This year marked the 14th annual Rare Disease Day, which highlighted the reality that more than 90% of rare diseases still have no FDA-approved treatment.

The orphan drug market is dedicated to treating diseases that are considered rare and life-threatening to a small patient population. In the U.S., a rare disease is one that affects fewer than 200,000 people; approximately 7,000 rare diseases have been identified. While a rare disease affects a small number of people, in totality, rare diseases affect more than 25 million Americans, according to the National Organization for Rare Disorders.¹

Despite the opportunities in the orphan drug market, there are challenges that may act as barriers to entry. For instance, the cost of development is typically much higher than therapeutics for more common diseases due to less availability of clinical trial participants. Additionally, the lack of prevalence of a particular disease can limit investment in the research and development required as evidence of the safety and efficacy of the treatment.

Fortunately, there are drug developers who have not been dissuaded by these obstacles. In 2020, the FDA approved 32 novel drugs and biologics with orphan drug designation, up from 22 in 2019. In the Center for Drug Evaluation and Research (CDER), 31 of the 53 novel drug approvals, or 58% (up from 44% in 2019), were orphan-designated products. And in the Center for Biologics Evaluation and Research (CBER), one of five novel biologic approvals, 20%, was an orphan-designated product and another of these five approvals, although not orphan designated, was for use in a rare disease.²

The increase in approvals is leading industry experts to value the global orphan drug market at $300 billion by 2026, more than 20% of global prescription drug sales³, up from $132 billion in 2019.⁴ This growing orphan drug market will beget a rise in research and development, and in competition. So, it is important that sponsors – especially those applying for orphan drug designation for the first time – understand how to prepare for and request an FDA orphan drug designation, and what entitles a drug to receive that eligibility status.

Before progress can be made in developing treatments for unmet medical needs, one must understand the history of orphan drug designation. The 1983 Orphan Drug Act (ODA), signed into law by President Ronald Reagan, completely changed the face of therapeutics for rare disorders.

The ODA provides:

• Tax credits up to 50% for research and clinical drug testing expenses;
• Eligibility for market exclusivity for seven years post-approval for the first orphan drug approved for a given indication; one drug may receive multiple exclusivities under one ODD;
• Waiver of new drug application (NDA)/ biologics license application (BLA) application fee (approximately worth $2.2 million); and
•  Pediatric Research Equity Act exemption.

In addition, the ODA authorizes FDA to designate drugs and biologics for orphan status (the first step to getting orphan development incentives) and provide grants for clinical testing of orphan products and offer assistance in how to frame protocols for investigations. A subsequent amendment defined a rare disease as one affecting under 200,000, however, a disease with more patients could qualify for ODD, if the firm could not recover the costs of developing the drug. Before the ODA, only 38 orphan products existed.