American Journal of Law & Medicine

Preserving an Incentive for Global Health R&D: The Priority Review Voucher Secondary Market

In December 2014, the United States government expanded the Priority Review Voucher ("PRV" or "voucher") program to include Ebola and other related Filoviruses. By doing so, lawmakers provided a potentially powerful incentive for drug companies to invest time and money in the development of novel medicines for terrifying diseases. This expansion is one of several additions made to the PRV programs since 2012. Many companies rely on voucher resale to recoup research and development ("R&D") costs; however, it is unclear whether the PRV program could be overextended, thereby diluting the value of the incentives. In this paper, I use historical approval data from the Food and Drug Administration ("FDA ") and United States drug revenue data to better understand the secondary market value of a PR V. The data suggests that that purchase prices of a PRV could continue to climb; despite this, the market size for these vouchers is limited. The implications of these findings are discussed further.

I.   INTRODUCTION
II.  THE PRV PROGRAM HAS RAPIDLY EXPANDED SINCE ITS INITIAL
     IMPLEMENTATION
     A. INDUSTRY STAKEHOLDER RESPONSE TO THE PRV PROGRAM HAS BEEN
        UNCERTAIN AND VARIED
     B. UNCERTAINTY AROUND THE PRV VALUE STILL EXISTS
III. UNDERSTANDING THE SECONDARY MARKET FOR A PRV WOULD
     HELP RESOLVE SOME UNCERTAINTY AROUND THE VOUCHER
     PROGRAM
     A. THE VALUE OF THE VOUCHER HINGES ON ITS USE BY THE
        PHARMACEUTICAL SECTOR
     B. THE SECONDARY MARKET SALES PRICE OF A PRV COULD INCREASE EVEN
        FURTHER
     C. THE SECONDARY MARKET FOR THE PRV IS LIMITED AND COULD EASILY BE
        DILUTED BY AN INCREASE IN THE NUMBER OF PRVS AWARDED ANNUALLY
IV. THE "LEAP-FROG" SCENARIOS WOULD LIKELY HAVE MINIMUM
    IMPACT ON THE JUSTIFIABLE PURCHASE PRICE OF THE PRV
V. EXPANSION OF THE PRIORITY REVIEW VOUCHER COULD
   UNDERMINE ITS HISTORICAL VALUE
     A. RELEVANCE OF THE FINDINGS REGARDING THE PRV SECONDARY MARKET
     B. STUDY LIMITATIONS
VI. CONCLUSIONS

I. INTRODUCTION

In March 2014, the largest Ebola outbreak in recorded history emerged in Western Africa. (1) Within eight months, the epidemic quickly spread within Guinea, Liberia, and Sierra Leone, reaching 20,171 recorded cases and 7,889 recorded deaths. (2) Although the outbreak has since plateaued, at the time of this writing, the latest figures showed 28,637 cases and 11,315 deaths. (3)

The outbreak drew attention from the American media and from political leadership when the first case of Ebola being contracted on United States soil was recorded in Texas on October 10, 2014. (4) Hearings in both the Senate and House of Representatives investigated methods for detection, prevention, control, and treatment of the Ebola virus. (5) From an R&D perspective, the United States--and the global research community--was unprepared to respond to this outbreak. Despite Ebola and related viral hemorrhagic fevers being listed as Tier 1 pathogens on the Centers for Disease Control's ("CDC") list of select agents, (6) there were no approved point-of-care diagnostics, vaccines, or therapeutics available for the detection, prevention, or treatment of Ebola. (7) The first United States patients were treated via serum transfusion from Ebola survivors, (8) a medical procedure not easily scalable for mass treatment. (9) Notably, at the onset of the Ebola outbreak, no active clinical studies for Ebola vaccines or therapeutics went beyond the early Phase 1 clinical studies with healthy volunteers. (10) All in all, eight months passed between the first outbreak and the first clinical study initiated in Western Africa. (11)

To help address the lack of private sector investment in novel Ebola vaccines and therapeutics, legislators and government officials explored strategies to support and incentivize clinical research and development for these much needed medicines. One such legislative proposal was the expansion of the PRV program to include Filoviruses such as Ebola. (12) This idea was quickly accepted, as the Senate passed the legislation on December 2, and the House of Representatives passed the legislation on December 3. (13) The bill was signed into law by President Barack Obama by December 16, 2014. (14)

The PRV program is a relatively new and controversial government program designed to incentivize R&D for areas of social need. Recent expansion of the PRV program and proposals to increase the scope of its effect has called for a deeper analysis than currently available. (15) It is important that we understand the consequences of expanding the program as expansion may impact its relative value and the availability of R&D for neglected tropical diseases.

This Article examines the PRV as a viable incentive for promoting R&D in areas of social need, such as Ebola. Parts II and III look at the history of the PRV program, focusing on program expansion and stakeholder response, respectively. Part IV takes a closer look at the theoretical value and secondary market for a PRV, describing where innovator companies would most benefit from a voucher. Finally, Part V discusses implications of proposed expansions to the voucher program and explores approaches that could keep the PRV as a viable incentive in the years to come.

II. THE PRV PROGRAM HAS RAPIDLY EXPANDED SINCE ITS INITIAL IMPLEMENTATION

Initially proposed as an experimental policy approach by Duke University academics and economists in 2006, the PRV program is a regulatory incentive program administered by the FDA to promote drug development for certain unmet medical needs. (16) PRVs are awarded to sponsors that successfully earn FDA approval for a novel drug or vaccine targeting an identified tropical disease (17) or a "rare pediatric disease" that meets pre-specified criteria. (18) The list of tropical diseases can be expanded to include "[a]ny other infectious disease for which there is no significant market in developed nations and that disproportionately affects poor and marginalized populations...." (19) In addition, the drug that is the subject of the application must contain no active ingredient (including any ester or salt of the active ingredient) that has been approved by the FDA, and it must qualify for a priority review on its own merits, meaning it can offer major advances in treatment or provide a treatment where no adequate therapy exists. (20)

The PRV program was passed into law in 2007 under the Food and Drug Administration Amendments Act ("FDAAA"), specifically rewarding vouchers for drugs or vaccines developed targeting any of the sixteen listed tropical diseases. (21) Since then, the voucher program has undergone two legislative expansions and one regulatory expansion. In 2012, "rare pediatric diseases" ("RPDs")--defined by the FDA as any drug affecting fewer than 200,000 people in the United States where a majority of those patients are under the age eighteen--was added to the PRV program through passage of the Food and Drug Administration Safety and Innovation Act. (22) This expansion had a sunset provision, which currently extends the inclusion of RPDs until 2016. (23) In response to the 2014 Ebola outbreak, President Obama signed the Adding Ebola to the FDA Priority Review Voucher Program Act, adding Filoviruses (24) to the list of tropical diseases eligible to receive a voucher. (25) Most recently, the FDA issued a Federal Register notice expanding the program to include Neurocysticercosis and Chagas disease, widely considered to be overlooked and missing from the initial list of sixteen tropical diseases, under authority in the Food, Drug & Cosmetic Act. (26) As of November 1, 2015, over nineteen diseases and disease classes have been specified, not including the RPD broad disease classification. (27) A full account of the program's expansion can be found in Table 1.

Once a company receives a PRV, it may redeem the voucher to designate either a New Drug Application ("NDA") or Biologic License Application ("BLA")--regardless of indication--as priority review. (28) Under the Prescription Drug User Fee Act of 1992 ("PDUFA"), the FDA created a two-tiered system for review of NDAs and BLAs: the Standard Review and Priority Review. (29) Assigning a Priority Review designation means the FDA aims to review and take action on an application within six months (as opposed to ten months under Standard Review). (30) This Priority Review designation is intended to direct the overall attention and resources of the FDA toward drugs that represent "significant improvements" over standard care. (31) However, redeeming a PRV would allow a company to designate any of its products as Priority Review and potentially allow that company to launch its product to market four months faster than if that product were designated as Standard Review--regardless of whether that product represents "significant improvements." (32)

An important component of the PRV is its ability to be transferred or sold between companies. (33) Transferability allows any company to benefit from the voucher, regardless of whether its respective drug development pipeline contains any products that would directly benefit from a PRV. (34) Indeed, this monetization has allowed smaller biotechnology companies, eager to engage in orphan drug development, (35) to leverage the PRV as an additional incentive and justification for investment. (36)

A. INDUSTRY STAKEHOLDER RESPONSE TO THE PRV PROGRAM HAS BEEN UNCERTAIN AND VARIED

Since its passage in 2007, the PRV program has received a mixed reception from companies and global health experts. Shortly after its adoption, Bill Gates praised the program at the World Economic Forum in Davos. (37) Since then, however, the impact of the PRV incentive in developing new medicines for neglected tropical diseases ("NTDs") has been questioned, in part because of uncertainty around the value of the voucher among pharmaceutical and biotech companies. …

Log in to your account to read this article – and millions more.