FDA and orphan drugs - one of the other “monopoly makers”

The FDA-regulated industries have many non-patent tools at their disposal to achieve and/or ensure market exclusivity for their products. One of the least well known of the FDA “monopoly makers” is the Orphan Drug Act of 1983. Under the Act, the FDA is able to grant orphan drug status to a drug intended to treat a disease or condition that affects fewer than 200,000 annually in the United States. If a company is successful in having a drug approved under orphan status, the company gets FDA-backed market exclusivity for seven years.

The Act was initially put in place to create an incentive for drug companies to invest in the development of drugs with limited markets (the long-tail of the medicine market). The statutory incentives include the exclusivity period and tax credits. The Act was widely viewed as a necessary precursor to such investment, and very few, if any, believed it would operate to generate any significant profit for the companies.

But all of that has changed. FDA’s orphan drug program has indeed created significant research and development investment into areas that likely would not have seen such activity but for the incentives created by the Act. By most measures, it has been an enormous success.

Here’s the twist — many of the 260 orphan drugs on the market have generated significant revenue and profit for the sponsor companies. Indeed, some orphan drugs have achieved blockbuster status (annual revenue exceeding $1B US) and, apparently, over 1,400 orphan drugs are currently under development. Numbers like these are making the orphan drug program a serious consideration in the protection of many types of pharmaceutical and biotech innovations.

Need an introduction? The Wall Street Journal ran an in-depth article today that provides an overview of the program and the current flood of interest it is attracting. The article portrays the transformation that the program has undergone and hints, not-so-subtly, at the irony surrounding the current use of the program. The article appears on the front-page of today’s print edition and is available on-line with a subscription. For more information on the program, visit the excellent website of FDA’s Office of Orphan Products Development.