Funding Orphan Drugs: Pitfalls of the Orphan Drug Act

| October 19, 2012 | 0 Comments

By Yvette Leung

Image credit: Town of Greece, NY.

The debate over cost and access to drugs has long raged between patients, health advocates, and pharmaceutical companies. For patients with “orphan diseases,” or rare diseases which affect fewer than 200,000 people in the United States, this debate becomes particularly acute, as the Orphan Drug Act passed by Congress in 1983 threatens to drive up prices for highly specialized treatments.  The central rationale behind this piece of legislation was to provide an incentive for private industry to invest resources into developing drugs to treat an extremely small patient pool. The law itself gives exclusive marketing rights for seven years to sponsors of drugs designated as having “orphan status,” a tax credit of half the cost of conducting clinical trials with human subjects, and research grants to promote the development of new treatments for orphan diseases. While the Orphan Drug Act has helped to bring drugs for rare diseases to millions of patients and continues to stimulate research and development of orphan drugs, the law is certainly not without its problems and caveats.

The loose definition of “rare diseases” put forth by the Orphan Drug Act allows for many loopholes through which drug companies are able to manipulate the Orphan Drug Act to support and finance drugs which could be extremely profitable. In particular, since the Orphan Drug Act specifically grants orphan drug status to a specific use of a particular drug, it is possible to impose specific constraints to obtain orphan drug status for multiple uses of the same drug. Known as “salami slicing,” this practice of breaking down the overall market of a drug into smaller components each with less than 200,000 patients by imposing specific medical prerequisites and constraints allows for certain drugs which target relatively common diseases to qualify for orphan drug status when used to treat a particular subset of patients with the disease.

Revealing examples of drugs which fall under this category are those which are designed to treat different kinds of cancer or AIDS, which are extremely profitable even without orphan drug designation. Among the many factors which the Orphan Drug Act does not take into account is that patient population can rise sharply, especially for diseases such as AIDS, which should theoretically cause conflicts with the granting of orphan status to drugs which target AIDS and other rapidly spreading diseases. While the Office of Orphan Product Development continues to strive for increasing regulations and transparency on what can be considered for orphan drug status, there continues to be a need for ensuring that drugs with orphan status are accessible by those who need them most.

Due to the increasing numbers of drugs being granted orphan status, the Orphan Drug Act has been both encouraging and suppressing competition amongst pharmaceutical companies. While companies are more pressed to compete and get their drug to the market first in order to obtain the exclusive marketing rights over the drug, other pharmaceutical companies which manufacture a similar drug with the same orphan status designation will effectively be shut out of the market for the drug for the next seven years. At the same time, since only one company will end up acquire marketing exclusivity, manufacturers of drugs are able to block competition if their drug is the first of its kind to hit the market. While other companies were blocked from marketing their erythropoietin drug, Amgen was able to attain the exclusive rights to sell their erythropoietin drug which has been approved for orphan drug status for treating anemia in several different contexts, including in AIDS patients and premature infants. Since it was approved for treatment of anemia in 1989, erythropoietin has since become one of the most successful drugs in history, with Amgen reaping in profits both during the initial seven years and beyond. This immense profitability of an orphan drug has caused many to rethink the purpose of the Orphan Drug Act and whether or not orphan drug status is warranted for drugs like erythropoietin which have become so lucrative that reducing competition serves to only decrease access to a drug and create opportunities for companies to drive up prices since they are the sole manufacturers of drugs which are often one of only few treatments for the rare disease in question. The traditional view of the Orphan Drug Act as a way in which to make unprofitable drugs and treatments profitable has increasingly been overturned in recent years with the advent of increasingly profitable orphan drugs, prompting the Orphan Drug Act to come under attack for protecting pharmaceutical manufacturers from competition and effectively allowing these companies to monopolize a particular market for their specific drug.

The question of access is a pressing matter which immediately affects the lives of those who suffer from these rare diseases. Recently, a controversy sparked over the pregnancy drug Makena, which is given to women with a high-risk of premature delivery. Having had Makena approved for orphan drug status under the Act, the pharmaceutical company thus became entitled to exclusive rights over the drug. Shortly after the drug was approved for orphan status, the price of Makena skyrocketed from $20 per dose to nearly $1,500, raising the total cost of the drug during a pregnancy to the exorbitant cost of $30,000. With such a huge increase in costs, patients who require Makena have been deterred or prevented from using the drug entirely.

This issue perhaps underscores an underlying issue which the Orphan Drug Act must address. Does giving exclusive rights to a drug company and effectively eliminating competition for seven years worth the trade-off of incentivizing research and development of orphan drugs? Are there ways to set up regulations to prevent the abuse of orphan drug status by companies which reduce drug access by driving up costs for further profit? How can we modify the definition of rare diseases to prevent “salami slicing” in the future? Is the solution to allow competition between companies which manufacture the same drug approved for orphan status? While we applaud the successes of the Orphan Drug Act and the millions of patients who have been positively impacted, it is also imperative for us to step back and consider ways in which to revise and improve the Orphan Drug Act to increase transparency between drug companies and the FDA, and to impose stricter criteria so that access to these drugs is not compromised by the financial prospects of selling increasingly lucrative drugs.


  • US Food and Drug Administration, n.d. Web.
  • “FDA opens up competition for pregnancy drug.” Los Angeles Times 31 Mar. 2011, Pharmacies: n. pag. Web.
  • Office of Inspector General, ed. The Orphan Drug Act: Implementation and Impact. Department of Health & Human Services USA, May 2001. Web. < oei-09-00-00380.pdf>.
  • Pollack, Andrew. “Orphan Drug Law Spurs Debate.” The New York Times 30 Apr. 1990, Health: n. pag. Web.
  • “Sacrificing the Cash Cow.” Nature Biotechnology 25.363 (2007): 363. Print.
  • US Food and Drug Administration: For Industry. U.S. Department of Health & Human Services, n.d. Web. <>.

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Category: Policy, Print, Spring 2012, Student Submissions

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