When Alnylam Pharmaceuticals canceled its Phase 3 clinical trial for the rare eye disease Stargardt disease, the reason wasn't due to safety concerns or efficacy doubts. Instead, the company cited the Inflation Reduction Act's (IRA) price negotiation rules as the determining factor.
The drug, Amvuttra, was already approved for patients with polyneuropathy, so adding a second rare disease indication would have triggered price negotiation exposure, threatening the company's pricing flexibility and potentially its return on investment.
This scenario is becoming increasingly common across the biotech landscape, according to Mariia Salova, MD, Senior Research Scientist at Avalere Health and author of the advisory firm’s recently published rare disease landscape report.
“That's one of the obstacles for companies developing a drug and for investors,” Salova said in an exclusive interview with Cure. "Rare Disease always is small, and it might not give those return on investments at enough level for investors to be interested in, so they opt out.”
For the 30 million Americans affected by one of more than 10,000 known rare conditions, this regulatory technicality creates a troubling paradox. The very policy designed to reduce drug costs may be inadvertently limiting treatment options by discouraging companies from developing multiple therapies for different rare diseases.
The IRA includes an orphan drug exclusion that protects rare disease treatments from Medicare price negotiations, but only if they carry a single indication. This forces companies to make a strategic decision early in development that could significantly impact long-term value.
A 2022 PhRMA survey found that 95 percent of responding member companies planned to develop fewer uses for new medicines specifically to maintain orphan status protection. Salova notes this is happening across both large and small biotech companies.
The distinction comes down to approved indications rather than research direction, Salova said. If a drug fails in clinical trials for one rare disease and pivots to another, it still maintains exemption, as long as it ultimately receives only a single approved indication.
Working with the FDA
Despite these challenges, Salova sees opportunities for rare disease startups willing to engage strategically with key stakeholders from day one.
"FDA is more than ever open to working with biotechs, especially when it comes to rare and ultra-rare diseases,” Salova said. "The FDA is acutely aware of difficulties surrounding rare diseases and clinical program development."
The FDA's newly established Rare Disease Innovation Hub aims to address some of the fundamental obstacles in this space. The Hub, launched in 2024, is focusing on innovative clinical trial designs for small populations, enhanced cross-center coordination and deeper patient engagement – all factors Salova identified as crucial for successful rare disease drug development.
The Hub, created to improve coordination between the Center for Biologics Evaluation and Research (CBER) and Center for Drug Evaluation and Research (CDER), is rolling out several initiatives this year to facilitate rare disease drug development.
These include workshops specifically addressing clinical trial design for small, diminishing patient populations and a new cross-center forum aimed at promoting dialogue on complex rare disease issues to streamline regulatory approaches.
“The FDA approved a significant number of rare disease therapies with orphan drug designation for patients with few to no treatment options,” said Patrizia Cavazzoni, MD Director, CDER, in a January report. (Since the report’s publication, Cavazzoni has left the FDA to join Pfizer as the company’s chief medical officer). “Therapies with orphan drug designations accounted for over 50 percent of our novel drug approvals, highlighting our steadfast commitment to address the huge unmet medical need in rare diseases.”
Growing Market for Rare Disease Treatments
While rare disease treatments have historically been challenging to develop, the economic incentives are substantial and growing. According to a recent Grand View Research report, the global market for rare disease treatments was estimated at $195 billion in 2024 and is projected to expand at a compound annual growth rate of 12 percent through the end of the decade. This growth is fueled by the large number of drugs already in development, increased support by regulatory agencies and new innovations in cell and gene therapies.
Adding the Patient Voice.to Rare Disease Drug Discovery
Another strategy for improving the likelihood of success in rare disease drug development is working with a variety of stakeholders to determine critical goals, from clinical trial design, endpoints, pricing, regulatory pathways and defining what will lead to a meaningful difference in patients’ lives, Salova said.
"Patient voice and caregiver voice are very important from early on all the way through approval and access," she said. "Incorporating that aspect is crucial to making sure that commercialization is successful at the end."
Identifying meaningful endpoints in clinical trials can be a particular challenge in rare diseases where traditional outcomes may not apply. But even that may not impress payers, Salova said, so having conversations with these groups can provide helpful feedback.
"Sometimes it is very difficult for companies, especially startup companies, to determine what the design of a clinical program should be," Salova said. “You need to make sure that the literature is there, the scientific support is there, regulatory is there, and also payers are also on board.”
Emerging Technologies and the AI-Impact to Reshape Rare Disease Therapies
Emerging technologies may also reshape rare disease drug development pathways, Salova said. While many rare disease drugs have utilized advancements in cell and gene therapy to target defective genetic conditions, these modalities are much more complex, expensive and time-consuming to test and manufacture.
AI is allowing researchers to instead search for small molecule approaches that could potentially help patients with rare diseases.
"There's a high potential for using AI and machine learning to identifying targets and leveraging the wealth of data," Salova said. “And AI can be used in many other different ways, from consent to designing trials to reading data – I think these are very interesting times.”