NCPA - National Center for Policy Analysis

Orphan Drugs Adopted

April 24, 2003

Few, if any, treatments were available to those suffering from rare diseases some 20 years ago. Some of these disorders affected only a handful of patients, and others a few thousand, but because of the high cost of drug development, for-profit pharmaceutical companies did not develop therapies, even when basic research had identified potential treatments.

  • Rare diseases collectively affect 25 million Americans, but those patients are subdivided into more than 6,000 subpopulations, ranging in size from less than one dozen to 200,000.
  • Bringing a new drug to market is costly -- the industry claims that it now costs an average of $800 million -- so firms concentrated on treatments for relatively common, chronic disorders such as hypertension, depression and arthritis.

However, the 1983 Orphan Drug Act gave drug companies financial incentives to sponsor new therapies for adoption by the U.S. Food and Drug Administration. After several revisions, the act now allows companies to take a 50 percent tax credit on all clinical trial costs, exempts them from paying the FDA's so-called user fee (currently $533,400), and gives them exclusive marketing rights for seven years.

Many rare diseases, it turned out, were ideally suited for treatment by replacing defective or missing proteins with ones produced using recombinant DNA technology. Thus an unanticipated effect of the Orphan Drug Act was to spur U.S. biotechnology development. In fact, five of the 10 best-selling biotech drugs worldwide in 2001 were originally approved as orphan drugs.

  • In the past two decades, 229 orphan drugs that together treat 11 million patients have entered the market, and the FDA has granted orphan status to nearly 1,000 other drugs.
  • Over the past 10 years, orphan drugs accounted for 17 percent of all drugs and biologics approved for sale in the United States.

Sources: Thomas Maeder, "The Orphan Drug Backlash," Scientific American, May 2003, and Marlene E. Haffner, Janet Whitley and Marie Moses, "Two Decades of Orphan Product Development," Nature Reviews: Drug Discovery, October 2002.


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