Orphan Drug Act and Its Criticism

The Orphan Drug Act of 1983 was created to encourage pharmaceutical companies to develop drugs for so-called rare or ultra-rare diseases. The National Institutes of Health (NIH) defines rare diseases as afflicting as fewer than 200,000 individuals. Generally speaking, it has worked. Many companies are willing to invest millions of dollars needed to develop the drug that has a very small market. The Orphan Drug Act largely made this possible by slashing taxes and changing a few of the regulatory hurdles on clinical trial size.

Three broad criticisms on the Act are: Firstly, the FDA is less fussy about the kind of data that it requires to approve a new drug for rare disease. In contrast, the FDA will approve new drugs for rare diseases based on short-term changes in a biomarker in only a handful of patients. As a bonus, the regulatory application for the rare disease comes with valuable fee exemptions. The FDA can easily monitor the performance of the rare disease drug once it gets approved especially when there is less than 1,000 patients prescribed to it. Thus, the FDA might view the risk/benefits of the rare disease drug differently from a drug likely to be prescribed to tens of thousands of patients immediately after launch.

Second point is that the pharmaceutical companies have found that they can charge exorbitant prices for drugs that target the rare disease. If a company is going to invest millions in developing a drug, how do they recoup the costs if there are fewer than 200,000 patients? What is often the case is, insurers find the high costs of the drugs to be less expensive than paying for the long-term care, patient visits and hospitalizations that are often associated with these diseases.

Third point seems to be that this has led to the companies acting only on greed, rather than some sort of corporate benevolence, saying, if a company decides to develop a new drug for a rare disease, the costs of development will be comparatively low, the return on investment can be enormous, and the sponsor will have marketing exclusivity for many years.

Furthermore, there can be tremendous competition in rare diseases, R&D leads to the potential for multiple entrances to treat specific rare diseases—competition that also can drive prices down.

Somewhat undercutting the entire topic is how our increasing knowledge of individuals respond to specific drugs, or more granular, our knowledge is about specific diseases, is leading to more and more focused treatments. In essence, every disease, when viewed through a lens of personalized medicine, becomes a rare disease.

Nonetheless, the Orphan Drug Act seems to have done a reasonable job of convincing biopharma companies that after all are in the business of making a profit, of placing some of their resources into developing and commercializing therapies for rare diseases.