Orphan drug pricing may warrant a competition law investigationBMJ 2010; 341 doi: https://doi.org/10.1136/bmj.c6471 (Published 17 November 2010) Cite this as: BMJ 2010;341:c6471
All rapid responses
In 2009 we worked on a project for an financial investor who was
proposing to purchase an orphan drug company. We decided it was not worth
the asking price.
While we thought this article and the accompanying editorial brought
out a lot of important and interesting points, particularly with regard to
the idea of using competition law to force drug companies to lower prices,
we thought that what did not come out was any analysis of how profitable
orphan drugs actually are to drug companies.
It is possible to analyse the financial statements of companies which
sell orphan drugs. These statements are normally to be found on the
"investor relations" section of company websites.
There is little point in looking at large companies which sell lots
of other drugs as their orphan drug sales are rarely large enough to
figure in financial reports. However, Orphan drugs are the main business
of two companies in Europe, Swedish Orphan Biovitrium and Orphan Europe.
Looking at their financial statements, which we have found on their
websites, it looks like Swedish Orphan has an operating profit margin of
1.1% and Orphan Europe, 19% (as of 2007 when Recordati bought it). Swedish
Orphan actually made a big loss in Q3 2010 once all expenses are included.
Swedish Orphan appears to be spending 26% of its revenue on R&D.
We think on an individual product basis, there will be products which
have extremely high margins and there are examples of companies which
cynically take established products through licensing processes without
adding a lot of value. However there are clearly companies which spend
significant sums on R&D, presumably performing RCTs and also maintaining
Looking at these profit margins, when you take the orphan drug
industry as a whole, we wouldn't say orphan drugs are exceptionally
profitable, certainly not on this evidence more profitable than "big
Competing interests: In 2009 we did a paid project for an investor looking into buying an orphan drug company