If you were a drug manufacturer, you naturally would want to focus your research on more common, highly prevalent diseases. If there are more patients with the disease, that means more drugs that can be sold.
In recent years, however, the number of so-called “orphan drugs” has increased. In the 1970s, only 10 orphan drugs were approved. Between 1983 until 2019, there have 564 orphan drugs that had been approved by the FDA. Why the change?
The primary reason was the passage Orphan Drug Act (ODA), which created financial incentives to encourage companies to develop new drugs for rare disease. What were these incentives? I list a number of them below, many summarized from a recent ICER white paper on rare disease.
- Longer market exclusivity. Manufacturers receive 7 years of market exclusivity for orphan drugs compared to only 5 years for non-orphan drugs. .
- R&D Tax credits. Clinical trial costs incurred to develop an orphan drug can be partly offset with a 25% tax credit which is bankable for future years of a company is not yet profitable.
- FDA user fee waiver. Prescription Drug User Fee Act (PDUFA) fees—which generally cost $3.2 million—are waived for orphan drugs.
- Research grants. Manufacturers developing orphan drugs are eligible for research grants from the Office of Orphan Products Development (OOPD).
- 340B exemptions. Orphan drugs are exempt from the requirement to give special discounts to pharmacies associated with 340B covered entities. Recent court rulings have indicated that orphan drugs are exempt from the 340B discount requirement even for non-orphan indications of any drug with at least one orphan indication.
- FDA Accelerated approval. In 1992, FDA instituted an accelerated approval pathway to expedite drug approval for serious conditions. While this approval process was not specific to orphan drugs, 1 in 7 orphan indications has received accelerated approval, largely due to the lack of any alternative treatment.