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January 24, 2023

Orphan drugs incentives and guidelines in 2023

A guide to applying for orphan drug status, including guidelines, incentives, and common challenges.
orphan drugs incentives and guidelines

Orphan drugs are treatments designed to treat rare disorders, rare diseases, and rare conditions. Pharmaceutical companies often overlook these orphan medicines and therapies due to the small target patient population, lack of knowledge about rare conditions or rare disorders, and limited economic viability. To encourage ongoing research, development, and clinical trials of orphan drugs, the US FDA has implemented several incentives and guidelines to encourage the development of these orphan medicinal products. Without any incentive, a pharmaceutical company or life science company might be less inclined to pour resources into studying rare conditions and orphan products development. What are the current orphan drugs incentives and guidelines that encourage research into treatments for rare diseases?

Orphan drug incentives to advance medicine

The goal of orphan drug incentives and guidelines is to encourage the development of rare disease drugs and orphan medicines through an incentive approach, which otherwise might not be commercially viable. These incentives and guidelines can be updated to reflect the industry’s and patients’ changing needs.

The Orphan Drug Act of 1983

The Orphan Drug Act of 1983 was established to promote the development of drugs, biologics, and devices that could effectively treat rare diseases or conditions.

A disease or condition is classified as rare if it affects fewer than 200,000 people total in the United States, or if the cost of developing a drug and making it available in the United States for such diseases or conditions will exceed any potential profits from its sale.

Since the establishment of the Orphan Drug Act, more than 4,500 orphan designation requests have been granted, and more than 730 drugs and biologic products have been developed and approved for more than 250 rare diseases. By contrast, before the Orphan Drug Act, fewer than 10 orphan drug products were brought to market between 1973 and 1983.

The orphan drug market challenges drug companies due to the small target population size. Companies are unlikely to earn back the cost of research and development. In response, the incentives in the Orphan Drug Act make orphan drug development more economically viable. The incentives include:

7 years of market orphan drug exclusivity

25% federal tax credit for expenses incurred in conducting clinical trial and research within the US
Waiver of Prescription Drug User Fee Act (PDUFA) fees for orphan drugs
Ability to compete for research grants from the Office of Orphan Products Development
Eligibility for regulatory assistance and guidance from the FDA in the design of a drug development plan

FDA Priority Review Voucher (PRV) Program

The Priority Review Voucher (PRV) program, enacted in 2007, provides vouchers that can be redeemed for expedited review of a subsequent drug application, which may reduce the time to market. The program is tailored toward tropical diseases and rare pediatric diseases.

About a dozen vouchers have been awarded, but not without controversy – voucher prices have increased over time, and the FDA has been reluctant to relinquish its purview to award priority review.

FDA Orphan Drug Designation

The FDA can grant this status to drugs promising in treating, preventing, or diagnosing rare diseases. According to the FDA, “Sponsors seeking orphan drug designation for a drug must submit a request for designation to the agency. Sponsors requesting the designation of the same drug for the same rare disease or condition as a previously designated product must submit their data and information to support their designation request.”

It’s important to note that orphan drug designation is separate from seeking approval or licensing. Drugs for rare diseases undergo the same rigorous scientific review process as any other drug.

Orphan Product Grants Program

Under the FDA’s Orphan Products Grants Program, clinical investigators may be awarded grants to support the development of safe and effective medical products for patients with rare diseases. The program has supported clinical trial research since 1983 and has funded successful rare disease clinical trials that have facilitated the approval of more than 80 products.

Since 2016, the FDA has funded natural history studies to address significant unmet medical needs for patients with rare diseases. Unlike common diseases, where there is a large pool of existing knowledge, rare diseases are challenged by major limitations on day-to-day function, core unmet needs, and other aspects that make drug development challenging.

Medicare coverage

Orphan drugs are generally covered by Medicare, which helps ensure that patients have access to these treatments. Most of the highest-expenditure drugs in Medicare have been granted at least one orphan designation, qualifying their manufacturers for Orphan Drug Act financial incentives. According to the US Department of Health and Human Services Office of Inspector General:

“Some of these orphan drugs have managed to generate significant Medicare expenditures and billions of dollars in annual revenue while treating only rare diseases and conditions. However, orphan drugs are not limited to the treatment of rare diseases or conditions. Although 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 diseases or conditions.”

Furthermore, orphan drug exclusion from specific pricing plans could provide significant financial incentives for drug manufacturers to seek orphan designation for drugs approved to treat common diseases or conditions.

How to adapt to the changing industry

As mentioned, guidance around orphan drug designation and incentives can be changed and altered in response to market needs, scientific developments, or a changing regulatory environment. Other changes are happening, too: technology is evolving to support how pharmaceutical companies approach all aspects of orphan drug development, from identifying experts and patient populations to developing study protocols and determining market access.

Developing drugs for rare diseases is lengthy and complex. During the time it takes to research an orphan drug, the market landscape may change, new data may be released, and researchers may move on to other projects or companies. Therefore, a pharmaceutical company or life science organization must use workflows that support this complexity and allow agility.

Pharma teams can use an insights management platform built specifically for the life science industry – supporting compliance requirements, enabling frequent touchpoints to discuss data and design study protocols, and using advanced technology to identify trending concepts quickly. This technology can help teams manage insights from the early stages of pre-clinical testing through launch and post-market monitoring, reducing complexity and enabling teams to be on the same page during a plan for orphan drug development.

Learn how a Within3 client used the platform to obtain feedback on educational materials from patients living with a rare disease.


Avalere. FDA priority voucher programs incentive for industry to develop novel treatments.
National Cancer Institute. Orphan Drug Designation.
FDA. Designating an orphan product: drugs and biological products.
FDA. Orphan drug grants program.
DHHS, Office of Inspector General. High-expenditure Medicare drugs often qualified for Orphan Drug Act incentives designed to encourage the development of treatments for rare diseases.
FDA. Medical products for rare diseases and conditions.
FDA. Rare Diseases: Common Issues in Drug Development Guidance for Industry.

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