Orphan Drug Approval Laws

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Continuing Education Activity

Rare diseases affect over 25 million individuals in the United States and have historically lacked pharmaceutical development attention due to decreased potential for profit. The Food and Drug Administration (FDA) qualifies a rare disease as one which affects fewer than 200,000 people, or as a condition that affects greater than 200,00 persons in the United States but for which there is no reasonable expectation that pharmaceutical companies will recover the costs incurred during drug development following pharmaceutical sales. The Orphan Drug Approval Law of 1983 incentivized pharmaceutical companies to develop drugs for rare diseases by offering market exclusivity and tax credits. This activity reviews the history of the Orphan Drug Approval Law and discusses associated ethical concerns and clinical significance.


  • Summarize the origin of the Orphan Drug Approval Law of 1983 and the purpose of the subsequent Kefauver-Harris amendment.
  • Describe the qualifications of a rare disease as the Food and Drug Administration designates it.
  • Identify the primary areas of ethical concern surrounding the Orphan Drug Approval Law in the United States.
  • Explain the clinical significance of the Orphan Drug Approval Law.


In 1983, the United States Congress passed the Orphan Drug Law Act (ODA), which incentivized pharmaceutical companies to develop drugs aimed specifically at treating rare diseases. Orphan drugs, or those that treat rare diseases, are referred to as such because prior development efforts may have been abandoned or "orphaned" due to a lack of funding or interest in drug development.[1] The act offers tax credits, a waiver of the Prescription Drug User Fee, and extended market exclusivity options to participating drug developers. 

The Food and Drug Administration (FDA) qualifies a rare disease as one which affects fewer than 200,000 people or as a condition that affects greater than 200,00 persons in the United States but for which there is no reasonable expectation that pharmaceutical companies will recover the costs incurred during drug development following pharmaceutical sales. In the United States, between 6,000 and 8,000 diseases meet this condition, affecting an estimated 25 million people.[2] Despite the large number of individuals affected by rare diseases, pharmaceutical companies have been reticent to focus their efforts on drug development for these conditions. They believed that they would not feasibly recover the development costs. 

This industry-wide decision originated from an amendment made to the Federal Food, Drug, and Cosmetic Act due to the increase in thalidomide-related congenital disabilities seen in the 1950s and subsequent decades.[3] The amendment, known as the Kefauver-Harris amendment, effectively increased the cost of drug development for all pharmaceutical companies, thus shifting the collective focus to developing drugs for larger, generalized populations. This shift effectively excluded certain populations with rare diseases and severely limited drug treatment options for these patients.


The function of the Orphan Drug Approval Law is to encourage pharmaceutical developers to increase research efforts focused on treatments for rare diseases, specifically those for which a current drug treatment does not exist. The FDA may award orphan drug approval for new molecular entities (NMEs), formerly approved drugs for which a secondary indication has been determined, and new formulations of existing or established drugs.[4] To provide this incentive, the FDA offers pharmaceutical manufacturers the orphan drug designation, which includes tax credits, a waiver of the typically-associated approval fees, and an extended market exclusivity period of 7 years.[5]

During market exclusivity periods, the FDA cannot award approval to any other treatments for the same disease indication, ensuring that the pharmaceutical company that developed the initial drug retains the opportunity for profit. Some critics of the ODA state that the existence of market exclusivity, while important in garnering interest on the part of pharmaceutical companies, discourages further research initiatives and provides those living with a rare condition minimal (and often costly) options for treatment.[6]

In recent years, some parties have raised concerns about the orphan drug approval process and unfair practices of some pharmaceutical companies, including concerns regarding manipulating the approval process to maximize the individual profits of pharmaceutical companies while monopolizing the production of medications for niche, specialty markets.[5] One study reported that orphan drugs have higher profitability than non-orphan drugs when considering the full context of developmental drivers, including shorter clinical trial times, smaller clinical trial sizes, higher rates of regulatory success, and government financial incentives.[7]

The results of the investigation surrounding FDA approval of orphan drugs yielded several conclusions, the most notable of which indicated many orphan drug applications were incomplete even upon approval and lacked necessary information such as the number of individuals who might benefit from an orphan drug as well as scientific evidence of the drug's efficacy. Also noted was the concern that while the FDA was responsible for investigating each application with staunch diligence, it appeared that the organization instead trusted the information provided to them in several situations. 

Issues of Concern

The primary issue of concern associated with the Orphan Drug Approval Law is that despite its aim to improve access to pharmaceutical treatments for rare diseases, those with rare diseases are faced with exorbitant drug costs to treat their conditions and are often unable to meet these costs- thus contradicting the original goal of the passed act.[3] This is largely due to the extended market exclusivity status granted to individual drug developers by the FDA. During extended orphan drug market exclusivity, the FDA cannot approve an additional application for a given disease indication. 

Per critics, the incentivization process associated with the ODA has led to a disproportionate focus by pharmaceutical companies on orphan drug development. By applying for orphan drug approval, pharmaceutical companies may avoid the costs associated with non-orphan drug applications. Furthermore, market exclusivity of orphan drugs allows pharmaceutical companies to set the market price for a personal medication, giving patients with rare diseases limited treatment options due to the absence of a generic medication.[5]

The paradoxical result of the ODA is particularly demonstrated by the case of a drug developed to treat Gaucher disease, which affects about 2,000 persons per year in the United States. At the time of its release, the drug displayed a prohibitive cost of nearly $400,000 per year per adult patient.[8]

The financial implications associated with orphan drugs are of particular concern to some. In 2010, orphan drugs represented 22% of total pharmaceutical sales and demonstrated an increased return on investment compared to non-orphan drugs.[6] The return on investment of orphan drugs increased even more drastically after the pharmaceuticals were brought to market.[9] Orphan drugs represent a significant source of global sales revenues in the pharmaceutical market, which challenges the previously held notion that orphan drug development would not be profitable for pharmaceutical companies.[10]

While the ODA has provided an adequate incentive for drug development, drug affordability, and patient access concerns remain. Many patients may inadvertently pay for their rare disease treatment twice-- once during public drug development funding efforts and once during the actual treatment process.[11] 

Additionally, the industry-wide focus on developing effective cancer treatment pharmaceuticals has shifted research attention away from more rare diseases, leaving those living with said conditions with significant unmet needs. Individuals responsible for determining current public policies are charged with assessing the therapeutic areas of approved drugs to assess whether one group is receiving more developmental attention than another.[4]

It is not uncommon for individuals with rare diseases to experience barriers to a successful diagnosis. Misdiagnosis, re-diagnosis, and incorrect treatments often result in undue financial and psychological stresses on the patient. Physicians may not be adequately trained to look for or diagnose rare diseases, leading to delays in care. A survey study assessing European individuals with rare disease diagnoses demonstrated that 41% of patients with an orphan disease experienced one or more incorrect diagnoses before the correct diagnosis was found.[12]

Clinical Significance

The ODA aimed to decrease research and development costs and encourage the development of drug treatments for rare diseases by offering expedited regulatory reviews, tax credits, and extended market exclusivity.[1] As new molecular entities, new formulations of existing medications, and drugs for which a secondary indication has been discovered arise, the clinical landscape has adjusted. Patient adherence to medications has improved due to the ODA enactment, and the patient reimbursement process may see improvements as secondary indication approvals accumulate as well.[4]

Before the passing of the ODA in 1983, only ten drugs for orphan diseases were accessible on the market for patient use. As of 2015, the FDA has approved over 550 orphan drugs and granted over 3,600 orphan drug designations, targeting 277 rare diseases.[6] The largest proportion of recent drug approvals and designations have been allocated to cancer therapeutics (31.9%), followed by infectious diseases and bleeding disorders. In addition, current studies indicate that the number of orphan drug approvals has increased significantly since the ODA enactment. Specifically, the number of secondary indication approvals has more than doubled in proportion since the 1980s, from 19% to 47% in the 2010s.[4] 

In addition to changing the landscape of drug development in the United States, the enactment of the ODA inspired similar changes internationally in regions such as Europe, Australia, Singapore, and Japan.[13] Overall, the Orphan Drug Act of 1983 has resulted in the approval of over 650 orphan drugs, demonstrating its effectiveness in increasing drug development for rare conditions or those affecting fewer than 200,000 individuals.[4] While the benefits collected by pharmaceutical companies remain controversial to some, most find the Orphan Drug Act to have had a positive influence on drug development for rare diseases, offering patients who formerly had limited options the chance to live a healthy life.

Enhancing Healthcare Team Outcomes

Clinicians (MDs, DOs, NPs, PAs) are responsible for correct and appropriate diagnoses to ensure their patients receive treatment for their condition(s). Rare conditions, known as orphan diseases, are a known source of potential misdiagnosis. In addition, once a correct diagnosis is reached, the physician and healthcare team must recommend an appropriate treatment plan. 

The Orphan Drug Act (ODA) incentivizes pharmaceutical companies to develop drug treatments for rare diseases in the United States. However, these treatments may be costly and prohibitive to receiving treatment in some cases. Therefore, clinicians and healthcare team members should educate themselves about current rare diseases and available treatment options for these conditions. Healthcare professionals can also stay informed about current trials for rare diseases that may offer their patients an early opportunity to receive treatment. Improved communication among healthcare professionals, including MDs, DOs, NPs, PAs, and pharmacists, regarding managing rare diseases can improve patient outcomes with these conditions. [Level 5]

Article Details

Article Author

Alexis-Danielle Roberts

Article Editor:

Roopma Wadhwa


6/5/2023 9:44:04 PM



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