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Orphan Drugs: A Small Market Segment With Hefty Perks

BY: Vaibhav Sivaramakrishan | Category: Healthcare | Submitted: 2010-08-14 07:18:04
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Article Summary: "Orphan drugs are pharmaceuticals which are developed to treat rare diseases. The Food and Drug Administration (FDA) has several strategies to motivate pharmaceutical companies to produce such drugs. This article summarizes the incentives offered to orphan drug manufacturers..."

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Orphan drugs are pharmaceuticals which are developed to treat rare diseases. According to the 1983 Orphan Drug Act, any disease that affects less than 200,000 people in the United States is classified as a rare disease. Cystic fibrosis is an example of a rare disease.

So what makes orphan drugs unique? As the name suggests, orphan drugs are unsupported commodities as manufacturers do not find it feasible to invest in orphan drug research. That is to say, due to the limited sale of the drug, the manufacturer will find it difficult to recover the costs of research and development. The Food and Drug Administration (FDA) has several strategies to motivate pharmaceutical companies to produce such drugs. To exploit these incentives, the sponsor who is interested in developing an orphan drug is expected to prove to the FDA that the production of the drug is not profitable.

The Incentives:
1) A seven year monopoly: Orphan drug manufacturers are given the opportunity to enjoy marketing exclusivity. On approval of an orphan drug, the FDA will not allow other manufacturers to market a drug that treats the same rare disease for a seven year period. However, marketing exclusivity may be withheld if the manufacturer does not meet the demands of patients.

2) Tax credits: The United States Internal Revenue Service offers tax credits equivalent to 50% of the cost of clinical trials. Trials conducted between the preclinical phase till the attainment of marketing approval may be considered for tax credits.

3) Getting paid to test drugs: The Orphan Products Grants Program provides funds for conducting clinical trials. The Office of Orphan Products Development (OOPD) request applications for these grants and experts review the applications. Decisions are made on a competitive basis and sponsors may get up to $200,000-$300,000 per year for three years.

4) Fee exemptions: Since 1992, the FDA has made various changes to the fee exemption criteria. In general, drug sponsors are required to pay application, establishment and product fees during the drug registration process. In 1997, the FDA completely waived the application fee for manufacturers of orphan drugs through the Food and Drug Administration Modernization Act (FDAMA). A decade later the act was amended and today new players in the market receive establishment and product fee waivers too.

5) Tips from the regulatory experts: An orphan drug sponsor has the privilege to request the OOPD for written recommendations from the FDA that will help in gaining approval for the drug. Of course, such applications are only granted if the sponsor shows that the drug is intended for a rare disease.

In recent times, there has been an increase in the frequency of the appearance of rare diseases mainly because of rapid changes in human environment and lifestyles. Research and development of orphan drugs has become more probable with the various incentives offered to sponsors by regulatory authorities. Small and medium sized enterprises are finding it easier to penetrate into the market with the help of local and international governments. Although orphan drug manufacturers may need to initially struggle to win market exclusivity, the rewards in the long run are valuable.

1) Seoane-Vazquez E, Rodriguez-Monguio R, Szeinbach SL, Visaria J. "Incentives for orphan drug research and development in the United States". Orphanet J Rare Dis 2008;3:33. [PubMed: 19087348]
2) Pisano, D.J., Mantus, D.S., FDA Regulatory Affairs: A Guide for Prescription Drugs, Medical Devices, and Biologics, New York; Informa Healthcare, 2008, pp. 167-.
3) Tobin, J.J., Walsh G., Medical Product Regulatory Affairs: Pharmaceuticals, Diagnostics and Medical Devices, Weiheim, Germany; Wiley-VCH, 2008, pp.91-95
4) Feinberg D.B., Pharmacy Law: Textbook and Review, New York; McGraw-Hill Medical, 2008, pp. 21-27
5) United States Food & Drug Administration, Developing Products for Rare Diseases & Conditions, Retrieved June 6, 2010, from FDA Website
6) United States Food & Drug Administration, Code of Federal Regulations Title 21 Part 316, Retrieved June 6, 2010, from FDA Website

About Author / Additional Info:
An undergraduate biotechnology student with an interest in regulatory affairs.

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