A) Fast-track approval
The FDA can grant fast-track approval to those drugs that it deems will provide a new therapeutic effect for a particular patient population. For example, clozapine was given a "1A" approval rating because it was hailed as the first break-through antipsychotic drug in 30 years. Similar fast-track approvals were given informally to LAAM and Nicorette. Those drugs given a "1A" approval level are accorded a shorter FDA review time, which lowers the time-to-market barrier and allows a company to start marketing its drug faster than drugs with lower ratings.
B) Orphan Drug Status
All of the drugs in these case studies were granted some form of market exclusivity post-FDA approval, either via orphan drug status or other exclusivity incentives. For example, LAAM was granted orphan drug status primarily because the size of the potential product market, i.e., based on the expectation that users of LAAM would be drawn from the patient population then taking methadone, fell below a U.S. prevalence of 200,000 patients. Orphan drug status can provide 7 years of post-approval market exclusivity as well as tax credits and federal grants for clinical research for the treatment of rare conditions. Orphan drug status serves to lower the investment barrier, while raising the expected returns, thus providing a more favorable NPV than a drug without orphan status.
C) Market exclusivity other than Orphan Drug Status
Naltrexone (as ReVia), clozapine, and Nicorette were given varying lengths of post-approval market exclusivity. Although not as comprehensive as orphan drug status, marketing exclusivity allows a pharmaceutical company to sell its drug for a certain length of time free of competition from generic versions of the drug. This type of marketing exclusivity is often granted to encourage pharmaceutical companies to develop an indication for a drug, e.g., naltrexone, whose patent has expired or to encourage a company to develop an already approved drug for a new indication. With market exclusivity, the expected returns are higher, thus improving the NPV, making entry into the market more appealing.
Pharmacotherapies that are unable to qualify for orphan drug status (e.g., Nicorette) may also apply for market exclusivity under the Waxman/Hatch regulations in the Drug Price Competition and Patent Term Restoration Act of 1984. A new product must meet the following criteria in order to qualify for exclusivity:
- FDA must not have approved an identical drug product with same conditions of use prior to submission of the product's NDA;
- NDA or supplemental new drug application (SNDA) must contain reports on new clinical investigations of the medication, not studies relied on for the approval of another drug product or for a previous NDA;
- Application must be supported by reports on clinical investigations other than bioavailability studies;
- These studies must be essential to approval of the supplement and must be conducted or sponsored by person submitting the supplement (Wright 1997; Tan Sheet, Apr. 15 and Nov. 11, 1996).
D) Less stringent phase IV clinical trial requirements In the case of ReVia, the FDA modified regulatory requirements to encourage DuPont to submit a SNDA for alcoholism. The FDA linked phase IV clinical trials requirements to the annual sales of ReVia. No phase IV trials were required if sales of ReVia did not meet certain thresholds. If ReVia did well on the market, DuPont would have to conduct phase IV trials based on the level of sales. By allowing for flexible phase IV studies, the federal government lowered post-marketing costs, improved NPV projections, and made investment in the alcoholism indication more promising.