I was surprised that this article didn't mention the Orphan Drug Act of 1983, which was passed by congress to facilitate the development of drugs for rare diseases (many other countries have similar legislation).
This act gives tax incentives, subsidies, lowers clinical trial requirements and increases exclusivity for the development of "orphan drugs", which otherwise might not be economically viable to develop. That said, if a condition is rare enough, there's probably no amount of tax incentives that's going to induce a for-profit company to go through the significant costs and hassle of bringing a drug to market.
These drugs will be registered as an orphan drug, it's a rare disease this guy is writing about, his sheet estimates 200 living individuals in the US. These days, many if not most drugs are registered that way. The author assumes an orphan drug registration for this drug.
The pharmaceutical company usually tries to register all their new drugs as orphan drugs initially, and as a drug becomes profitable for a certain disease, other diseases (more common diseases) are included in the registration to maximize profit.
As an addendum, the development costs for orphan drugs are not magically low, it's still multiple hundreds of millions that the company has to put up with before approval.
The calculus for determining whether an indication is worth pursuing is probably determined more by 1) potential pricing and 2) translational risk than by total number of patients, tax incentives or added exclusivity, although shorter clin development requirements are hugely important
If the translational risk is high (i.e. what works in mice / other disease models prob won't work in humans), the probability of success approaches zero. So the expected value approaches zero. It doesn't matter how many patients there are, the magnitude of the unmet need or how nice the molecule is if it isn't effective.
With a high enough price, you can get a billion-dollar drug from a few hundred patients. Avexis, which was acquired by Novartis for $8.7B, had a lead drug targeting Type 1 SMA, which has only a few hundred patients worldwide. If they charge $2M / patient (which they might) it only takes 500 patients for $1B annual revenue. Of course they were pursuing other indications, had other development projects and had valuable manufacturing assets so the $9B wasn't all for that one indication, but a lot of it was
And while $2M is prob high, the reason they can get away with even tossing out prices like that is that their drug is a potential cure for a disease that kills 90% of affected infants before 2 years of age. potential cure in that it has only been studied in a few dozen patients (thanks to ORphan drug act shorter cook studies) and that patients haven't been followed more than a few years, so who knows how durable the treatment is
Is a medicine that adds 70 years to someone's life worth $2M? What about 40 years? 10? 5? Hard to know.
Not really. While he makes it sound bad, what is happening is that in exchange for actually proving that drugs we "know work" actually work companies get a monopoly for a short time. I'm glad some of the treatments doctors have been using for years now have science behind them so we know more about how well they work.
This act gives tax incentives, subsidies, lowers clinical trial requirements and increases exclusivity for the development of "orphan drugs", which otherwise might not be economically viable to develop. That said, if a condition is rare enough, there's probably no amount of tax incentives that's going to induce a for-profit company to go through the significant costs and hassle of bringing a drug to market.