Definitions

orphan drug

orphan drug

orphan drug, drug developed under the U.S. Orphan Drug Act (1983) to treat a disease that affects fewer than 200,000 people in the United States. The orphan drug law offers tax breaks and a seven-year monopoly on drug sales to induce companies to undertake the development and manufacturing of such drugs, which otherwise might not be profitable because of the small potential market. (Of the 5,000 diseases covered under the act, 47% affect fewer than 25,000 people.) The law has led to the introduction of valuable new drugs for the treatment of rare diseases, but some drug companies have been accused of abusing the law's provisions by making inordinately high profits on orphan drugs under monopoly. Since the 1983 act went into effect, many orphan drugs have been approved, including those for the treatment of such conditions as AIDS, cystic fibrosis, blepharospasm (uncontrolled rapid blinking), and snake bite.
In the U.S., an orphan drug is any drug developed under the Orphan Drug Act of January 1983 ("ODA"), a federal law concerning rare diseases ("orphan diseases"), defined as diseases affecting fewer than 200,000 people in the United States or low prevalence is taken as prevalence of less than 5 per 10,000 in the community. This has been adopted as a subclause of the Food and Drug Administration (FDA) regulations. The granting of orphan drug status is designed to encourage the development of drugs which are necessary but would be prohibitively expensive/un-profitable to develop under normal circumstances. Because medical research and development of drugs to treat such diseases is financially disadvantageous, companies that do so are rewarded with tax reductions and marketing exclusivity (a "monopoly") on that drug for an extended time (seven years post-approval). The concept behind the ODA is that the longer period of exclusivity will encourage more companies to invest money in research. Under the act many drugs have been developed, including drugs to treat glioma, multiple myeloma, cystic fibrosis, phenylketonuria and snake venom. In the US, from January 1983 to June 2004, a total of 1,129 different orphan drug designations have been granted by the Office of Orphan Products Development (OOPD) and 249 orphan drugs have received marketing authorization in the US. In contrast, the decade prior to 1983 saw fewer than ten such products come to market.

A similar status exists in the European Union, administered by the Committee on Orphan Medicinal Products of the European Medicines Agency (EMEA). In late 2007, the FDA and EMEA had come to an agreement whereby the same application could be used for both agencies, thereby reducing the time and finances required of companies to apply for orphan drug status. However, the two agencies still maintained separate approval processes.

In 2003, the leading orphan drug by worldwide sales revenue was Amgen’s Erythropoietin (Epogen), with sales of $2.4bn.

Development of orphan drugs

Orphan drugs generally follow the same regulatory development path as any other pharmaceutical treatment. Testing focuses on the characterization of the molecule(s), stability, safety, and efficacy. However, some statistical burdens are reduced. For example, the regulations generally reflect the fact that it is not possible to test 1,000 patients in a Phase III clinical trial when fewer than 1,000 patients have the disease in question.

Since few markets would naturally exist to create these goods, as the costs of developing, researching and producing this drug would likely exceed any revenues, government intervention is required, usually to establish such a market or to produce the goods itself. Critics of the free market often cite this as a market failure in free market economic systems. Free market advocates often respond that, without government intervention in the form of extensive safety and efficacy testing, the development costs would be considerably lower.

The intervention by government can take a variety of forms:

  • Tax benefits to companies who produce or research these drugs
  • Granting of additional rights above and beyond those granted by the regular patent laws.
  • Subsidizing and funding clinical research by universities and industry sponsors to develop medical products (including drugs, biological products, devices, and medical foods) for rare diseases.
  • Creating a government-run company to research and produce drugs (see Crown corporation for an example of this type of solution).

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