
Ca-ssis/istock via Getty Images
Expanding orphan drug access for rare conditions
Incentives have accelerated orphan drug development, turning rare disease treatments into one of the fastest-growing and most innovative sectors in the biopharmaceutical industry.
Orphan drugs have gone from industry afterthoughts to a booming sector largely due to targeted incentives for drug development and research. With over 30 million Americans living with rare conditions, orphan drugs represent a fast-growing area in the pharmaceutical industry.
What is an orphan drug?
An orphan drug is any medication specifically intended to address a rare condition that affects fewer than 200,000 individuals in the United States. Orphan drugs are in high demand among patients who face serious or life-threatening illnesses yet have few, if any, other treatment options. With an estimated 7000 orphan diseases, 1 out of every 10 Americans live with a rare condition.
Because orphan drugs cater to such small patient populations, they often come with steep price tags. In 2019, the average annual cost of an orphan treatment per treated patient was $32,000, with treatments ranging from $6,000 to $500,000 per year, highlighting the financial barriers many patients encounter when seeking critical care for rare conditions.
What is the Orphan Drug Act?
The Orphan Drug Act is a U.S. law passed in 1983 to encourage the development of orphan drugs. Before the passage of the Act, pharmaceutical companies tended to avoid investing in treatments for diseases with small patient populations, citing the high costs and limited market returns. By enacting financial incentives for drug developers, the Act was passed to stimulate research and development (R&D) for orphan drugs.
These incentives include the following:
- Tax credits for clinical testing. Pharmaceutical companies can claim a tax credit for 25% of qualified clinical trial expenses incurred in developing an orphan drug. This benefit was reduced from the original 50% by the Tax Cuts and Jobs Act of 2017.
- Market exclusivity. Upon FDA approval, orphan drugs receive seven years of market exclusivity. During this period, no other company can market the same drug for the same indication unless they demonstrate clinical superiority.
- Research grants. The FDA offers grants through the Orphan Products Grants Program to support clinical development. This program has funded numerous studies, contributing to the approval of over 80 products.
- Waived user fees. Sponsors of orphan drugs are exempt from paying certain FDA fees, such as the Prescription Drug User Fee Act application fees, reducing the financial burden associated with the regulatory approval process.
These legislative measures fundamentally alter the cost–benefit equation. Pharmaceutical and biotechnology companies that previously deemed rare disease work financially prohibitive could suddenly see a path toward recouping their investments. The result was a significant uptick in both the volume and variety of new research programs devoted to rare diseases.
Since the Orphan Drug Act was enacted, the FDA has approved more than 600 orphan drug indications across over 450 unique drug products, a significant increase compared to just 10 such approvals in the decade before the law was passed.
Regulatory pathways
While the Orphan Drug Act laid the foundation, the FDA has supplemented its framework with a range of expedited programs that can overlap with orphan status, further accelerating development. Two of the most notable examples include the following:
- Fast Track designation. A process designed to facilitate the development and expedite the review of drugs that address serious conditions and fill an unmet medical need. Since many rare diseases have no approved therapies, orphan drugs often qualify for Fast Track, granting more frequent communication with the FDA and potential eligibility for priority review.
- Breakthrough Therapy designation. Granted when preliminary clinical evidence indicates that a drug may demonstrate substantial improvement over available therapies. For numerous rare conditions, "available therapies" are minimal or non-existent, allowing promising orphan drugs to access additional FDA guidance and a more rapid development timeline.
In practice, these designations can be stacked or combined. A product that secures orphan designation is also eligible to receive Fast Track or Breakthrough Therapy status, resulting in a speedy path to approval.
Challenges in orphan drug development
Despite several supportive regulatory initiatives, developing therapies for rare diseases remains highly challenging.
One of the most significant hurdles involves assembling a sufficient patient cohort for clinical trials. Because rare diseases, by definition, affect small numbers of individuals, it can be challenging to locate, enroll and retain enough participants to generate statistically robust data. In many cases, sponsors must organize multi-center or even international trials to gather the necessary patient populations, which can introduce logistical and regulatory complexities.
Another obstacle is the limited natural history data for many rare diseases. Sponsors and regulators often find it difficult to choose appropriate trial endpoints or design comprehensive studies because of a lack of historical benchmarks and an incomplete understanding of disease progression.
Additionally, when a disease is poorly understood and presents with highly variable symptoms across patients, developing consistent clinical metrics becomes even more challenging.
The high costs of R&D, combined with the need for specialized expertise, can also impede progress. Orphan drug research often involves advanced therapies, such as gene or cellular treatments, that require cutting-edge technology and compliance with rigorous manufacturing protocols. Research and production for these modalities can be prohibitively expensive, although incentives and fast-track options mitigate some of these burdens.
Market projections
Moving forward, the momentum behind orphan drugs to expected to persist. By 2030, orphan drugs are projected to nearly double their global market, increasing from 15% in 2023 to 27%. This growth is being driven by a surge in rare disease R&D and favorable regulatory policies. In fact, the global orphan drug market is expected to surpass $270 billion by the end of the decade, reflecting a compound annual growth rate of over 11%.
Ultimately, orphan drugs illustrate how targeted legislation and strategic incentives can galvanize scientific discovery for underserved patient communities while positioning rare disease therapeutics as high-yield, long-term assets.
Alivia Kaylor is a scientist and the senior site editor of Pharma Life Sciences.