Product Opportunities in Japan - Focus on Medicinal Products for Rare Diseases; Orphan Rules Part 1

August 2011

The development of products for rare diseases, or Orphan products, was until recently of limited interest for most companies due to the small market size and difficulty developing products for small populations. While many organizations around the world are established to support and promote the development of products for rare diseases, many large pharmaceutical companies focused only on those indications where the market size justified their utilization of resource. Regulatory agencies worldwide have developed systems to foster development of drugs for rare diseases, including both development support and fee waivers. For very small populations, regulatory agencies may also waive many typical requirements for drug approvals or allow approval based on a less significant body of evidence of safety and effectiveness. While in the past, larger pharmaceutical and biotechnology companies had limited interest in products for rare diseases, there is now renewed interest in these Orphan products given the realization that the development pathway may be less burdensome, pricing attractive and cost to market limited.

In Japan there is particular focus on products for rare diseases and for such Orphan products for pediatric use. The Ministry of Health, Labor and Welfare (MHLW) has specified systems for designation of Orphan products under the Pharmaceutical Affairs Law (PAL) and systems to help support the development of products for rare diseases. The requirements for calculation of the patient population and clarification on procedures to obtain Orphan drug status in Japan were updated in 2010. The PAL defined a product for rare disease in Article 77-2 as;*

1. Product for treatment of a disease affecting fewer than 50,000 patients in Japan;
2. Is a product for an unmet medical need (no alternative medicine and treatment, or significantly improved efficacy or safety expectations as compared to existing treatments;
3. And has a high probability of a successful development (strong rationale and proof of concept).

Orphan designation in Japan also affords a company with certain services that may be provided by the MHLW or the Pharmaceuticals and Medical Device Agency (PMDA: www.pmda.go.jp). These services and fee waivers can help support preferential treatment in obtaining scientific and regulatory consultation from the PMDA and in gaining priority for such meetings that are most often awarded quickly and as face-to-face meetings. These benefits are realized during the development phase. Other benefits during development of Orphan products in Japan are also available from the National Institute of Biochemical Innovation (NIBIO: www.nibio.go.jp), which focuses on providing grants or other subsidies for organizations developing products for rare diseases in Japan and particularly those specified as products of interest by the MHLW. NIBIO was established in 2005 and can also provide guidance as well as tax incentives for development of products for rare diseases. Grants provided by NIBIO can help support both preclinical and clinical costs for the development of Orphan products. Products are eligible for grants to cover up to half (50%) of the direct costs for development from the designation of the Orphan status through approval and may also be available for some post-marketing clinical studies if required by the PMDA as condition for approval.

The responsibilities and flow of activities to obtain an Orphan in the figure below:

The PAL also allows for post-approval benefits for Orphan products in Japan, which includes an extension of the reexamination period from 6 to 10 years max for drugs or biologics, and from 4 to 7 years for medical devices. Generic competition cannot enter the market for this first reexamination period, thus providing protection for Orphan drug or biologic products for up to 10 years. Post approval benefits for products developed to treat rare diseases and designated as Orphan products also include significant tax incentives that were enacted in the 2006 revision of the Japanese tax code under the Special Taxation Measures Law. Under this law NIBIO can evaluate the cost of development of the Orphan product and award the developing organization a tax deduction of up to 12% of the total development cost.

When requested for guidance and advice to support the development of an Orphan product, the MHLW, PMDA or NIBIO, can provide significant resources and support to organizations developing these products for rare disease. The organization responsible for providing the consultation and support needed may depend on the stage of development. The specific request to be designated as an Orphan product in Japan is first to the MHLW and specifically to the Valuation and Licensing Division, Pharmaceutical and Food Safety Bureau. NIBIO is typically involved in the designation process to define a product as one for a rare disease and designate it as Orphan but is not responsible for the actual decision to award the designation. Once the Orphan designation is granted by MHLW, NIBIO is mainly responsible for providing consultation and grant support during the development process and up to approval for marketing in Japan. The consultation from NIBIO tends to be specific to scientific, research and development related topics. PMDA also provides consultation prior to Market Authorization for Orphan and non-Orphan products. The decision to consult NIBIO or PMDA may be subject dependent and often requires prior consultation with the Agencies to formulate a plan. PMDA also enacted specific guidance in 2009 in support of venture firms to provide consultation, fee reductions or waivers and additional consultation opportunities. Given that venture-backed firms develop most Orphan products, this adds additional support for such organizations.

In addition to recent improvements in the PMDA systems to support small companies (e.g. venture companies), Japan also has established a Law for Facilitating the Creation of New Business that includes the possibility to obtain grants as a specific subsidy under the Small Business Innovation Research (SBIR) grant system. Venture companies and other designated small businesses that receive this aid may be qualified to receive government support including guarantees of debt and reduced interest rates to borrow for research related purposes. The annual schedule for SBIR grants starts in late April each year with a first payment of grant funds in late July and second payment the following February.

To obtain a designation as an Orphan product, the sponsoring organization initially submits a predetermined application form and summary information to demonstrate that the product meets the criteria to treat a rare disease. This application is filed to the Evaluation and Licensing Division, Pharmaceutical and Food Safety Bureau at the MHLW. The MHLW will evaluate the application and may request more information as needed, or a meeting with the sponsor. The MHLW may also request advice from the Pharmaceutical Affairs and Food Sanitation Council on the indication and qualification as a rare disease in Japan. Given the requirements for designation as an Orphan medicinal product, it is important also for the sponsor to present a strong rationale and potentially proof of principle data in animals or humans that the product has a high potential to treat the rare disease.

Sponsors should also consider reviewing the list of products the MHLW has designated as medicinal products they would like to accelerate the development of in Japan. This list includes products for which the MHLW wants to expand development in pediatric patients. In 2010, the list included 108 drugs that meet a specific unmet medical need in Japan. While this list primarily focused on products that are approved in other countries, some products are still in development. The MHLW panel designated all these products as Fast-Track development products. In some cases, the MHLW and PMDA significantly reduced or waived requirements for gaining approval of these products in Japan, including Japanese Bridging studies. While many products in early development may not be on this list, the indications on the list for products of interest may transcend the specific product and provide insight into what new entities and target indications may receive significant support from MHLW or NIBIO. In conclusion, since 1993 the MHLW has awarded more than 250 Orphan designations and of these over 160 products have been approved as of the end of 2010. The system in Japan to support the development and approval of products for rare diseases has refined over the years with the establishment of NIBIO, recent changes to the PAL, improved tax incentives and focus of the MHLW on specific indications and pediatric unmet needs. This environment for development and introduction of foreign Orphan products into Japan is now one of the most positive and supportive in the world towards sponsors. Small companies or venture backed companies in particular can take advantage of these benefits afforded by the Japanese government to further support the improvement of the medical care in Japan and address the unmet medical need for many rare diseases.

*A product for rare disease is defined in the revision of PAL & Adverse drug reaction suffering relief fund law of 1993.

Richard E. Lowenthal, MSc MBA
Pacific-Link Consulting LLC (San Diego and Tokyo)
JETRO North America Health Care Advisor