iStock

An old steroid treatment, long available outside the United States, received approval this week for a rare disease that afflicts about 15,000 Americans. Though not previously approved in the United States, the drug, deflazacort, has for years been available to patients suffering from the devastating and fatal disease Duchenne muscular dystrophy; families can import it from abroad for about $1,200 per year on average.

The new list price for the drug? $89,000 a year.

After rebates and discounts, the net price will be $54,000 a year, said Marathon Pharmaceuticals Chief Financial Officer Babar Ghias in an interview.

The company sought approval for deflazacort as an “orphan drug,” a special approval pathway intended to encourage the development of drugs for very rare diseases. With orphan designation, the company gets seven years of exclusive rights to sell the drug in the U.S., even though it has long been available as a generic in other countries.

The company also scored a valuable “priority review” voucher, essentially a ticket that it can use to get a future drug reviewed by regulators faster — or that it can sell to another company for hundreds of millions of dollars.

In theory, these vouchers exist for a good reason: Regulators want to encourage companies to invest in developing drugs for rare diseases that afflict children. But when old drugs already being used for a disease go through the approval process to earn a voucher — and a high price — it has raised questions about whether the incentives are being misapplied.

“It seems like it’s yet another example of gaming the system,” said Aaron Kesselheim, an associate professor of medicine at Harvard Medical School. “How many examples of this do we have to see before we can start to rethink the priority review voucher as a means of incentivizing innovation? This also seems to be another example of gaming the Orphan Drug Act, which was intended to try and encourage research into new therapeutic entities for people who have rare diseases — and it doesn’t seem like this is that.”

For patients, the cost of the drug — which goes by the brand name Emflaza, would be “zero to low out-of-pocket expense,” because of insurance and financial assistance programs that the company will offer, Ghias said. But to critics of old drugs that receive high prices, those measures are a public relations move that will simply insulate the company from its harshest potential critics — families with dying children who above all want access to the drug.

“Instead of making the price at a level that is reasonable for patients, they make it a very high price and offer this pathway that patients may not qualify for, they may not know about, there may be limitations on it. So it's a marketing move and not really a public health solution,” Kesselheim said.

In recent years, companies that have gotten old or existing drugs approved to treat rare diseases have reaped big financial rewards. For example, tetrabenazine, a drug that was available from abroad and used for years to treat the uncontrollable tremors of Huntington's disease, was approved as an orphan drug in 2008. In 1998, it cost $42.28 for a bottle of tetrabenazine pills from a European pharmacy, according to Joseph Jankovic, a neurologist at Baylor College of Medicine. After receiving approval as an orphan drug, that bottle of pills — now known by the brand name Xenazine — carried a list price of more than $6,000 in the U.S. in 2008. The price was repeatedly ratcheted up to more than $21,243 a bottle, according to Truven Health Analytics data. Xenazine accounted for $325 million in U.S. sales in 2015, the year it went generic, according to data from Evaluate, a market intelligence firm.

Gaining federal approval has its advantages, many physicians argue. It typically means the drug will be covered by insurance, and the evidence that is used to support the approval may persuade more physicians to use the drugs.

Marathon said that, currently, only about 7 to 9 percent of those afflicted with Duchenne have access to deflazacort.

Ghias said that the company carefully thought about pricing and came up with a price far lower than other rare disease drugs — in the bottom 10th percentile of rare disease drug prices.

The patient advocacy group Parent Project Muscular Dystrophy said in a statement that the organization was excited about the approval “and hope that this means easier access for more families. There are many questions still to be answered, including pricing, and we look forward to talking to Marathon with the community to begin to answer those questions.”

Duchenne is a devastating genetic disease that robs boys of their ability to walk in their adolescence and teens and kills them as young adults. Deflazacort has been shown to help patients retain muscle strength. According to the Food and Drug Administration, patients taking the drug appeared to retain the ability to walk longer than those taking a placebo, although the agency noted that the comparison has statistical shortcomings.

Craig McDonald, a professor at the University of California at Davis, said that about 60 of his patients with Duchenne muscular dystrophy are already taking deflazacort — and he has used it in his clinic for a decade. The majority of his patients get access to the drug for free through an expanded access program funded by Marathon, he said, noting that many of the families he sees — with parents who are migrant workers or covered by California's Medicaid program — would never be able to afford $1,200 out of pocket to import the drug.

“Now the hope is at least all children will have access to an actual FDA approved therapy for Duchenne,” McDonald said. There is another, similar steroid called prednisone already available in the U.S., but McDonald said the milder side effect profile of deflazacort is appealing. He added that there haven't been adequate head-to-head comparisons but there is some data to suggest that the effects of deflazacort are superior.

Ghias said the company made significant investments to bring the drug through the approval process, but would not disclose the amount of the investment. In its news release, the company said it conducted 17 preclinical and clinical studies. But the large, 196-person trial that helped support the drug's approval was completed in 1995; therefore, Marathon's contribution — according to the study describing the results in the journal Neurology last year — was providing funding for “editorial assistance.”

If recent history is a guide, the priority review voucher that the company received for bringing the drug through the FDA process may be, by itself, a rich financial reward. In August 2015, United Therapeutics sold a priority review voucher to AbbVie for $350 million.