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Impact of the Orphan Drug Tax Credit on Treatments for Rare Diseases

Nearly 30 million Americans suffer from a rare disease or condition. Despite the large number of patients living with rare diseases, only four percent of rare diseases have an approved treatment. As such, many patients suffering from a rare disease lack any treatment options.

Before the Orphan Drug Act (ODA) was enacted in 1983, drug developers were often hesitant to invest in developing new treatments for rare diseases because the small patient populations made it difficult to recover development costs. For rare diseases, clinical trial costs alone can total thousands of dollars per person diagnosed with the disease. Promising new drugs to treat rare diseases could languish without a sponsor willing to fund further development – hence the term “orphan drug.”

Rising investment in treatments for rare diseases can be attributed in large part to the incentives provided by the ODA. Since the law’s enactment, 486 orphan products have been approved, which includes a mix of more effective formulations, new indications, dosages, and sources of supply. In that time, more than 200 new orphan drugs have been approved by the Food and Drug Administration (FDA) – compared with only 34 approved before enactment of the ODA. This report defines new orphan drugs as new molecular entities (NMEs) and new biologic license applications (BLAs) that have been approved by the Food and Drug Administration (FDA)...