or via contribution to healthcare related taxes and health insurance payments. It is assumed that children which take the medicine in question, and indirectly others, will considerably benefit from better treatment outcomes. These benefits may relate to:

·Improved paediatric care through added precision in the use of pharmacotherapy in paediatric populations

·Reduced ADRs and burden of paediatric diseases

·Shorter periods of hospitalisation.

In return, these benefits may contribute to lower consumption of medicinal products through better targeting of treatment. However, it is also possible that these benefits will lead to an increase in the consumption of medicinal products as a result of the potential improved access to medicines.

This means that more children could be treated with the right medicine. Improved access to medicines may also imply marginally lower liability cost for health service providers (resulting in lower insurance premiums). The following graph (Figure B.11) summarises the main elements of the cost-benefit model:

Figure B.11: main elements cost-benefit

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_04004.jpg)

Details of the model are provided in Appendix E.3 of the economic study.

4.1Cost-benefit assessment of selected medicinal products

This analysis represents a bottom-up approach, based on a detailed benefit model and cost data (‘economic value’), and covers eight medicinal products for which sufficient data were available. Seven are for treating a chronic disease and one for an acute disease. They cover a diverse spectrum of seven different diseases. Five of these are used on-label for certain age groups of children, while for three drugs, although PIP studies were negative, data indicate their continued use in children.

Of these eight products, five show low to marginal percentages of all episodes related to paediatrics (0.09%; 0.21%; 0.33%; 0.83%; 1.48% - in absolute numbers: 323; 770; 1,017; 3,209; 4,351). Three have with 7.4%, 9.5% and 37.6% significant shares (absolute: 12,644; 206,986; 405,096). Making use of FDA and EMA statistics and paediatric safety review reports for the products included, the absolute numbers of ADEs (note: not ADRs, the numbers of which are lower) for the eight drugs were estimated at 0.17, 0.25, 0.87, 1.27, 1.47, 2.00, 4.22, 34.30.

The values of serious paediatric ADE reports as percentage of all paediatric episodes, ranging from 0.0002% to 0.41%. Only for a single drug deaths of children were reported as ADEs. Relating those data to a six-month period, an absolute number of 0.25 deaths due to an ADE was estimated. Note that these figures are derived from mathematical computations and therefore are not reported in integers. In the literature, there is quite some discussion around sometimes significant underreporting of ADRs, ADEs and medication errors. On the other hand, using ADE data leads to overestimation of ADRs. Also, FDA safety reports use prescriptions per patient (sometimes over 10 and more years) as a reference base, which also leads to overestimation of ADEs on a treatment episode base in case the patient obtains more than one prescription during this period.

Furthermore, both EMA and FDA note some overreporting (double reports on the same ADE), particularly on deaths, and some error in reporting. For the benefit calculations, the ADE data is adjusted upwards by 100% (doubling) data for deaths, and 200% to 400% (3 to 5 times) for less serious events to account for likely underreporting.

4.2Estimating monopoly rents

To estimate the true costs to national/regional (government) payers and statutory health insurances, monopoly rents for the pharmaceutical industry need to be increased by the extra revenue accruing to other beneficiaries like wholesalers, pharmacies as well governments (wherever VAT or sales tax is levied on medicinal products). In Germany, e.g., this additional monopoly rent amounts to 32% of industry monopoly rent. Because in some countries no wholesalers may be involved or no sales tax is levied on prescription medicinal products, it is assumed that, on average across the EU, the monopoly rent to industry accounts for 87.5% of overall rent, and only 12.5% accrue to other beneficiaries. This renders an extra cost to society estimate of €590m. In order to arrive at the cost to health system payers (national or regional health services respectively statutory health insurances) this sum needs to be reduced by the (co-)payments charged to patients, respectively their parents. These vary widely across EU member states. We introduced the simple assumption that for each (adult and paediatric) treatment episode the Third-Party Payer receives a lump sum of €5. For the eight medicines overall net extra cost for the 6-month extension is then estimated at €551m to health systems, or more than half a billion Euros. The co-payments by patients of €38.5m are not accounted for as extra costs, because we assume that they may have taken anyhow these or other medicines for which similar co-payments would have to be paid. This does not hold for one medicinal product. Due to the low price per treatment episode, the full cost of the monopoly rent is allocated solely to patients.

4.3Benefits derived from cash savings due to ADRs avoided

To estimate potential benefits to health systems from cash savings from avoidable ADRs we assumed that they might be reduced by 20% based on estimates in the literature. They will result from hospital stay and outpatient encounters (emergency room visits and ambulatory services) avoided. For the six-month period, the cumulative estimate across all drugs is for avoidable hospitalisation costs €32,000 and outpatient treatment € 5,000, or overall € 37,000 (over a range of €97 to €31,000 per drug). For 10 years, this sums up to € 741,000. Compared to the overall monopoly rent estimated at more than half a billion Euros, these savings are marginal, leading to benefit-cost ratios of almost zero or a negative return of 99%. Even increasing the estimate for the number of ADEs by another ten times would not lead to any significant results for this item.

4.4Intangible benefits due to ADRs avoided

In a further step, various non-cash or intangible benefits were estimated. They concern benefits expected from improved actual treatment of children, which result in reduced mortality, improved quality of life (QoL) experiences due to long-term disabilities, and time saved by informal carers. Furthermore, in order to account for further benefits not accounted anywhere else, we add a hypothetical benefit of €10 per each treatment episode. For four medicinal products with very few paediatric treatment episodes compared to all treatment episodes the benefits estimated are considerably higher than for the cash benefits, but still marginal, with less than €100,000 for the 6-month period, and less than €2,000,000 for 10 years. Also the 6-month and 10-year benefit-cost ratios are marginal to negligible. On the other hand, for the product with the largest share of paediatric treatment episodes the estimated value is very different.

It was estimated overall intangible benefits of almost €5m for 6 months, or €100m for ten years. For ten years, we obtained a benefit/cost ratio of 1.5, or a positive rate of return of 50%. For one of the products – the medicine for acute treatment where extra costs accrue only to patients due to higher co-payments, but not to healthcare systems – 10-year intangible benefits are estimated at €80m, leading to a societal benefit/cost ratio of above 5 or a rate of return of more than 400% for this medicinal product. Overall, the greatest benefits are derived from two rather generic and very rough estimates concerning “avoidable reduced quality of life” and a catch-all “additional benefit per paediatric episode” set at €10. The latter term is used as an estimate of a generic benefit for all due to better treatment options (valued at €5); and in addition, to also account for any other significant ADEs (the number of which is unknown) we apply another €5 per episode.

These items are not discussed in the literature, but introduced here to account for any other events and benefits not covered by the earlier items. Intangible benefits for avoidable reduced quality of life are estimated at €2,840,000 across all medicines (range: €6,120 to €2,470,000); for the ten-year period, the estimate is €56,800,000. This value is directly related to the number of paediatric episodes and the estimated number of serious adverse events, where the Asthma medicine far outstrips all others.

Even higher intangible benefits are estimated for the catch-all additional benefit per paediatric episode of €10. Of course, they are directly related to the absolute number of episodes and the percentage of episodes related to paediatrics. Here two drugs are particularly notable: the Asthma medicine with €2,070,000 and the Migraine one with €4,050,000 for 6 months (the range for other medicines is comparably low: €3,200 to €126,500). The sum across all medicines is €6,340,000 for 6 months and €126,800,000 for 10 years. Considering the other intangible benefit estimates cumulated across all drugs, deaths avoided do not contribute to a significant extent to the benefits estimated (€360,000 for 6 months or €7,200,000 for 10 years; only one product is involved); this is due to the low number of reports on death events. For intangible costs to informal carers, the total value across all medicines is €9,400 (with individual values ranging from €22 to €8,000) and €188,000 for ten years.

4.5Overall benefit-cost ratio estimate for the eight medicinal products

There are two products (Drug A and Drug B) among the eight medicinal products studied here with strongly favourable benefit-cost ratio when calculated over a 10-year period, basically due to non-cash benefits. Drug A is an Asthma pill and provides €32m net benefit, while Drug B, a migraine pill provides €66m net benefit. All other medicinal products have a negative benefit-cost ratio over 10 years. Aggregating cash and non-cash benefits data for all eight medicinal products, overall benefits of €199m for 10 years are estimated. Overall cash cost to society (patients, health systems) from total monopoly rent to all stakeholders (pharmaceutical industry, wholesalers, pharmacies, governments from value added/sales tax) are estimated at €590m. The overall socio-economic benefit-cost ratio across all medicines is 0.34, the societal overall rate of return minus 66%. A detailed calculation is available in Appendix E of the economic study.

4.6Estimation of the cost and benefits medicinal products compliant PIPs

The Paediatric Regulation was a first, most important step (“milestone”) to improve the onlabel prescribing of medicines for children. However as noted also in other studies, so far only a small start was achieved. As most results from PIPs and other measures are still to come, “however only the children and adolescents of tomorrow” will fully profit. The estimates attempt to cover this perspective for tomorrow by aggregating estimated benefits over a period of ten years.

Furthermore, planning and executing PIPs and other measures, improving labelling and generating more knowledge on the treatment of children are only “one half of the solution”. As long as the second half of the solution is not assured, as long as the new knowledge is not translated into adjusted paediatric prescriptions and clinical practice for better healthcare for children, the overall impact will remain small. Knowledge as such may have intellectual, intangible value in satisfying our curiosity, but as long as it is not diffused and applied in paediatric healthcare provision, it does not generate tangible social or economic value. A basic estimate of such potential benefits is estimated. This estimate remains speculative.

Basis of the following data and ‘level 2’ calculations of benefits and costs is a list of 119 PIPs which passed the compliance check and were approved by EMA as compliant with the requirements for acceptance. From these, the eight medicinal products covered earlier already obtained the extra 6-month SPC extension and are excluded from the following calculations. This leaves us with 111 PIPs relating to medicinal products. Of these, 21 still qualify for such an extension. The remaining 90 PIPs do not qualify or we do not know their status. 3 of these were excluded due to probable double counting because they relate to the same active ingredient (INN), which leaves us with 87 PIPs for consideration.

4.6.1Characteristics of drugs covered by PIPs

From a comprehensive German study166, it is known that the relative distribution of paediatric prescriptions for the top five therapeutic areas (overall about 35.2 m prescriptions for 2011) in Germany is about as follows:

·Pulmonary/ENT diseases: 60%

·Infectious diseases: 22%

·Central nervous system incl. pain: 17%

·Cardiological/heart diseases: 1%

·Oncology: 0.1%

Classifying the 108 (87 + 21) PIPs according to these areas plus the categories vaccines and others, we obtain the following results:

·Pulmonary/ENT diseases: 7

·Infectious diseases: 15

·Central nervous system incl. pain: 4

·Cardiological/heart diseases: 6

·Oncology: 7

·Vaccines: 13

·Others: 56

“Others” include therapeutic areas like Dermatology, Diagnostics, EndocrinologyGynaecology-Fertility-Metabolism, Gastroenterology-Hepatology, HaematologyHemostaseology, Immunology-Rheumatology-Transplantation, Neonatology-Paediatric Intensive Care, Nutrition, Ophthalmology, Psychiatry, and Uro-Nephrology.

With respect to the type of disease, these can be classified as follows:

·19 acute

·9 acute/chronic

·60 chronic (incl. cancer)

·13 vaccines

·7 unknown

Reliable prices for these drugs are difficult to establish.

Table A.30 presents the ranges estimated based on intensive web searches. Mutatis mutandis, it seems that the overall distribution of these PIPs reflects to a great extent the distribution of the eight medicines analysed earlier across these categories.

Table A.30: Price range of medicinal products

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4.6.2Estimating future benefits and costs

Except for the benefits and costs estimated in the previous section, we do not have any reliable or meaningful estimates at hand. As a very first and speculative estimate, we apply the following logic for estimating benefits. The earlier results have shown that cash benefits are in all probability marginal to negligible, so they are not considered. It should be remembered that the most relevant intangible generic benefit for all paediatric patients due to better treatment options was set at €5, and that in addition, to also account for "significant" ADEs (the number of which is unknown), we applied another €5 per episode.

Therefore, here we only estimate intangible benefits of a generic kind; but we increase the value per paediatric episode from €10 as used in our earlier estimates to a mean value of €15 to also cover in a cursory manner all other intangible benefits as well. Due to the severity of oncology incidents with children, we double the estimated benefit per episode to €30. On the other hand, for vaccines we reduce it to €10 to reflect their overall safety and relatively low ADR incidence rate.

The estimates of the paediatric episodes per drug are derived from the estimates per drug for the eight drugs analysed earlier – taking into account the therapeutic indication, plus setting them into some proportion to the overall relevance of the therapeutic area as indicated by the prescribing figures above for Germany. Details are provided in section 6.3.3 of the economic study.

4.6.3Estimating costs to health system payers

Estimating overall cash costs to health system payers is similarly difficult and speculative. It is assumed that of the above PIPs only 21 may be granted an additional 6-month SPC. These cover the following therapeutic fields:

·Pulmonary/ENT diseases: 2

·Infectious diseases: 5

·Cardiological/heart diseases: 4

·Oncology: 1

·Vaccines: 1

·Others: 8

Making use of our earlier estimates for the 8 drugs analysed in the preceding section, we set the extra costs resulting from the 6-month monopoly rent of the marketing authorisation holders at a value of about €50m for the first three therapeutic fields covered by 11 PIPs, and at €20m for the other 10. Then we arrive at an overall estimate of 11 x €50m plus 10 x €20m equal to €750m in monopoly costs.

4.6.4Summary of the results

Comparing these projected first estimates for the 108 extra PIPs, one may contrast the estimated overall intangible benefits of €970m with the estimated extra monopoly costs of €750m. This would lead to a socio-economic benefit-cost ratio of about 1.30 for the 10-year period, or a rate of return of 30% for these additional PIPs. Adding this “surplus” of €220m to the cash and intangible benefits reported in the previous section, our benefit estimate arrives at roughly €500m. This does not fully cover the estimated monopoly cash cost to health systems estimated there at €590m, but improves the overall balance considerably.

4.7Estimation of R&D spillovers resulting from the PIPs

An estimate of the broader socio-economic benefits results from the private sector investment into paediatric R&D (level 1 analysis) has been conducted. The estimation of R&D spillovers is separate from the estimation of the health benefits achieved in relation to new and improved medicine. The positive spillover effects constitute of additional jobs, growth and innovative activity across (EU and non-EU) sectors that would not have happened if it were not for the R&D investment made in relation to the Paediatric Regulation. The investment in R&D, although a cost imposed to the pharmaceutical industry, can also be viewed as an R&D investment towards new and improved medicine that triggers further investment and growth.

The so-called social rate of return from R&D investment is equal to the sum of the following:

·Private rate of return to the organisation

·The return to the pharma sector, including to generic companies

·The return to other sectors in the economy.

Several studies have estimated rates of return from investment in R&D although the literature in the field of pharmaceutical R&D development is scarce. Annual reporting by GSK (2013, pp. 4 and 2015, p. 4)
[2](#footnote3)
 notes that the estimated internal rate of return of R&D investments is 13% and, in 2013, long-term targets are set at 14%. An earlier study by Garau and Sussex (2007) also refers to a 14% private rate of return.
[3](#footnote4)
 We will use 14% to estimate the private rate of return following € 2,026m investment in R&D (excluding administrative costs) in relation to PIPs.

Estimates of intra-industry and across industry rates of return could not be identified in the literature specifically related to R&D investment in the pharmaceutical industry. One literature review (Health Economics Research Group and RAND, 2008) summarises the rates of return from different types of R&D investment in different sectors and also provides estimates for the rate of return from UK investment in medical research.
[4](#footnote5)
 The study finds that most literature estimates that the total social rate of return from private investment is around 50%, eg 51% as used in Garau and Sussex (2007).

Moreover, the study summarises that the total social rate of return from public investment is at least 20% and could be as high as 67%, with a more conservative best estimate of 30%. Because the R&D spent in relation to the Paediatric Regulation is an imposed investment rather than a strategic company decision, the 30% rate of social return feels more appropriate than the higher rate of return that is associated with private R&D investment. It has been assumed that the intra-industry and across industry rate of return is equal to the difference between the total social rate of return and the private rate of return and amounts to 16%.
[5](#footnote6)
 

It should be noted that in the case of spillovers from private investment in R&D, the literature refers to three types of spillovers: improving the productivity of other firms’ R&D, encouraging entry of potential competitors, and a reduction of production costs.
[6](#footnote7)
 In the case of the Paediatric Regulation not all three spillovers may be equally present and the spillover effect might be different in relation investment in paediatric-only trials. Overall, knowledge spillovers are likely to contribute to additional growth and investment.

Following the study by the Health Economics Research Group and RAND, the above presented rate of return implies that the R&D investment “implies that for an extra €1 invested in cardiovascular research this year, the UK’s GDP will be €0.30 higher next year and every year thereafter, than it otherwise would have been” (pp. 40). Based on this estimate, if all of the €2,103m industry spent in relation to the Paediatric Regulation were to yield a 30% social rate of return that would be equivalent to €608m of GDP every year thereafter.

This degree of perpetuity may be overstated in the case of the Paediatric Regulation and we expect that, in practice, the spillover effect follows a decay curve with an innovation and restructuring phase, following by the diffusion and increase in demand (generics entering the market), and sometime thereafter, a point in time where R&D investment and innovation becomes obsolete. According to a study by Zagame et al (2012), the cumulative effect of an R&D investment can take up to 15 years to accrue but can be preceded by negative rate of return. Following the study, investment benefits from approximately a 10-year period of growth.

For simplicity it has been assumed a linear rate of return with, on average, a total social rate of return of 30% (this is unlikely to be the case and the biggest returns will be experienced in the earlier years) and a maximum cumulative return on investment 10 years after the initial R&D investment. Based on a 30% total social rate of return the total return on investment to society after 10 years amounts to €6,078m and the intra-industry and across industry rate of return after 10 years amounts to €3,242m (see Table A.31).

Considering the 10-year period, both the private and intra-industry and across industry rates of return are larger than the initial investment suggesting a healthy return.

The economic value of the SPC extension was estimated (extrapolated based on actual data) for 12 products that accrued economic value until 2015 for relevant EU member states to amount to €742k. The estimated social return is significantly higher than this economic value of the SPC extension (excluding cost to society in relation to other products and countries, as well as the dead weight loss in relation to the SPC). Despite the crude methodology used to estimate the effect of spillovers and the challenge to gross up the value of the direct loss to society as a result of the Paediatric Regulation (ie the reward to industry), it suggests that the benefits of the Regulation outweigh the costs.

Table A.31: Estimated return to society and industry of the Paediatric Regulation, millions of euro

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:   [(1)](#footnoteref2)
     
       To note that the authors of this paper have no clear understanding why this should be the case and whether respondents may have misunderstood the question: The chart suggests that around 33% of respondents have seen a reduction in the number of episodes as a result of the use of more efficacious paediatric drugs or more appropriate dosing regimens. The chart also suggests that 20% of respondents have seen an increase in the numbers of episodes, as a result of better drugs / dosing. This last point seems counter-intuitive.
:   [(2)](#footnoteref3)
     
       
    <https://www.gsk.com/media/2701/annual-report-2013-interactive.pdf>
     and 
    <https://www.gsk.com/media/4697/gsk-annual-report-2015.pdf>
:   [(3)](#footnoteref4)
     
       Garau M, Sussex J. Estimating Pharmaceutical Companies’ Value to the National Economy. Case study of the British Pharma Group. London: office of Health Economics; 2007.
:   [(4)](#footnoteref5)
     
       Frontier Economics (2014). Rates of return to investment in science and innovation, A report prepared for the Department for Business, Innovation and Skills (BIS).
:   [(5)](#footnoteref6)
     
       Because of the method of calculating the intra-industry and across industry rate of return and because we have not ‘discounted’ the 14% rate of return, the private rate of return may also be overestimated and the intra-industry and across industry rate of return may be overstated.
:   [(6)](#footnoteref7)
     
       Health Economics Research Group, Office of Health Economics, RAND Europe. Medical Research: What’s it worth? Estimating the economic benefits from medical research in the UK. London: UK Evaluation Forum; 2008.

[Top](#document5)

Annex 4: Costs and Benefits

This Annex provides a table giving an overview of all costs and benefits.

|  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
| OVERVIEW OF COSTS AND BENEFITS OF THE ORPHAN REGULATION | | | | | | | |
|  | | Citizens/Consumers | | Businesses | | Administrations | |
|  | | Qualitative | Quantitative / monetary | Qualitative | Quantitative / monetary | Qualitative | Quantitative / monetary |
|  |  |  |  |  |  |  |  |
| Aid for research | Economic cost for EU and various national governments, which provided subsides to stimulate the development of orphan medicines.    Directly related to the rewards of the Orphan Regulation |  |  |  |  | With the very limited information available, it was not possible to assess the extent to which these additional R&D expenditures would have been incurred  without the Orphan Regulation. | These costs have been estimated at -/- €1.1b |
| Fee waiver, protocol assistance | Economic cost for administration (EMA)    Economic benefit for businesses |  |  | Interviewees from industry have suggested that protocol assistance is most valuable to relatively inexperienced developers. In general, developers of products for which demonstration of significant benefit is required stand to benefit from protocol assistance. The importance of fee reductions is higher for SMEs (for which fees can be waived completely) than for large pharmaceutical companies for whom such fees are a relatively minor cost | The value of those rewards can be expressed in monetary terms. The value of the provision of the fee waiver and protocol assistance rewards under the EU Orphan Regulation during 2000-2017 is estimated at €0.16b (discounted value 2018). |  | The costs of this assistance, which are incurred by the EMA, are fully financed by the EU and have been estimated at -/- €0.2b |
| Administration: EMA/COMP costs | Additional economic cost resulting from the tasks that EMA executes in relation to the EU Orphan Regulation, as well as the cost borne by the EEA member states and other organisations in relation to the meetings of the various committees discussing applications for orphan designations and marketing authorisations.    Directly related to the rewards of the Orphan Regulation |  |  |  |  | Member States contribute indirectly by nominating national experts as members to the COMP. These members are not reimbursed for their work in the COMP. The organisations from which they are seconded thus indirectly bear the costs as a result of time spent by COMP members outside these institutions. No estimates are available of these costs. | Annual costs for EMA and national governments have been assessed based on the approximate number of staff (in full time equivalents) involved in the various activities relating to the EU Orphan Regulation.    -/- €0.02b |
| R&D costs for new orphan medicines | Economic cost for businesses |  |  | Companies were reluctant to provide information on absolute expenditure on R&D on orphan medicines. An attempt was made to gain insight into the relative costs of development of orphan medicines (compared to non-orphans). However, such information could not be used in any meaningful way (few and different answers). As the results from the consultations did not provide a sufficiently robust input for our analysis, the study used estimates of R&D costs for orphan medicines found in literature. | As the results from the consultations did not provide a sufficiently robust input for our analysis, the study used estimates of R&D costs for orphan medicines found in literature. Using the above estimates and assumptions, the EU Orphan Regulation is estimated to have led to an increase of €11.0b (discounted value 2018) in R&D expenditure for orphan medicines in the period 2000-2017. |  |  |
| Extra costs for manufacturing, marketing, distribution orphan medicine | Economic cost for businesses |  |  |  | The assessment of these costs was based on the methodology used to assess the economic value of the market exclusivity reward. Based on the extra sales of €19.1b (see below), these costs over the years 2000-2017 were assessed at €12.04b (discounted value 2018) after deducting from the extra sales benefits to the industry related to an exclusivity margin (30%) and a competitive profit margin (10%); the latter assumed to be a margin that would (continue) to apply even when generic price competition occurs and hence already applies as a benefit during market exclusivity. |  |  |
| Private contribution to health care costs [1](#footnote2) |  |  | -/- €0.7b   The private contribution by patients is assessed at 3% of additional health care costs. |  |  |  |  |
| Change in non-health costs of disease |  |  | NDA |  |  |  |  |
| Additional impact on health costs |  |  | NDA |  |  |  | NDA |
| Extra health care costs financing | Economic costs for the (national) health system. These are the costs related to providing medicines to patients living with rare diseases. |  |  |  |  | Direct impacts on health care costs are typically taken into account in Health Technology Assessment (HTA). HTA reports were identified for 32 orphan medicines that contain information on ICERs, but only a few of them disclose the additional underpinning information. As a result, the impact on additional costs of treatment with orphan medicines or cost-savings in the health care system could not be assessed. | The extra costs for the health care system have been assumed to be equal to the extra revenues realised by industry (sales revenues and revenues deriving from market exclusivity19,1b + 4,6b).    -/- €23.7b |
| Costs relating to financing of extra costs of the health sector | Economic cost for health sector |  |  |  |  | A large part of the additional health care costs is reimbursed from collective sources (either government budgets, collective health insurance systems or otherwise). Healthcare systems across the EU Member States are organised and financed in different ways. Surveys with representatives of national authorities provided some relevant information. Based on this information, only a small proportion of costs related to orphan medicines was considered to be financed from out-of-pocket expenses by patients, most likely less than 5% of the total | For the analysis a 97%-3% division has been used between public and private financing. Health care financing costs were estimated at -/- €23.0b |
| Extra sales revenues | Economic benefit for businesses |  |  |  | The estimated value of increased sales of orphan medicines in the EU market in 2000-2017 of an estimated value of €19,11 b (discounted value). Almost 45% of this is due to sales from newly developed orphan medicines, another 44% is due to faster access to EU/EAA market of the other 110 orphan medicines and 11% due to wider spread of medicines. |  |  |
| Revenues from market exclusivity reward | Economic benefit for businesses |  |  | In the survey to developers, the market exclusivity reward was identified as the most important incentive of the EU Orphan Regulation, with 95% considering it ‘important’ or, most often, ‘very important’. | As the additional R&D compensation offered by market exclusivity may co-exist with (multiple) other forms of protection (for instance, when the market exclusivity period overlaps with the patent/SPC protection), its value could not be quantified. Only the impact of the longer duration of the protection could be taken into account. On average, the additional protection period resulting from the market exclusivity was 3.4 years. The estimated value of this extra R&D compensation was €4.59b. |  |  |
| Revenues for the health system | Economic benefit for (national) health system |  |  |  |  |  | The extra costs for the health systems resulting from the EU Orphan Regulation need to be recovered from public and private sources. It has been assumed in the analysis that such costs are fully covered, implying that costs and benefits for the health system are balanced. Effectively, this means that the cost estimates provided here are carried over to another set of stakeholders, including governments (in case of publicly funded health systems) and patients (e.g. through insurance premiums and when co-payments apply).  €23,7b |
| Health benefits | Benefits concern the improvement in the quality of life of patients due to the treatment with orphan medicines. These benefits can be expressed in terms of the number of quality-adjusted life years (QALY) [2](#footnote3)  gained by patients. | The level of health benefits has been assessed using information on the Incremental Cost-Effectiveness Ratio (ICER [3](#footnote4) ), from HTA reports. | Based on a multiplication of the calculated ICERs (range €54,000 to €110,000) and the estimated extra health care costs presented above, it is estimated that, as a result of the Regulation, 210,000 to 440,000 QALYs were gained. |  |  |  |  |
| NET benefits |  |  | -/- €0.7b |  | +€0.82b |  | -/- €24.3b |
| ICER |  |  | €54,000 to €110,000 |  |  |  |  |
| Net societal cost per QALY |  |  | €58,000 to €118,000 |  |  |  |  |

NDA: No data available to assess this impact

  

|  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
| OVERVIEW OF COSTS AND BENEFITS OF THE PAEDIATRIC REGULATION | | | | | | | |
|  | | Citizens/Consumers | | Businesses | | Administrations | |
|  | | Qualitative | Quantitative / monetary | Qualitative | Quantitative / monetary | Qualitative | Quantitative / monetary |
|  |  |  |  |  |  |  |  |
| Costs for compliance with the Regulation - Research | Economic cost for businesses to conduct paediatric clinical research mandated by the Regulation    Directly related to the Paediatric Regulation |  |  | The costs incurred by individual PIPs vary significantly depending by the type of clinical trials to be conducted, the number of subjects involved and the therapeutic area concerned | These costs have been estimated at €2,0 b per year.    The estimated average cost of each PIP is of €18,9 m (cost incurred over several years). |  |  |
| Costs for compliance with the Regulation – Administrative costs | Economic cost Administrative costs for businesses to comply with the Regulation    Directly related to the Paediatric Regulation |  |  |  | The costs are related to the filing of a PIP applications and are estimated at €82 m per year. |  |  |
| Costs Administration: remuneration of the work of national competent authorities | Costs for the remuneration of the National competent authorities for their work on PIP related procedures    Directly related to the Paediatric Regulation |  |  |  |  | Costs estimated on the basis of unpublished data collected in the framework of the evaluation of the EMA fees system. | Estimated annual costs for NCAs for PIP related procedures:    PIP assessments: € 0,6 m  PIP waivers € 90.000  PIP compliance checks €50.000 |
| Costs  for society linked to the marketing of paediatric medicinal products | Economic cost society due to the monopoly rent (linked to the SPC extension) and revenues of other beneficiaries (like wholesalers    Directly related to the rewards of the Paediatric Regulation |  | Estimated cost € 590 m over a 10 year period  (€ 551 m are estimated to be direct costs to the national health services. |  |  |  |  |
| Benefit    To society due to cash and non cash benefits following the marketing of new paediatric medicines | Economic benefit    These include:  -cash benefit linked to avoided adverse reactions due to the use of medicines untested in children (avoided hospital stays and outpatients visits)    - Non cash benefits for which monetary benefit has been calculated: improved treatments for children, reduced mortality, improved quality of life, avoided long-term disabilities, time saved by informal carers | 2 estimates have been calculated, one on the basis of real data of 8 products which have obtained an SPC extension and have already lost their exclusivity (estimate 1) and a second estimate of future benefits for a larger basket of products but for which data needed to be extrapolated, This basket includes products which may not receive an SPC extension (estimate 2). | Estimate 1:  € 199 m over a 10 years period    Estimate 2: € 500 m over a 10 years period |  |  |  |  |
| Benefit    For businesses due to the monopoly rent | Economic benefit  for businesses  due to the monopoly rent linked to the SPC extension    Directly related to the Paediatric Regulation |  |  | The estimate has been calculated, one on the basis of real data of 8 products which have obtained an SPC extension and have already lost their exclusivity. | This benefit is estimated in € 520 m |  |  |
| Benefits  for businesses due to the obtention of ten orphan rewards or for the use of the PUMA procedure | Economic benefit for businesses |  |  | Only a limited number of orphan rewards and PUMA have been granted. There are therefore insufficient data to assess their economic value | NDA |  |  |
| Benefit    Spill over effect for society due to investments in R&D by businesses linked to the Paediatric regulation | Economic benefit   for society  Jobs creation, promotion of innovation linked to the R&D investments by businesses linked to the Paediatric Regulation | The estimation is calculated as a result of an investment of € 2 b. in R&D by businesses following the obligations of the Paediatric Regulation | Estimated in €6 b. over 10 years |  |  |  |  |
| Benefit    Intra industry and cross industry spill over effect due to investments in R&D by businesses linked to the Paediatric regulation | Economic benefit   for businesses  intra sector and cross-sector jobs creation, promotion of innovation linked to the R&D investments by businesses linked to the Paediatric Regulation |  |  | The estimation is calculated as a result of an investment of € 2 b. in R&D by businesses following the obligations of the Paediatric Regulation | Estimated in €3,2 b. over 10 years |  |  |

Annex 5: Agency’s committees

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_03002.jpg)

COMP = Committee for Orphan Medicinal Products; PDCO = Paediatric Committee; PIP = Paediatric Investigation Plan; CAT = Committee for Advanced Therapies; CHMP = Committee for Medicinal Products for Human Use; MA = Marketing Authorisation.

Source: Orphan study report (2019)

Committee for Orphan Medicinal Products (COMP)

COMP is involved in the implementation of the EU Orphan Regulation. It meets every month to discuss applications to assess their eligibility against all applicable criteria (e.g. prevalence, medical plausibility, significant benefit), to determine the orphan indication, to adopt opinions and prepare summary reports, which are then sent to the European Commission. These meetings currently take around three days each time.

Whereas it is at the discretion of the Member States to decide who they would like to nominate, the COMP internally seeks for a good balance of expertise by having members who represent different clinical fields and backgrounds. Many hold positions in national ministries or national competent authorities, whereas others hold positions in academia or clinical practice. However, all members are nominated on a personal title.

Committee for Medicinal Products for Human Use (CHMP)

All products for which a marketing authorisation is sought through the centralised procedure must be assessed by the Committee for Medicinal Products for Human Use (CHMP), regardless of whether they have an orphan designation. The CHMP will conduct a scientific assessment to establish the benefit to risk ratio of the product, and thus determine whether the product should be allowed onto the European market and, if so, for which therapeutic indication(s).

The purpose of the scientific assessment performed by the CHMP is thus a different one from that conducted by the COMP, which focuses on the fulfilment of the criteria for orphan designation.

The CHMP is also responsible for assessing similarity for applications for marketing authorisation for products with an orphan designation in case there is already an authorised product on the market for the same orphan indication that is still protected by market exclusivity.

Paediatric Committee (PDCO)

Since the introduction of the Paediatric Regulation in 2007, developers should submit a ‘Paediatric Investigation Plan (PIP) for all products “not later than upon completion of the human pharmacokinetic studies”.
[4](#footnote5)

Only when there is sufficient justification that paediatric investigations are not warranted, such as when the product targets a condition that does not affect children, can the obligation to submit a PIP be waived. In case of compliance with an agreed PIP, a marketing authorisation holder is eligible for the so-called ‘paediatric extension’, a 6-month extension of the Supplementary Protection Certificate (SPC). In the case of designated orphan medicines, however, a different reward is offered in the form of an additional two years of orphan market exclusivity.

All PIPs are assessed by the Paediatric Committee (PDCO), including in the case of designated orphan medicines. The Paediatric Regulation and the Orphan Regulation intersect at the point where products are being developed for the treatment of rare diseases that occur in children. In such cases, both the COMP and the PDCO have roles to play in the regulatory assessment process.

To increase cooperation across regions, a discussion forum to regularly exchange information mainly via teleconferences (‘paediatric cluster’) was formed in 2007, including members of the US FDA and the Agency (PDCO). The cluster has since been joined by the Pharmaceuticals and Medical Devices Agency (PMDA) Japan, Health Canada, and the Australian Therapeutic Goods Administration (TGA) as an observer. In 2013 the Agency and its US counterpart launched so-called ‘common commentaries’ on paediatric development plans that have been submitted to both the Agency and FDA and that are therefore being reviewed by both agencies. While informal and non-binding, these commentaries and discussions between the two agencies have helped to align views and to avoid contradictory requirements on the paediatric development programme.

Committee for Advanced Therapies (CAT)

An increasing share of orphan medicines fall into the category of ‘advanced therapy medicinal products’ (ATMPs). In 2007, the new EU Regulation for ATMPs, Regulation (EC) No 1394/2007, was introduced which “lays down specific rules concerning the authorisation, supervision and pharmacovigilance of advanced therapy medicinal products” (Article 1).

Along with the introduction of the Regulation, the Committee for Advanced Therapies (CAT) was established, which is responsible for conducting the assessment of whether a product meets the criteria for designation as an ATMP.

Like the orphan designation, designation as an ATMP is optional. The ATMP Regulation offers a set of incentives to developers of ATMPs. These incentives are all linked to the Agency’s services and procedures.

Unlike the Orphan Regulation and the Paediatric Regulation, the ATMP Regulation does not provide any incentives in the form of extended market exclusivity rights. The incentives conferred by the ATMP classification are cumulative to those that come with the orphan designation.

Annex 6: Implementation of the various incentives

Incentives (Regulation)

Market exclusivity

This exclusivity means that a regulatory competent authority cannot authorise the same or a ‘similar’ medicine for the same orphan indication, nor can it take an application for authorisation into consideration whilst an exclusivity period is in effect on a first product, even when that product is not protected by a patent.
[5](#footnote6)

It can be extended by two more years if the application for a marketing authorisation includes the results of all studies conducted in compliance with an agreed Paediatric Investigation Plan (PIP).
[6](#footnote7)

Market exclusivity for orphan medicines is cumulative with patents/supplementary protection certificates and with existing regulatory frameworks for data exclusivity and market protection.
[7](#footnote8)

Market exclusivity period may be reduced to six years if:

·“at the end of the fifth year, it is established, in respect of the medicinal product concerned, that the criteria laid down in Article 3 are no longer met, inter alia, where it is shown on the basis of available evidence that the product is sufficiently profitable not to justify maintenance of market exclusivity. To that end, a Member State shall inform the Agency that the criterion on the basis of which market exclusivity was granted may not be met and th4e Agency shall then initiate the procedure laid down in Article 5.

Protocol assistance

While the market exclusivity reward can be seen as the major incentive for the development and marketing of orphan medicines, particularly for the eventual marketing authorisation holder, the EU Orphan Regulation also foresees in the provision of a specific form of scientific advice by the Agency, known as ‘protocol assistance’ for orphan medicine developers (Article 6).
[8](#footnote9)
 This implies that, in addition to the general scientific advice the Agency can provide on appropriate tests and studies in the development of a medicine, orphan medicine developers can seek advice in relation to the criteria for authorisation of orphan medicines.

Fee waivers

If sponsors obtain a marketing authorisation or make use of other services of the Agency, they normally have to pay certain fees (European Medicines Agency, 2017c). Various main fee categories can herein be distinguished, including:

·Centralised procedure, covering fees for the application, extension and variations to a marketing authorisation;

·Scientific advice;

·Scientific services.

The system contains various exemptions, such as fee reductions for small or medium-sized enterprises (SMEs), some fee reductions in case of multiple applications on usage patent grounds, as well as fee reductions for designated orphan medicines. The latter is funded by a special annual contribution to the Agency (Article 7 sub 2).

Table A.32: Fee reduction for designation orphan medicines

|  |  |  |
| --- | --- | --- |
| Procedure or service | Applicable to | Reduction |
| Protocol assistance, initial and follow-up requests | SME sponsors for all assistance | 100% |
|  | Non-SME sponsors for non-paediatric-related assistance | 75% |
|  | Non-SME sponsors for paediatric-related assistance | 100% |
| Pre-authorisation inspection | All sponsors | 100% |
| Initial marketing authorisation application | SME sponsors | 100% |
|  | Non-SME sponsors | 10% |
| Post-authorisation applications and annual fee, specified in Council Regulation (EC) No 297/95, in the first year from granting of a marketing authorisation | SME sponsors | 100% |
| Pharmacovigilance fees, specified in Regulation (EU) 658/2014 | All sponsors | n/a |

Source: Orphan study report (2019)

Aid for research

Besides the market exclusivity reward, the protocol assistance and the fee waiver, the EU Orphan Regulation introduced the incentive ‘aid for research’ (Article 9).
[9](#footnote10)
 This incentive makes it possible for the European Commission and/or Member States to provide additional funding for the research and development of designated products. The self-evident intent of this incentive is to further encourage investments in, in particular, the early stages of research into rare diseases. Such basic research is important to elucidate the mechanisms underpinning rare diseases, which in turn is a prerequisite for product development.

What these European and national programmes together demonstrate is that, overall, in the 18 years since the introduction of the EU Orphan Regulation, there has been a clear increase in research-related accompanying measures, and specifically in the:

·Level of public funding available for rare disease research, at the EU and national levels;

·Level of coordination of national and international research agendas in rare diseases;

·Extent of the data and knowledge infrastructure for rare diseases, from patient registries to biobanks.

EU research and innovation programmes

EU Framework Programmes

The EU’s support for rare disease research was initiated within the fourth EU RTD Framework Programme (FP4) and confirmed and expanded within the fifth Framework Programme (FP5), with the number of supported projects increasing from 23 within FP4 to 47 within FP5.

In the intervening period and following the implementation of the EU Orphan Regulation in 2000, the EU reconfirmed its commitment to rare disease research with a larger programme of work within each successive EU RTD Framework Programme.

Since 2000 for more than two decades, rare disease research has been a priority for the EU.
[10](#footnote11)
 More specifically, the sixth Framework Programme for research and technological development (2002-2006) (FP6) supported 59 projects with approximately €230 m. The seventh Framework Programme
[11](#footnote12)
 for research, technological development and demonstration activities (2007-2013) (FP7) supported more than 120 rare disease projects under the Health theme with approximately €620 m. Support was available for projects that shed light on the course and/or mechanisms of rare diseases, or test diagnostic, preventive or therapeutic approaches.
[12](#footnote13)

Horizon 2020
[13](#footnote14)
 has continued the EU’s commitment to funding rare disease research and upon its completion will likely have more than doubled the investment made under FP7. In its 2017 publication,
[14](#footnote15)
 the European Commission indicated that, in 164 collaborative research projects into rare diseases had been supported until that time by FP7 and H2020, with a total value of €874m out of which SMEs were supported with €180m. Horizon 2020 and FP7 combined have committed more than €1b to collaborative rare disease research over the last ten years.

ERA-Net research programmes on rare diseases

The ERA-Net research programmes on rare disease research (E-Rare)
[15](#footnote16)
,
[16](#footnote17)
 are a good example of the evolution of the Members States coordinated efforts in support to rare disease research in the 19 years following the implementation of the EU Orphan Regulation.

E-Rare was implemented first in 2006, in the closing stages of the sixth European RTD Framework Programme (FP6) with the aim of fostering an increased focus on rare disease research at the level of individual EU member states.
[17](#footnote18)
 The pooled national funds were matched by EC funds and were used to support various coordination activities (e.g. setting of a common research agenda) and to fund transnational research to complement the bigger multinational groups funded by the EU.

The initial partnership, E-Rare 1, consisted of eight countries who issued two transnational calls in 2007 and 2009. The Commission approved a follow-on project under FP7 (E-Rare 2), which ran from 2010-2014. E-Rare 2 had an expanded network, with the original eight EU member states increasing to 15 countries and with annual calls for proposals. In addition to an increase in the number of research projects supported, the network also redoubled its efforts to enhance coordination among member states by enabling information exchange and extension of the rare disease research funders’ network.

The network earlier success led to a further proposal within Horizon 2020 and the launch of E-Rare 3, again with a larger membership and an expanded agenda. E-Rare 3 is made up of 25 public bodies, ministries and research funding organisations from 17 countries.
[18](#footnote19)
 Since its inception, E-Rare has launched eight Joint Transnational Calls (JTCs) for projects, with a total investment value of €92m.

The E-Rare network has established good links with the international rare diseases research community and its programme of work follows the basic guidelines defined by the International Rare Disease Research Consortium (IRDiRC).

International Rare Disease Research Consortium

The European Commission has been actively driving international research collaboration in rare diseases. IRDiRC was established in 2011 by the European Commission (DG RTD) together with the US National Institutes of Health (NIH) and aims to strengthen rare disease research by coordinating rare disease research funding
[19](#footnote20)
 at the global level. IRDiRC is a model of international research policy collaboration that brings together 59 organisations funding rare diseases research, patient advocates and industry, across five continents.
[20](#footnote21)
The IRDiRC recognises that coordinating efforts to overcome common barriers in the development of orphan medicines is key to maximising the impact of collective global investments. IRDiRC’s Therapies Scientific Committee launched recently the Orphan Drug Development Guidebook
[21](#footnote22)
, which aims at facilitating medicines development for rare diseases by organizing available tools in USA, Europe and Japan into a standardized framework.

Capitalizing on the momentum of this progress, IRDiRC devised its goals for the decade 2017-2027, to:

·enable all people living with a rare disease to receive an accurate diagnosis, care, and available therapy within one year of coming to medical attention

·catalyse the approval of 1000 new therapies for rare diseases, the majority of which will focus on diseases without approved options.

RD-ACTION

The RD-ACTION
[22](#footnote23)
 (2015-2018) project was set up to meet diverse challenges of rare diseases at EU level: it must expand and consolidate the achievements of two previous Joint Actions on Rare Diseases supported by the European Commission: Orphanet and the European Union Committee of Experts on Rare Diseases
[23](#footnote24)
 (EUCERD) Joint Action.

European Reference Networks

A European initiative to support both patient care and research on rare diseases is the creation of European Reference Networks (ERNs).
[24](#footnote25)
 The ERNs primarily focus on the provision of advice, via an IT tool, on concrete patient's cases (for diagnosis and treatment) but also serve as information, research and knowledge centres with the aim of contributing to the most recent scientific findings.

Research is a key element of the ERNs, providing an integrated structure to facilitate collaboration and creating a knowledge hub to encourage translational research and the creation of cross-border registries. In March 2017, the first 24 ERNs were launched.

EU contributions to rare disease research

The EU has invested considerably in research for rare disease in other ways. This includes for instance support for basic research, such as what is supported through the EU framework programmes and support for the creation of an infrastructure to promote knowledge sharing. Estimates of the financial contributions so far have been summarised in Table A.12.

Table A.33: EC funding contributions to rare disease research

|  |  |
| --- | --- |
| Initiative | EC contribution to rare disease research |
| Seventh Framework Programme for Research and Innovation (FP7) | €624m (based on non-public data provided by DG RTD extracted from the Cordis database) |
| Horizon 2020 and ERA-NETs (E-Rare 1, 2 and 3) | Contribution of €180-185m by the EC (€5m to E-Rare 1 and E-Rare2, nearly €120 m for new therapies for rare diseases , €5m for integration and opening research infrastructures and €55m for the Rare Disease European Joint Programme Cofund)  In E-Rare 1 (2006-2010), and E-Rare 2 (2010-2014) overall €56.4m was invested. (Aymé S, 2013) In E-rare 3 (2015-2019), more than €90m was invested. (European Commission, 2017b) |
|  |  |
| RD-ACTION (‘joint action’ on rare diseases) | €8.3m. (Hedley et al., 2016). |
| European Reference Networks | The ERNs are supported from several EU funding programmes, including the Health Programme, the Connecting Europe Facility and Horizon 2020. |

Source: Orphan report (2019)

National research activities

At the level of the EU Member States, various ‘other incentives’ have been put in place to complement the EU Orphan Regulation and further support the development of orphan medicinal products.

A prominent place herein is taken by national rare disease plans. Such national rare disease plans are aimed at guiding and structuring relevant actions in the field of rare diseases within the framework of their health and social systems. They commonly include a commitment to research funding.

It is, however, not known to what extent commitments have been converted into actual spending on research for rare diseases and development of orphan medicines.
[25](#footnote26)
 

The research and coordination aspects of the national plans analysed revealed a reasonably consistent picture. A majority of member states have (or had) a national programme for rare disease research. In most cases, there are specific rare disease programmes. In a minority of cases, support is available through a broader medical research programme where rare disease research proposals will have to win grant funding in competition with

Annex 7: International context

Comparison of criteria for orphan designation in the EU, US and Japan

|  |  |  |  |
| --- | --- | --- | --- |
|  | EU | US | Japan |
| Orphan condition | < 5 in 10,000 in EEA; OR  without incentives it is unlikely that the marketing would generate sufficient return to justify the investment. | ≤ 6 in 10,000 in US; OR    an orphan subset of a non-rare disease; condition where the characteristics of the medicinal product limit its use in a particular subgroup; OR    there is no reasonable expectation that the sales of the drug will be sufficient to offset the costs of developing the drug for the US market and the costs of making the drug available in the US. | < 4 in 10,000 in Japan; |
| Medical need | No satisfactory methods of treatment (or prevention or diagnosis) for life-threatening or chronically debilitating condition exist; OR  if any such methods exist the medicinal product must be of significant benefit to those affected by the condition, i.e.:  a.conferring a clinically relevant advantage; OR  b.a major contribution to patient care. | Not a criterion unless the same drug has previously been approved for the same use or indication, clinical superiority needs to be proven as follows:  Shown to provide a significant therapeutic advantage over an approved drug in one or more of the following ways:  (i) Greater effectiveness;  (ii) Greater safety in a substantial portion of the target populations;  (iii) In unusual cases, where neither greater safety nor greater effectiveness has been shown, a demonstration that the drug otherwise makes a major contribution to patient care. | No appropriate alternative drug/medical device treatment for serious disease including difficult to treat the disease; OR  higher efficacy or safety is expected compared with existing products. |
| Medical plausibility/ scientific rationale | Usually in vivo data. | Clinical study data or case reports if available; in vivo animal data; in vitro data if no clinical or in vivo data available | Non-clinical and clinical data in the latter half of the phase I study or in the first half of the phase II study. |

Table A.34: Key differences in the procedures for orphan designation in the EU, US and Japan

|  |  |  |  |
| --- | --- | --- | --- |
| Items | EU | US | Japan |
| Application to | Committee for Orphan Medicinal Products (COMP). | Office of Orphan Products Development (OOPD). | Ministry of Health, Labour and Welfare (MHLW) |
| Timetable | Timetable for submission and assessment published by the Agency. | Any time; no defined timetable; | Any time; no defined timetable; |
| Key aspects of the application | Prevalence;  Medical need;  Medical plausibility. | Prevalence.  Scientific rationale. | Prevalence;  Medical need;  Possibility of development. |
| Sponsor established in territory | Proof of establishment in EU. | Not required. | Not required. |
| Translations | Translations of product name and proposed orphan indication into all official languages of the EU plus Icelandic and Norwegian. | Not required. | Application in Japanese. |

In the US, a medicinal product is eligible for orphan designation when it is intended to treat a disease that affects less than 200 000 persons (which is equivalent to 6 in 10,000) in the US or affects more than 200 000 persons and for which there is no reasonable expectation that the cost of developing and making a medicinal product for such disease or condition will be recovered from sales.
[26](#footnote27)
 In addition, in the US an orphan designation may be given to an orphan subset of a non-rare disease condition where the characteristics of the medicinal product limit its use in a particular subgroup.
[27](#footnote28)
 

Table A.35: Comparison of incentives offered by the EU, US and Japanese regulatory frameworks to support OMP development

|  |  |  |  |  |
| --- | --- | --- | --- | --- |
|  | EU | USA | Japan | Australia |
| Year of introduction | 2000 | 1983 | 1985 | 1997 |
| Financial incentives | Fee reductions / waivers | Tax credits, fee waivers | Subsidies for research, fee waivers, tax credits and reductions | Fee waivers |
| Market exclusivity | 10 (+2) years | 7 years | 10 years | No |
| Scientific advice (protocol assistance) | Yes (free) | Yes (free) | Yes (reduced fees) | Yes |
| Aid for research | EC Framework Programmes | FDA Orphan Products Grant Program; NIH grants | Grants programmes | No |
| Regulatory tools to accelerate approval | Priority medicines (PRIME); centralised procedure; conditional approval; approval under exceptional circumstances; accelerated assessment | Fast-track approval;  Breakthrough designation; Accelerated approval pathway;  Priority review designation | Priority review; Fast-track approval | Possibility to rapid review |

Figure A.36: US, EU & Japan Orphan Designations per Year (2003-2017)

![](./../../../resource.html?uri=IMMC:SWD%282020%29163.ENG.xhtml.SWD_282020_29163_ENG_xhtml_03003.jpg)

Source: EvaluatePharma 2018.

Figure A.37: Common orphan designations in the US, EU and Japan (n=4116)

|  |
| --- |
| 2  57  2645  554  134  171  553 |

Modified from Murakami M and Narukawa M, Drug Discovery Today, (2016), 21(4):544-549

:   [(1)](#footnoteref2)
     
       In the analysis it was assumed that, in the EU, the large majority (97%) of all health care costs that are directly due to treatment with orphan medicines (excluding associated costs of treatment) is financed from public sources.
:   [(2)](#footnoteref3)
     A QALY is 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 1 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. (
    <https://www.nice.org.uk/glossary?letter=q>
    ). For more information about QALY, see for instance: MacKillop & Sheard, 2018, Quantifying life: Understanding the history of Quality-Adjusted Life-Years (QALYs), Social Science and Medicine, volume 211.
:   [(3)](#footnoteref4)
     The incremental cost-effectiveness ratio is the difference in the change in mean costs in the population of interest divided by the difference in the change in mean outcomes in the population of interest. (
    <https://www.nice.org.uk/Glossary?letter=I>
    ) It is therefore a measure for the ‘value for money’ a medicine offers in comparison to other treatments.
:   [(4)](#footnoteref5)
     Section 5.2.3 of Part 1 of Annex 1 of Directive 2001/83/EC).
:   [(5)](#footnoteref6)
     
       Article 8 of Regulation 141/2000 states: ‘Where a marketing authorisation in respect of an orphan medicinal product is granted (…) or where all the Member States have granted marketing authorisations in accordance with the procedures for mutual recognition (…) the Community and the Member States shall not, for a period of 10 years, accept another application for a marketing authorisation, or grant a marketing authorisation or accept an application to extend an existing marketing authorisation, for the same therapeutic indication, in respect of a similar medicinal product.’ A marketing authorisation for a product similar to one under market exclusivity can only be granted if one of the derogation options under Article 8(3) of Regulation (EC) No 141/2000 applies.
:   [(6)](#footnoteref7)
     
       See article 37 of Regulation No 1901/2006 on the Regulation on medicinal products for paediatric use.
:   [(7)](#footnoteref8)
     
       Data exclusivity is a form of protection conferred on the dossier of trial results that the marketing authorisation holder submitted to obtain approval. The exclusivity means that for a period of 8 years, a company that seeks to produce a generic version of the product cannot reference the data. The scope of protection thus differs from the market exclusivity in that the protection is on the data rather than on the product. After the 8-year data exclusivity, the marketing authorisation holder still is entitled to a 2-year period of market protection during which it has the sole right to market the product. One additional year of market protection (represented by ‘+1’) can be granted in the case of:During the period in between the expiry of data exclusivity and that of market protection, third parties can file for a marketing authorisation by referring to the data of the reference product but cannot yet bring the product on the market. This differs from the orphan market exclusivity, during which the Agency will not yet consider any such applications. Together, the scope of protection from data exclusivity and market protection also differs from that of market exclusivity in that all subsequent variations of the product or any additional indications cannot trigger a new period of protection, as these would come under the same Global Marketing Authorisation.
:   [(8)](#footnoteref9)
     
       Article 6 of Regulation 141/2000 states: “The sponsor of an orphan medicine may, prior to the submission of an application for marketing authorisation, request advice from the Agency on the conduct of the various tests and trials necessary to demonstrate the quality, safety and efficacy of the medicinal product (…)”.
:   [(9)](#footnoteref10)
     
       Article 9 of Regulation 141/2000 states: ‘Medicinal products designated as orphan medicines under the provisions of this Regulation shall be eligible for incentives made available by the Community and by the Member States to support research into, and the development and availability of, orphan medicines and in particular aid for research for small- and medium-sized undertakings provided for in framework programmes for research and technological development.’
:   [(10)](#footnoteref11)
     
    <https://ec.europa.eu/info/research-and-innovation/strategy/support-policy-making/scientific-support-eu-policies/p4p_en>
:   [(11)](#footnoteref12)
     
       
    <https://wayback.archive-it.org/12090/20191127213419/https:/ec.europa.eu/research/fp7/index_en.cfm>
:   [(12)](#footnoteref13)
     
       European Commission (2016), Working document: Ex-Post Evaluation of the Seventh Framework Programme, January 2016.
:   [(13)](#footnoteref14)
     
       
    <http://ec.europa.eu/research/participants/data/ref/h2020/wp/2018-2020/main/h2020-wp1820-health_en.pdf>
:   [(14)](#footnoteref15)
     
       https://op.europa.eu/en/publication-detail/-/publication/c2ba4fd4-ae31-11e7-837e-01aa75ed71a1/language-en/format-PDF/source-69927191
:   [(15)](#footnoteref16)
     
       http://www.erare.eu
:   [(16)](#footnoteref17)
     
       
    [Julkowska D](https://www.ncbi.nlm.nih.gov/pubmed/?term=Julkowska%20D%5BAuthor%5D&cauthor=true&cauthor_uid=28440796)
     et al. The importance of international collaboration for rare diseases research: a European perspective. 
    [Gene Ther.](https://www.ncbi.nlm.nih.gov/pubmed/28440796)
     2017:24(9):562-57
:   [(17)](#footnoteref18)
     
       The ERA-NET instrument is a generic instrument that provides EC financial support to Member State level ‘public-public’ partnerships (typically amongst research funders) in the preparation and implementation of joint research actions of a transnational nature.
:   [(18)](#footnoteref19)
     
       Austria, Belgium, France, Germany, Greece, Hungary, Italy, Latvia, Poland, Portugal, Romania, Spain, the Netherlands, Switzerland, Israel, Turkey, Canada and Japan.
:   [(19)](#footnoteref20)
     
       
    <http://www.irdirc.org/>
:   [(20)](#footnoteref21)
     26 EU Member States (Austria, Belgium, Bulgaria, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Poland, Portugal, Romania, Slovakia, Slovenia, Sweden, Spain, The Netherlands); 7 associated (Armenia, Georgia, Israel, Norway, Serbia, Switzerland, Turkey), UK and Canada.
:   [(21)](#footnoteref22)
     https://irdirc.org/activities/task-forces/orphan-drug-development-guidebook-task-force/
:   [(22)](#footnoteref23)
     
       
    <http://www.rd-action.eu/>
:   [(23)](#footnoteref24)
     
       The mandate of the EUCERD expired in 2014. The EUCERD has been succeeded by the European Commission Expert Group on Rare Diseases.
:   [(24)](#footnoteref25)
     
       The ERNs were established in 2017: 
    <https://ec.europa.eu/health/ern_en>
:   [(25)](#footnoteref26)

    Publications on existing programmes and their impact do not always make a distinction between (fundamental) research in the field of rare disease and the development of orphan medicines.
:   [(26)](#footnoteref27)
     
       Orphan Drugs Act of 1983. Public law 97/414, 97th Congress, Jan 4, 1983.
:   [(27)](#footnoteref28)
       O’Connor DJ; Expert Opinion on Orphan Drugs (2013), 1(4):255-259.

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