The Hard Truth About Rare Disease and Gene Therapy Drug Development

Ken Getz, MBA, Executive Director and Research Professor, Tufts Center for the Study of Drug Development, Tufts University School of Medicine

Since the Orphan Drug Act went into effect in 1983, more than 600 drugs have been approved for rare diseases, according to Pharmaceutical Research and Manufacturers of America. And an estimated 35% of all drugs and biologics in the global R&D pipeline now target rare diseases.

Initially the development of rare disease drugs and biologics was the domain of emerging biotechnology organizations and small and specialty pharma companies. But numerous incentives and unique market characteristics enticed major pharma to invest heavily in this sector. Tax credits, an accelerated regulatory approval pathway, higher relative overall success rates (i.e., investigational new drug filing to regulatory approval), exemptions from user fees, and periods of market exclusivity were major incentives.

Sponsor companies also reasoned that the more than 7,000 rare and ultra-rare diseases identified—most considered serious and life-threatening illnesses with no known effective treatments—would offer market opportunities with limited competition. As such, rare disease treatments could command higher prices in select markets and lead to significant profits.

By the end of 2024, through acquisition and organic growth, most of the largest pharmaceutical companies had R&D pipelines with a predominance of rare disease therapies. According to Citeline, two-thirds of all drugs and biologics in the R&D portfolios of Amgen, Bristol Myers Squibb, Merck KGaA, Novartis, and Pfizer, for example, target rare diseases; and the proportion is between 50% and 65% in the R&D pipelines of AbbVie, AstraZeneca, Biogen, GSK, Roche, Sanofi, and Takeda.

Despite the many factors that compelled companies to invest in and build rare disease pipelines during the past 30 years, steadily declining average returns on R&D investments and soft global economic conditions are now causing many R&D sponsors to rethink their strategies.

Rare disease realities in clinical trials

Developing drugs for rare diseases has proven to be more expensive and time-consuming than that of large population chronic diseases. Sponsor companies and their collaborators face great difficulty finding and engaging experienced investigative sites and rare disease patients in their studies. A 2022 study conducted by Tufts Center for the Study of Drug Development (Tufts CSDD), for example, found that Phase II and III rare disease clinical trials involved 30% more planned visits, had 23% longer start-up timelines, 19% longer treatment durations, and significantly lower completion rates (see Table 1).

Late-stage clinical trials are particularly difficult in rare diseases. There is a limited pool of qualified patients and there are ethical and enrollment challenges associated with having a comparison control group. These clinical trials will take many years to complete and may be underpowered, contributing to disappointing investigational treatment effects.

Rare disease commercialization realities

The profitability and return on R&D investment (ROI) associated with traditional drug development—most notably blockbuster-era treatments—targeting large-market chronic diseases simply does not translate into drug development for rare disease communities and narrowly defined population subgroups.

Many rare disease treatments are genetic therapies that are inherently restricted to a single indication with very limited potential for label expansion and value creation through product lifecycle extensions.

Gene therapies, by their nature, often have very high fixed manufacturing costs that contribute to high therapeutic prices per patient. Moreover, the high price for curative gene therapy treatments is expected to be paid up-front while the benefits accrue over a patient’s lifetime, presenting challenges to health insurers and employee health benefit plans. Sponsor companies also face increasing government and societal pressures to control the prices of drugs and biologics targeting rare diseases, making it difficult to recoup R&D and manufacturing investments.

The average ROI for marketed drugs and biologics targeting rare diseases and smaller, more narrowly defined patient communities has fallen dramatically. According to published reports from Deloitte, looking at rolling three-year averages for approved and commercialized drugs and biologics between 2013 and 2024, the average estimated ROI for drugs or biologics launched since 2022 is 2.5%, one-third of the rate of return seen a decade ago. As one colleague facetiously noted at a conference recently, sponsors would get a higher return at this time parking their drug development investment in a high-yield savings account.

Rethinking R&D strategies

Rising development costs, longer clinical durations, and low relative and expected returns on R&D investment have greatly diminished the attractiveness of rare disease markets.

Sponsor companies remain passionate and committed to finding treatments and cures for unmet medical needs among rare disease communities. But awareness of development and commercialization realities has peaked. And success in the blockbuster GLP-1 space has sparked renewed interest among pharmaceutical and biotechnology organizations in pursuing large population, chronic disease conditions.

Some sponsor companies are looking in earnest to lower development costs and drive faster and more efficient development activity to support their rare disease clinical development assets. Use of artificial intelligence/machine learning-enabled tools and analytics, novel protocol designs that share clinical costs and infrastructure, risk-based approaches, and remote and virtual technologies supporting clinical trial execution are among the top solutions being piloted and used.

Global economic conditions do not bode well, however, for investment in rare disease drug development. Many major pharmaceutical companies are scaling back, or have announced plans to reduce, their investments in rare disease development activity. Some of the largest pharma manufacturers are downsizing and restructuring in response to rising operating costs, late-stage clinical program terminations, and patent expirations that will dramatically reduce these companies’ short-term market performance.

In the current economic environment, it has also been very difficult for emerging and small biotech and pharma companies to secure venture capital and private equity investment. Federal funding cuts are expected to severely limit the availability of small business government grants that historically support early stage, proof-of-concept therapeutic development.

In the absence of transformational practices and solutions, and facing tight and uncertain global economic conditions, drug development investment in rare disease and gene therapies is unsustainable. Yet it is vital to have a path forward for these much-needed therapies, offering hope and meaningful change and improvement in patients’ lives and health outcomes.

Ken Getz, MBA, Executive Director and Research Professor, Tufts Center for the Study of Drug Development, Tufts University School of Medicine