Slide 1: The year is 1983. You are a pharmaceutical company. You can either allocate research dollars toward diseases affecting large markets (er, populations), or rare diseases with little chance to return your investment. ENTER THE ORPHAN DRUG ACT.

Slide 2: The Orphan Drug Act was created to incentivize drug development for rare conditions, defined as those affecting fewer than 200,000 people in the United States.

Slide 3: The act’s stipulations:
1. Exclusive marketing rights (no generics) for 7 years to drugs indicated for rare diseases
2. A 25% tax credit for the cost of clinical research*
* Reduced to 25% from 50% in 2017

Slide 4: In recent years, the pharmaceutical industry has taken advantage of the law and the financial protection it provides. It is unclear if the Orphan Drug Act can continue to fulfill its purpose as currently written.

Slide 5: As Drs. Sarpatwari and Kesselheim write in NEJM, the threshold of 200,000 patients may have correlated with potential to profit in 1984. However, “the pharmaceutical market has undergone radical changes…including dramatically increased prices for rare-disease drugs.”

Slide 6: The act’s pitfalls:

Redundant funding
Orphan drug designation has been awarded to drugs whose indications were later broadened to include more common diseases. But this doesn’t stop the drug from receiving orphan incentives.

Orphan drugs are already profitable
The pricing of orphan drugs is often astronomically inflated, resulting in large profits despite small treatment populations.

More orphan drugs than ever before
As advances in genomics and biomarkers allow for more individualized medicine, it has become easier to label conditions as a “rare disease,” meaning more drugs will qualify for benefits.

The Food For Thought

The Orphan Drug Act was designed to incentivize drug development for rare conditions, but in the years since its conception both the pharmaceutical industry and scientific landscape of disease have changed a lot.


  • US Food and Drug Administration. The Orphan Drug Act. 1983. Link.
  • Sarpatwari A, Kesselheim AS. Reforming the Orphan Drug Act for the 21st Century.
    N Engl J Med. 2019 Jul 11;381(2):106-108. PMID 31291512.