The Orphan Drug Act: Legal Overview and Policy Considerations

The Orphan Drug Act: Legal Overview and Policy Considerations

March 5, 2024
The Orphan Drug Act: Legal Overview and Policy
Considerations
Just under half of all Food and Drug Administration (FDA)
drug. Additionally, if the FDA has already designated and
drug approvals between 2017 and 2021 were for orphan
approved an orphan drug for a particular rare disease or
drugs, which are drugs used to treat rare diseases or
condition, a manufacturer may receive a subsequent orphan
conditions. Historically, orphan drugs received little
designation for a drug with the same active ingredient or
attention from drug manufacturers, as their development
active moiety that is used to treat the same disease or
was often financially infeasible due to high cost and an
condition if it can present a “plausible hypothesis” that the
inability to recoup those costs as a result of small patient
second drug is clinically superior to the first.
populations.
Orphan-Drug Exclusivity
Congress enacted the Orphan Drug Act (ODA) (P.L. 97-
The FDA may grant regulatory exclusivity to certain
414) in 1983 as a way to “facilitate the development of
products upon approval or licensure. During the exclusivity
drugs for rare diseases or conditions.” The ODA attempts to
period, the FDA may not approve another application for a
balance the competing interests of pharmaceutical
competing product. For example, if a drug manufacturer
companies and patients with rare diseases by creating
receives FDA approval to market a drug designated as an
financial incentives for companies to develop and market
orphan drug, the manufacturer is generally entitled to a
orphan drugs in the United States. The ODA amends the
seven-year market exclusivity period. During the
Food, Drug, and Cosmetic Act (FDCA) to create two
exclusivity period, the FDA cannot approve an application
primary mechanisms to encourage orphan drug
from a different drug manufacturer to market the same drug
development: orphan-drug designation (described in 42
for the same disease or condition.
U.S.C. § 360bb), and market exclusivity (described in 42
U.S.C. § 360cc). Since the ODA’s enactment, the FDA has
Similar to the ODA’s orphan-drug designation provisions,
approved more than 500 orphan drugs. The mechanisms of
its market exclusivity provision was designed to spur
designation and market exclusivity, explained further
innovation in the orphan drug arena. For example, the
below, are designed to spur continued innovation in the
statute provides an exception to the seven-year exclusivity
orphan drug field.
period so that the FDA may approve a competing orphan
drug if it finds that the manufacturer of the original orphan
Orphan-Drug Designation
drug cannot provide sufficient quantities of the drug to meet
Drug manufacturers or sponsors may apply to obtain an
its demand. Following some litigation concerning the scope
orphan-drug designation for drugs in development at any
of the ODA’s exclusivity provisions, Congress also codified
time before the drug receives FDA approval. If granted,
the FDA’s policy of clinical superiority. After the seven-
designation enables a manufacturer to access various forms
year exclusivity period expires, the FDA will not grant
of financial assistance for drug research and development,
another market exclusivity to a subsequent manufacturer of
including tax credits for clinical testing costs, grant funding
the same orphan drug for the same disease or condition
to cover research expenses, and a waiver of the FDA’s
unless the second drug is clinically superior to the first.
prescription drug user fee if the manufacturer submits an
This requirement ensures that the seven-year exclusivity is
application for FDA approval of the drug.
not perpetual, and it encourages manufacturers to continue
researching new and improved treatments, which in turn is
Orphan-drug designations are granted by the FDA if the
intended to benefit patients.
drug is currently being or will be investigated for a rare
disease or condition and the approval or licensure of the
The FDA’s implementing regulations have narrowly
drug would be for the treatment of that disease or condition.
interpreted the ODA’s exclusivity provision in Section
The FDCA defines “rare disease or condition” as one either
360cc. For example, the regulations state that exclusivity
that affects fewer than 200,000 people in the United States
protects only the approved indication or use of a designated
or for which a manufacturer has no reasonable expectation
drug, and thus the FDA allows two different manufacturers
of recovering drug treatment research and development
to have orphan-drug exclusivity for the same drug for the
costs.
same disease, if the drug is indicated for use in different
patient populations. In other words, the FDA treats orphan-
The ODA’s orphan-drug designation was designed to
drug exclusivity as specific to the designated use or
encourage innovation and research in the orphan drug field.
indication of the drug, rather than extending exclusivity to
A manufacturer may seek an orphan-drug designation for
cover multiple indications for use. At least one federal
either a previously unapproved drug or a new use of a drug
circuit court has expressed disagreement with this
that is already FDA approved. More than one manufacturer
interpretation of the ODA, which the FDA still uses. (See,
may be granted an orphan-drug designation for the same
e.g., Catalyst Pharmaceuticals Inc. v. Becerra, 14 F.4th
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The Orphan Drug Act: Legal Overview and Policy Considerations
1299 (11th Cir. 2021)). For more information on the
34 were approved to treat both rare and common diseases,
Catalyst case, see CRS Report R47653, The Orphan Drug
suggesting that these products may represent a lucrative
Act and Catalyst Pharmaceuticals, Inc., v. Becerra, by
opportunity for manufacturers.
Hannah-Alise Rogers.
Overrepresentation of Orphan Drug Products in
Policy Considerations and Proposals for
Certain Disease Areas
Congress
A 2018 GAO report indicated that between 2008 and 2017,
Various stakeholders have identified concerns regarding the
the FDA received a total of 3,690 orphan-drug designation
FDA’s administration of the Orphan Drug Designation
applications. Of those, 3,491 had a therapeutic area
Program. These concerns include inconsistencies in the
captured in FDA’s internal database. These applications had
FDA’s review and approval processes, the high cost of
a significant focus on smaller patient populations and
orphan medications potentially leading to limited patient
specific therapeutic areas. Approximately 71% of the
utility, potential misalignment of incentives under the
applications targeted diseases affecting no more than
Orphan Drug Program, and a disproportionately high
100,000 individuals, and half were aimed at populations of
number of authorized orphan drug products that are aimed
50,000 or fewer. Over half of these applications were
at treating particular therapeutic areas. This section reviews
concentrated in the following therapeutic areas: oncology
some of these concerns and highlights possible
(30%), neurology (13%), hematology (7%), and
considerations for congressional action.
gastroenterology and liver (6%) products. The remaining
44% were dispersed across 37 other therapeutic areas, each
Issues
area representing 5% or fewer of the total applications. A
Inconsistencies in the FDA Review and Approval
more recent study estimated that there are approximately
Process
7,000-10,000 rare diseases that cumulatively affect more
A 2018 report from the Government Accountability Office
than 30 million Americans. That study further found that
(GAO) found several inconsistencies with the FDA’s
4% to 6% of rare diseases have an FDA-approved drug and
review process for orphan drug products. For example, in
that up to 15% of rare diseases may have at least one drug
its review, GAO found that the FDA had granted orphan-
that has shown promise in development.
drug designation to multiple applications that were missing
required information. GAO recommended that the FDA
Legislative and Policy Proposals
take action to improve the consistency of its reviews,
Researchers and other stakeholders have suggested various
including by clarifying some of the guidance its reviewers
policy options for optimizing the ODA. Some of the
use to evaluate orphan drug applications, which the FDA
reforms suggested include revising the definitions used for
implemented the following year.
rare diseases and orphan drugs, directing the development
of patient assistance programs to ensure eligible patients
High Cost of Approved Medications
have an affordable supply of medication, directing the
High prices may lead to decreased utilization of orphan
creation of mechanisms to better collect real-world
drug products, which may impact patient health outcomes.
evidence stemming from the use of these medications via
For example, a 2023 study assessing treatment costs of
patient registries, and ensuring payor coverage of orphan
newly approved drugs at market entry from 2017 to 2021
drugs. Other stakeholders have suggested reviewing the
indicated that drug treatment costs were higher for patients
incentivization model for orphan drugs and have proposed
who used orphan drugs than for those who did not. This
that a realignment of these incentives may allow the federal
study analyzed the treatment costs of 242 drugs approved
government to both ensure that these products are being
between 2017 and 2021, including 118 orphan drugs, and
developed for more rare diseases and that prices remain
calculated the median treatment cost for an orphan drug at
affordable to patients. Some of these stakeholders have also
more than $218,000, while the treatment cost for non-
suggested reviewing and limiting the market exclusivity
orphan drugs was just under $13,000.
granted by the ODA, including granting market exclusivity
only for drugs whose combined population across all
Potential Misalignment of Incentives Under the Orphan
orphan indications is fewer than 200,000 individuals and
Drug Program
granting market exclusivity only for those drugs that
Various stakeholders have noted instances of manufacturers
exclusively treat orphan populations.
obtaining multiple orphan designations and associated
incentives for the same drug product, as well as obtaining

orphan designations for drugs that are also used to treat
more common conditions. While the ODA’s incentives may

motivate some drug manufacturers to develop products with
multiple indications for use, some stakeholders have

expressed concerns regarding this practice. For example, a
study published in 2024 found that between 1990 and 2022,
Hannah-Alise Rogers, Legislative Attorney
of the 491 novel orphan drugs that were approved, 100
Hassan Z. Sheikh, Analyst in Health Policy
were indicated for use in both rare and common diseases.
The study also reported that of the 73 orphan drugs that
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were among the top globally selling branded drugs in 2021,

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The Orphan Drug Act: Legal Overview and Policy Considerations

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