An orphan drug is a pharmaceutical agent developed to treat rare medical conditions that would not be profitable to produce without government assistance. The orphan drug designation was created to incentivize companies to develop new drugs and biologics for rare diseases. These incentives include a partial tax credit for clinical trial expenditures, waived user fees, and eligibility for 7 years of marketing exclusivity.¹

The Orphan Drug Act of 1983 is a law to facilitate development of orphan drugs, drugs for rare diseases which affect small numbers of individuals residing in the U.S. (e.g. Huntington's disease, myoclonus, ALS, Tourette syndrome). ¹

The House of Representatives passed the Fairness in Orphan Drug Exclusivity Act in November 2020. The bill would require drugmakers to prove that they don’t expect to recoup R&D costs through U.S. sales in 12 years in order to obtain orphan drug designation. Currently, market exclusivity can be extended for a new version of the same drug without the contingency of showing unprofitability again.²

Developing treatments for rare diseases can have more scientific, ethical and operational challenges than developing diseases that affect larger populations. Orphan drug designation rewards biopharma companies for developing drugs for rare diseases, it is a recognition that providing life-saving treatments has immense challenges and can impose heavy financial constraints.

Efforts to bring treatments for rare diseases to market are coordinated by the Food and Drug Administration (FDA) Office of Orphan Products Development (OOPD). The Orphan Drug Act (ODA) provides two mechanisms for orphan drug designation: if it treats an orphan disease, one that affects less than 200,000 people in the U.S., or if it affects more than 200,000 people in the U.S., drug companies must not expect the cost of development to be recovered from sales in the United States.³ Orphan designation qualifies the sponsor of the drug for various development incentives of the ODA, including tax credits for qualified clinical testing. A marketing application for a prescription drug product that has received orphan designation is not subject to a prescription drug user fee unless the application includes an indication for other than the rare disease or condition for which the drug was designated.⁴

Between 1973 and 1983, fewer than 10 treatments for rare diseases were approved. Since 1983, the OOPD program has helped develop and bring to market more than 600 drugs and biologic products for rare diseases.³

Waiver of new drug application (NDA) or biologics license application (BLA) application fee has a value of over $2 million.¹

1. Moffett D. FDA Orphan Drug Designation for Rare Diseases. Nuventra.com. https://www.nuventra.com/resources/blog/orphan-drug-products/. Published 2021.

2. H.R.4712 - 116th Congress (2019-2020): Fairness in Orphan Drug Exclusivity Act. https://www.congress.gov/bill/116th-congress/house-bill/4712/text. Published 2020.

3. Developing Products for Rare Diseases & Conditions. U.S. Food and Drug Administration. https://www.fda.gov/industry/developing-products-rare-diseases-conditions.

4. Designating an Orphan Drug or Biologic. U.S. Food and Drug Administration. https://www.fda.gov/industry/developing-products-rare-diseases-conditions/designating-orphan-product-drugs-and-biological-products