The Orphan Drug Act: Moving Rare Disease Research Forward

The Orphan Drug Act: Moving Rare Disease Research Forward

Just as neglect is often associated with orphans, treatments for rare diseases are usually ignored and unlikely to be sought after. Such treatments are appropriately labeled “orphan drugs” due to the lack of interest in developing them.1 As of 2013, there are about 7,000 rare diseases that have been identified.2 In contrast, only about 400 of these diseases have an available medical treatment.2,3 One of the major problems in the field of rare diseases is that scientists and pharmaceutical companies often hesitate when faced with the prospect of researching and investing in the development of such a product. On the surface, it seems like the cost of investing in the research and development (R&D) of orphan drugs overwhelming exceeds any benefits that may stem from it.4 Orphan drugs may be seen as an undesirable investment for pharmaceutical companies due to the high cost and time it takes to get them on the market, in addition to the slim chances of obtaining a profit. By implementing policies that make orphan drugs more attractive, legislations like the Orphan Drug Act (ODA)* prove to combat the challenges of orphan drug R&D and investments effectively.

Researchers and pharmaceutical companies are less willing to be involved in the R&D of orphan drugs because of the additional time and effort required compared to non-orphan drugs.2 Due to the lack of available knowledge and complexity of rare diseases, discovering a particular gene, mutation, and/or biochemical pathway to target may be more time consuming than other diseases and conditions that are more heavily studied and understood.5 Thus, the initial research stages of treatments for rare diseases can be a much lengthier process.5 A major hurdle that all drug development groups face is passing the clinical phases to be approved by the United States Food and Drug Association (FDA). The approval process of all drugs is the same, as they must go through four clinical phases and passing the first three to be approved for distribution to the general population.6 Phase III proves to be a major challenge for orphan drugs as the number of available patients to recruit is quite small compared to more common diseases and disorders.6 This phase usually requires between 1,000-2,000 patients with the particular disease because a large number of patients is needed to help determine the efficacy and any possible side effects.6 Due to these unique challenges, the ODA includes a policy allowing a lower number of patients for Phase III (a median of 538 patients compared to a median of 1,557) and a policy for the FDA to “fast-track” the approval process for orphan drugs that have successfully completed the clinical trials.3,4,8 This fast-tracking process allows orphan drugs to be approved within ten months of submitting the application in contrast to about 13 months for non-orphan drugs.3,7 This policy gives patients earlier access to potentially life-altering or life-saving drugs.


“...the ODA provides financial incentives that decrease the financial burden for researchers and pharmaceutical companies in an attempt to increase the appeal in studying potential treatments for rare diseases.”

Flexible clinical requirements and fast-track approval do remedy some of the concerns researchers and pharmaceutical companies have in regards to orphan drugs. However, R&D of such drugs still proves to be more costly than non-orphan drugs as these policies target the clinical phase and FDA approval periods, leaving the initial stages just as long and costly as without the ODA. Additionally, patient recruitment for clinical trials is still an issue for some orphan drugs as the median number of patients previously mentioned is still barely attainable, and thus, the recruitment of such patients must extend multi-nationally.2 As a result of this recruitment, the cost of research per patient increases.2 Pharmaceutical companies may look at these challenges as financial burdens where there is still the possible risk of not meeting the required number of patients to achieve a successful (i.e., statistically significant) Phase III trial.5 Due to the overwhelming costs and lack of funding interest towards the R&D of orphan drugs, the ODA provides financial incentives that decrease the financial burden for researchers and pharmaceutical companies in an attempt to increase the appeal in studying potential treatments for rare diseases.3,4,8 These incentives include tax credits for the cost of R&D, reduced or no procedural fees and grants for drug development.3,4,8 Out of all the policies of the ODA, the economic incentives seem to be behind the surge of orphan drug development as they enable a greater amount of smaller companies, in addition to larger companies, to become involved in developing a drug that is costly and risky.9


“In 2015, it was reported that the median cost of an orphan drug per patient per year was 13.8 times greater than that for a non-orphan drug...”


Another factor that may disinterest pharmaceutical companies in investing in the R&D of orphan drugs is the small consumer market.4,5 Consequently, pharmaceutical companies have a greater risk of financial loss due to the imbalance of the cost of R&D in comparison to potential revenues. With the introduction of the ODA came another incentive to increase the appeal of investing in orphan drug research: market exclusivity. Companies who develop drugs with approved orphan drug status are given seven years of market exclusivity following FDA approval.4,8,10 This policy prevents any other companies from entering the market for “the same orphan drug and indication.”4 Due to this lack of competition, the pharmaceutical companies that were the first to develop a certain orphan drug successfully were able to set its market price and exclusively reap the benefits for seven years.10 Consequently, pharmaceutical companies are using this incentive to maximize profit by implementing sky-high prices, making new treatments possible but economically unobtainable. In 2015, it was reported that the median cost of an orphan drug per patient per year was 13.8 times greater than that for a non-orphan drug ($66,057 compared to $4,775).7 While the cost of some orphan drugs is covered by some insurance plans for patients, the out-of-pocket payments can still reach up to $5,700 a year.10 Additionally, with the increase of the developmental cost of drugs, insurance companies may shift more of the cost to the patients.10 Results from the 2015 report beg the question: does incentivizing the R&D of orphan drugs provide any benefit for the rare disease community when the high prices make these treatments economically challenging for patients?


“Before the ODA, there were only ten orphan drugs available and thirty-three years later, there have been 424 approvals of orphan drugs...”

The Orphan Drug Act was the first of its kind when it was introduced in 1983.2,4,8 and soon after similar legislations were implemented in the EU, Australia and Japan.4 Before the ODA, there were only ten orphan drugs available and thirty-three years later, there have been 424 approvals of orphan drugs (up until 2007, the 322 drugs approved were for 238 different diseases) along with an increasing amount of research and knowledge in the field.1,8,9 The ODA has garnered more interest in the R&D of orphan drugs and, as an indirect result, created more than 50% of the top biotech companies.5 The benefits of the ODA to the rare disease community are clear, however, due to the now appealing potential profits from these treatments, pharmaceutical companies may be taking advantage of the flexible approval requirements and financial incentives. To achieve both increased R&D of orphan drugs and availability of orphan drugs to those in need, the ODA should be reassessed, and additional policies must be added.

Orphan drugs were originally seen as the runt of the pharmaceutical litter, drugs that researchers and pharmaceutical companies neglected to study and invest in.3 Issues such as the cost and time of R&D, the challenges of recruiting patients from a small population of people and the small possibility of making a profit in a small market, once made investing in such an endeavour unappealing. However, since the Orphan Drug Act was implemented, there has been increasing interest of pharmaceutical companies in investing in the R&D of orphan drugs. With incentives including tax breaks, fast-tracking FDA approval, and market exclusivity, orphan drugs are now becoming an attractive venture for pharmaceutical companies.


*This article will use the United States Orphan Drug Act as a reference since there is no established equivalent in Canada as of yet (one was announced in 2012, but has not yet been approved).5


Works Cited:

1. Sharma A., Jacob A., Tandon M., Kumar D. Orphan drug: Development trends and strategies. Journal of Pharmacy & BioAllied Sciences. 2010; 2(4): 290-299.

2. Vickers PJ. Challenges and opportunities in the treatment of rare diseases. Drug Discovery World Web site. http://www.ddw-online.com/therapeutics/p211490-challenges-and-opportunities-in-the-treatment-of-rare-diseases-spring-13.html. Published in 2013.

3. Lant K. The Impact of Rare Disease Research On The Development of New Medicines. Clinical Leader Web site. http://www.clinicalleader.com/doc/the-impact-of-rare-disease-research-on-the-development-of-new-medicines-0001. Published December 17, 2015.

4. Luth W., Ali-Khan S., Bubela T. Canada’s Orphan Drug Framework: Lessons from the United States, Europe and Japan. Paceomics. Web site. http://paceomics.org/wp-content/uploads/2015/10/Canadas-Orphan-Drug-Framework.pdf. Published October 14, 2015.

5. Why Research on Rare Diseases? EURORDIS Web site. http://www.eurordis.org/sites/default/files/publications/why_rare_disease_research.pdf. Published in October 2010.

6. Step 3: Clinical Research. FDA Web site. http://www.fda.gov/ForPatients/Approvals/Drugs/ucm405622.htm. Updated May 19, 2016.

7. EvaluatePharma. Orphan Drug Report 2015. Evaluate Group. 2015; 3: 1-31. Published in October 2015.

8. Rhee TG. Policymaking for Orphan Drugs and Its Challenges. AMA Journal of Ethics. 2015; 17(8): 776-779.

9. Shelley S. The business of orphan drugs is booming. Pharmaceutical Commerce Web site. http://pharmaceuticalcommerce.com/brand-marketing-communications/the-business-of-orphan-drugs-is-booming/. Published on August 26, 2015.

10. Hyde R., Dobrovolny D. Orphan Drug Pricing and Payer Management in the United States: Are We Approaching the Tipping Point? American Health & Drug Benefits. 2010; 3(1): 15-23.


Cite This Article:

Macatangay K., Zheng K., Chan G., Ho J. The Orphan Drug Act: Moving Rare Disease Research Forward. Illustrated by C. Scavuzzo. Rare Disease Review. July 2017. DOI:10.13140/RG.2.2.32859.36640.

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