The Orphan Drug Act at 40: Legislative Triumph and the Challenges of Success

Abstract

Policy Points.

• The Orphan Drug Act (ODA) was the result of patient advocacy and by many measures has been strikingly successful. However, approximately 95% of the more than 7,000 known rare diseases still have no US Food and Drug Administration–approved treatment.

• The ODA's success led to sustained criticism of high drug prices, often for products that have orphan drug indications. Critics misconstrue the ODA's intent and propose reducing its incentives instead of pursuing policies focused on addressing broader prescription drug price challenges that exist in both the orphan and nonorphan drug market.

• Patients and their families will continue to defend the purpose and integrity of the ODA and to drive investments into rare disease research and clinical development.

Forty years ago, congress enacted the orphan drug act of 1983 (ODA), one of the most important and successful US laws to stimulate global life science innovation. ¹ A striking product of grassroots patient advocacy, the ODA has served as the model not only for orphan drug legal frameworks in the European Union, Japan, and other countries ² but also for subsequent US laws intended to correct other market failures of public health importance, such as the dearth of antimicrobial drug development. ³

Orphan drugs are those intended to treat rare diseases or conditions that affect fewer than 200,000 Americans or more than 200,000 patients, or for which “there is no reasonable expectation” that the costs of development are recoverable in the United States. ¹ , ⁴ Before 1983, only 38 drugs to treat rare diseases had been approved by the US Food and Drug Administration (FDA). As of the end of 2022, the FDA has approved 882 different drugs for use in the treatment of 392 rare diseases. ⁵ , ⁶ Nevertheless, these achievements pale against the burden of the unmet medical needs of patients with rare diseases. More than 30 million Americans are living with a rare disease—a prevalence comparable with type 2 diabetes—and 95% of the more than 7,000 known rare diseases do not yet have an FDA‐approved treatment. ⁶ , ⁷

Intent of the ODA

Former Congressman Henry Waxman designed the law around three major provisions—7 years of market exclusivity concurrent with patent protection, a 50% federal tax credit to defray clinical testing expenses, and research grants—to correct the “inherent financial disincentives to producing orphan drugs” in “our country's system of discovering and developing new drugs” that had “failed to serve millions of people… who suffered from rare diseases.” ⁸ , ⁹ Informed by the findings of a 1979 FDA task force, ^{8 p60} Waxman was also driven by the stories of patients and patient advocates such as Abbey Meyers and Muriel Seligman, who “described lives of helpless isolation, driven by the unending and often futile search for answers about their condition.” ^{8 p59}

It is ironic Waxman had to surmount “stiff resistance” from the pharmaceutical industry to enact what became a cornerstone of global investment and innovation in rare disease therapeutics. ^{8 p65‐70} Equally instructive is Waxman's chronicling of the bipartisan, bicameral congressional support that was instrumental to enacting the law and remains the hallmark of continuing federal support for rare disease innovation. ⁸

Measures of Success

The law proved a timely, crucial framework for converging, contemporaneous trends: the rapid growth of the biotechnology industry in investments, ventures and partnerships, and development programs ¹⁰ ; commercialization of the landmark federal Human Genome Project ¹¹ , ¹² ; and the FDA's improved timeliness and sustained rigor in its premarket review of new drugs. ¹³

The results have been impressive. As of November 28, 2023, there have been a total of 6,670 orphan drug designations and 1,184 orphan drug indications approved. ¹⁴ Orphan drug designations “more than doubled between the 1980s and 1990s, almost doubled between the 1990s and 2000s, and almost tripled in number between the 2000s and 2010s.” ¹⁵ The “drug lag” of the 1980s and 1990s, with new drugs approved first abroad, disappeared. Orphan drugs now constitute almost two‐thirds of arguably the most innovative drugs reviewed by FDA—a trend “likely to continue.” ¹⁶ Fully 20 of the 37 novel drugs approved by the FDA's Center for Drug Evaluation and Research (CDER) last year were orphan drugs; in 2021, it was 26 of 50. ¹⁷ , ¹⁸ In the near future, analysts estimate that orphan drugs will be a third of the global pipeline of drugs in development. ¹⁹

Criticisms of Orphan Drug Pricing

From the onset, the commercial success of “blockbuster” orphan drugs sparked scrutiny of high launch prices and the degree of federal investments enabling their commercial development. ²⁰ , ²¹ In 1990, Waxman authored an amendment to reassess orphan drug exclusivity after 3 years; despite passing Congress, it was vetoed by President George H.W. Bush. ²² By 1994, even the biotechnology industry was willing to reduce ODA exclusivity to 5 years, with a 2‐year extension for drugs treating patient populations of less than 100,000. ²³

That year, Waxman, with Senators Howard Metzenbaum and Nancy Kassebaum, unsuccessfully proposed reducing 7 years to 4 years, extenible by another 3 for drugs with “limited commercial potential.” ²⁴ Waxman argued that “the incentives in the Act [should] continue to be generous” but that “we do not want the Act used for blockbuster drugs which clearly would have been developed without [them].” ²⁵

Ultimately, the ODA's market exclusivity has remained unchanged, but criticisms of orphan drug pricing have only gained momentum. In 2017, without oversight or legislative hearings to substantiate the decision, and despite extensive evidence of its efficacy, Congress cut the orphan drug tax credit in half to 25% of qualified clinical testing expenses. ²⁶ , ²⁷ Rather than reverse this unfounded choice, House Democrats in the 117th Congress proposed further limiting the tax credit to only the first approved orphan drug use of a drug as part of the unsuccessful Build Back Better Act, although this change was not included in the Inflation Reduction Act subsequently enacted in 2022. ²⁸ , ²⁹

The tension between the persistent market failure in addressing financially unattractive rare diseases that maintain the ODA's necessity and the evident market success of orphan drugs that are actually developed remains. A 2021 US Department of Health and Human Services (HHS) Office of the Inspector General (OIG) study examined the ODA's incentives in relation to the 40 therapies with the highest Medicare Part B and Part D expenditures. ³⁰ Underscoring the financial returns of rare disease development, the OIG found that half of these drugs were orphan drugs, and 12 were approved for multiple rare disease indications. But, as the FDA noted in its response to the OIG, these drugs represented “only 4% of all orphan‐designated drugs with FDA approval for rare disease indications” and were among the 40 studied drugs because they “are primarily used for their common disease indications.” ^{30 p26}

In the absence of an indication‐based pricing or reimbursement system for therapies that treat multiple conditions, the ODA incentives remain of benefit to sponsors who develop orphan drugs that are also approved for more common conditions. The OIG concluded rightly that “[a]lthough the vast majority of orphan drugs treat only rare diseases or conditions, many of the high‐expenditure orphan drugs included in our review were originally approved—and are still primarily used—to treat relatively common conditions.” ^{30 p14} It is debatable whether these or other successful orphan drugs are, in the words of Congressman Waxman, “blockbuster drugs which clearly would have been developed without” the ODA—and it remains to be seen whether Congress will consider future amendments to the law's incentives.

Continued Congressional Stewardship of the Act

Despite ongoing pricing critiques, independent evaluations of the law, such as a 2018 Government Accountability Office (GAO) study, have consistently reinforced that “rare disease drug development challenges continue.” ³¹ , ³² To offset these challenges, and in striking counterpoint to its curtailment of the orphan drug tax credit, Congress has in fact tailored in the past few decades an array of new policies complementary to the ODA's intent.

• In 1997, Congress waived the user fees being established and collected by the FDA for the review of new drug applications solely seeking approval of orphan drug indications. ³³ Congress has continued to waive the user fees for these specific applications in subsequent reauthorizations of this law, the most recent of which was signed into law in 2022. ³⁴

• In 2003, when Congress enacted the Pediatric Research Equity Act to require pediatric studies of premarket applications for new active ingredients, indications, dosage forms, dosing regimens, and routes of administration, it included an exemption for orphan drug‐designated drugs. ³⁵

• As part of the Affordable Care Act, Congress established an annual fee on branded prescription drug manufacturers relative to their share of sales to government programs such as Medicare and Medicaid totaling $2.8 billion per year but exempted qualifying orphan drugs sales, so long as those drugs are not otherwise approved for non‐orphan drug indications. ³⁶

Over the years, disputes over the ODA's implementation have also spilled into the courts, and patient advocacy has been central to crafting consensus amendments to correct the resulting disruptive caselaw. ³⁷ , ³⁸ In November 2021, an appeals court reversed the FDA's decades‐long interpretation that orphan drug exclusivity protects the “use or indication” ultimately approved, rather than the rare disease designated at the outset of drug development. ³⁹ Historically, the FDA has approved a single drug for multiple orphan drug indications within a given rare disease when that product has proven to be safe and effective for that population; for example, one drug (ivacaftor) was broadly designated for cystic fibrosis in 2006 and received multiple approved indications that reflect the product's safety and efficacy in patients in different age categories. ¹⁴ Under the Court's interpretation of the ODA, these subsequent approvals might not have been possible and the treatment options for patients commensurately limited, with a manufacturer no longer having an incentive to continue to study the product in younger patients. ⁴⁰ Although the FDA recently announced its intent to continue to tie the scope of orphan drug exclusivity to the uses or indications for which a drug is approved, uncertainty over the scope of orphan drug exclusivity could persist without clarification from Congress. ⁴¹

Success Breeds Ill‐Conceived “Reforms”

Concerned with orphan drug profits, critics suggest there is a breakpoint when the ODA's incentives are not needed to incentivize development of rare disease indications for marketed, revenue‐generating drugs. ⁴² But focusing on the profitability of a specific drug for its initial approved indication loses sight of the ODA's intent to incentivize serial innovation through repurposing or developing an existing drug for another disease, especially orphan drugs that may have efficacy against multiple rare conditions. This policy imperative is often mischaracterized as a flaw or loophole or improperly labeled “evergreening,” especially in the case of “blockbuster” drugs. One frequently cited example is the drug adalimumab (Humira), which has over ten FDA‐approved indications but only four of which are for the treatment of rare diseases. Furthermore, those four indications comprised just 3.8% of Humira's $13.6 billion sales in 2016. ⁴³

Increasingly, critics misconstrue the ODA's incentives as giveaways or improbably conclude, despite the historic proliferation of orphan drug designations and product approvals cited above, as well as testimonials from federal agency leaders responsible for the ODA's implementation, that “the cost‐effectiveness of the [Orphan Drug Act's] incentives remains unknown.” ⁴⁴ , ⁴⁵ Others misinterpret the law to construe the ODA as affording “effectively unlimited periods of monopoly power” or claim, on the basis of analyses that exclude all biological products (a substantial proportion of new orphan drugs) that the ODA does nothing but “reward some drug manufacturers for bringing drugs to market that in all likelihood would have been produced without additional incentives.” ⁴⁶ In addition to the aforementioned 2018 GAO report, a litany of independent assessments over the past four decades offer dispositive evidence to the contrary. ¹⁵ , ⁴⁷ , ⁴⁸ , ⁴⁹ , ⁵⁰ , ⁵¹ , ⁵²

• In 1992, FDA Commissioner Kessler testified to the Senate that “[w]e must not tinker with this very successful act. I don't think we know enough about these market forces to make certain any changes we make will not hurt.” ⁴⁷

• In 2001, the HHS OIG concluded that “[t]he Orphan Drug Act's incentives… motivate drug companies to develop orphan products.” ³⁰

• In 2013, Congressman Waxman remarked at a patient conference that the ODA “had been more successful than even he imagined at the time it was written.” ⁴⁸

• In 2021, the Congressional Budget Office concluded that “[t]he Orphan Drug Act appears to have led to an increase in the number of new drugs for rare diseases.” ⁵³

• A 2021 GAO report found that “[m]anufacturers have received approval for hundreds of treatments for diseases or conditions affecting small, previously overlooked populations—treatments that likely would have never been developed without the incentives offered under the ODA.” ³⁰

Recently, critics have essentially monetized reductions in FDA review time of orphan drugs through expedited approval pathways such as Accelerated Approval, Breakthrough Therapy, and Fast Track, as financial windfalls. This line of fallacious thinking has led to the potentially harmful policy proposal of imposing higher prescription drug rebates for accelerated approval drugs, despite clear evidence that “accelerated approval drugs are not driving Medicaid spending.” ⁵³ , ⁵⁴ Such invasive proposals are propelled by a failure to fully value that such pathways were designed by Congress to speed drugs—of which orphan drugs constitute an ever‐increasing share—to patients, affording them priceless and potentially life‐saving opportunities to safely and effectively treat their diseases sooner. ⁵⁴ , ⁵⁵ In 2022 alone, such expedited review pathways were used by the CDER to review 65% of all novel drugs approved that year, and orphan drugs were found by the FDA to make the greatest use of combinations of expedited review pathways and designations to reach the market. ¹⁶ , ¹⁸

These views also explain the congressional skepticism that led to cutting the orphan drug tax credit in half and animates even more extreme proposals to “revoke” orphan drug exclusivity, force sponsors to “repay the tax credits and research grants,” or demand price‐setting as a condition of receipt of incentives ⁴² —proposals guaranteed to dramatically reduce orphan drug designations, end clinical development programs, and chill investment. ⁵⁶ In the case of the unsuccessful 1994 amendments to the ODA, protracted congressional debate over similar reductions in statutory incentives led to a third of surveyed companies attesting that “uncertainty about the future of the Orphan Drug Act was adversely affecting their decisions about orphan drug research.” ⁵⁷ Other authors suggest that the federal government dispense with the ODA's long‐standing rare population threshold and instead require the government to choose “diseases that have to date been ignored by major pharmaceutical companies” as the basis for orphan drug incentives. ⁵⁸

Alternatively, some advocate for experimenting with establishing a new threshold to create new entitlements for “ultra‐rare” patient populations, disregarding the policy risks of amending the ODA amid the aforementioned criticisms of the law's existing incentives. The reality that more than 95% of rare diseases still lack an FDA‐approved therapy, combined with a challenging political environment in which lawmakers on both sides of the aisle have shown more interest in cutting incentives for orphan drug development rather than creating new ones, makes the proposition of significantly altering the ODA very risky for the millions of Americans holding out hope for an FDA‐approved therapy to treat their conditions.

Even the historic congressional proposals to reassess or curtail orphan drug exclusivity appear to be solutions in search of a problem. A 2021 comprehensive review of 552 marketed orphan drugs found that only 394 had “some form of patent or orphan exclusivity protection,” of which 75% had only one approved orphan drug indication and no other approved use. ⁵ Significantly, only 61 of these drugs had “orphan drug exclusivity exceed[ing] the patent life,” suggesting strongly that such exclusivity is not the basis for the higher health care expenditures or launch prices of such concern to critics of the ODA. It is questionable whether additional qualitative or quantitative assessments of the ODA's incentives would reveal more than the findings of the 2018 GAO study: that they are “significant” but subject to “limitations.”

The Future of Rare Disease Innovation

Underlying much of the fault‐finding with the ODA is a fundamental failure to value patient perspectives. The mortality, morbidity and disability, cost of illness, and other economic losses for those left untreated and with unmet medical needs is almost incalculable for the over 350 to 470 million people in the world suffering from a rare disease or condition. ⁵⁹ , ⁶⁰ , ⁶¹ As the National Institutes of Health (NIH) note, “most of the approximately 7,000 to 10,000 known rare diseases disproportionately affect children, adolescents and young adults.” ⁷ Few critics appreciate that “our country's system of discovering and developing new drugs contained an important flaw” that the ODA corrects—the unique challenges of orphan drug development, including, according to the FDA, “the complex biology and the lack of understanding of the natural history of many rare diseases [and t]he inherently small population of patients with a rare disease can also make conducting clinical trials difficult.” ⁵⁹ Despite the ODA's success in dramatically increasing the number of therapies available to treat rare diseases, the challenges of developing safe and effective therapies for this underserved patient population have resulted in less than 18% of orphan drug designations leading to an FDA‐approved orphan drug indication.

The newly created Medicare Drug Price Negotiation Program, established as part of the Inflation Reduction Act, exemplifies how Congress is increasingly scrutinizing the “fit” of ODA incentives to orphan drugs that are also approved for nonorphan drug–designated uses. ⁶² The program includes an exclusion for orphan drugs that is limited to drugs only designated and approved to treat a single rare disease. ⁶³ Like the historic enactments in other policy contexts, such as financing of the Affordable Care Act's coverage expansions or user fees for FDA's drug reviews, the exclusion embodies the ongoing tension between the continuing national interest in sustaining incentives for rare disease innovation, including “repurposing” approved drugs, and high prescription drug prices—a tension likely to heighten in the future. By one forecast, by 2026, the ten bestselling orphan drugs will each have between $3 and $13 billion in global sales. ⁶⁴ In seeking to address drug pricing, however, implementation of the Inflation Reduction Act will collaterally disincentivize manufacturers from conducting research and development on drugs to treat multiple rare diseases by making such drugs eligible for negotiation if they have a second or more orphan drug designations. ⁶⁵ , ⁶⁶

Coupled with pricing policies such as the Medicare Drug Price Negotiation Program, the proliferation of health technology assessment and innovative payment reforms, such as value‐based purchasing, could either raise new barriers or facilitate patient access to potentially curative orphan drugs. Prescription drug pricing is likely to be far more susceptible to the findings and outcomes of these programs and policies, potentially diminishing the need and weaking the rationale for curtailing the ODA's incentives. At the same time, overly aggressive implementation of the Medicare Drug Price Negotiation Program, or other drug pricing reforms that fail to appropriately reflect the value these therapies provide to patients with rare diseases, could attenuate the ODA's previously successful incentives, weakening their “pull” to spur new or continued investment in developing therapies to treat rare diseases.

The same partnership of patients with rare diseases with public and private sector leaders that led to the ODA's enactment must continue to protect the ODA and ensure future innovation. Patients with rare diseases and their families are organized in hundreds of advocacy organizations, providing services, sharing resources, and educating peers; fundraising to support basic and clinical research; supporting patient registries and patient assistance programs; and volunteering for clinical trials. Their advocacy in their communities, states, and Washington, DC continues to raise awareness and improve law and policy.

The consensus of patients with rare diseases is that, rather than altering the ODA's statutory framework, more attention and resources should instead be directed toward advancing the science of understanding rare diseases and their prevalence; reducing the long diagnostic odysseys that patients with rare diseases undergo that result in “irreversible disease progression and ongoing high medical costs” ⁷ ; improving clinical education to facilitate rare disease diagnosis; and promoting public‐private partnerships to validate new assays, biomarkers, and endpoints that can facilitate clinical development of new treatments, especially for medium‐ and low‐prevalence rare diseases.

To these ends, federal agency leaders are fully engaged with patients with rare diseases. Acknowledging advances in gene therapy and gene editing, FDA's leaders have challenged the private sector to develop such treatments, including individualized “n of 1” therapies, ⁶⁷ by launching the Accelerating Rare disease Cures program ⁶⁸ and the public‐private Rare Disease Cures Accelerator, ⁶⁹ as well as, with the NIH, the Bespoke Gene Therapy Consortium. ⁷⁰ The newly established Advanced Research Projects Agency for Health (ARPA‐H) should also prioritize rare disease research breakthroughs in its investment portfolio.

Patient Experiences and Unmet Medical Needs

The true measure of the ODA's impact is in the living experiences of patients with rare diseases and their families. The experience of the Friedreich's ataxia (FA) community compellingly confirms that not only has the ODA significantly accelerated therapy development for rare diseases, it has also stimulated a remarkable change in the entire culture of rare disease therapy development. FA is a rare, relentlessly progressive neuromuscular disorder, typically diagnosed between the ages of 7 and 15, that severely impacts an individual's vision, hearing, and speech. It also greatly reduces one's strength and coordination in their arms and legs, leading to early wheelchair use, and causes curvature of the spine often requiring the implantation of metal rods to straighten it. Those living with FA also face a significantly increased risk of diabetes and, most condemningly, a serious cardiomyopathy culminating in congestive heart failure—the leading cause of death. Those diagnosed with FA only have an average life expectancy of early adulthood.

In 1997, when the FA gene was first identified, there was no treatment for FA, very little research ongoing, and no treatment options available for the thousands of young Americans living with this devastating condition. Thanks to the incredible advocacy by organizations such as the Friedreich's Ataxia Research Alliance, which was founded in 1998 by Ron and Raychel Bartek after their son Keith was diagnosed with FA at the age of 11, patients and their advocates were at the center of efforts to use the full power of the ODA to establish effective public‐private partnerships involving patient groups, academic investigators, industry, and government agencies to change the devastating trajectory of those with FA.

Two and a half decades later, the number of FA scientists has grown from the 80 who participated in the first international FA scientific conference in 1999 to the 450 who participated in the eighth such conference in November 2022. The number of industry partners has changed from zero to about four dozen, and dozens of clinical trials have been completed with another dozen underway. All this hard‐earned progress culminated on Rare Disease Day, February 28, 2023, when the FDA announced the approval of the first treatment for FA—a small molecule shown by the clinical trial data to slow the progression of the disease. ⁷¹

The experience of the patients with FA community is the proof of ODA's importance. To enable other patients to collaborate with public and private partners in finding new treatments or cures and to bring similar relief to the millions of patients living with the thousands of rare diseases that have no FDA‐approved treatments or cures, the integrity of the ODA must be preserved—a law that its author, Henry Waxman, rightly deemed “an example of government at its finest.” ⁸