Orphan Drugs: What Are They?

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In the pharmaceutical industry, the be-all and end-all is the medical drug. Yet despite the influx of breakthrough pharmaceutical treatments in recent years, achieving progress is significantly more difficult than the mainstream public is led to believe. This is where the concept of ''orphan drugs'' comes in.

Strictly defined, “orphan drug” is a designation granted to a substance that is thought to be fundamentally vital to human health but whose development comes at a prohibitive cost. First given an official status in January 1983 with the Orphan Drug Act (ODA), the term orphan drug is understood by the industry to indicate a drug which treats a rare disease affecting relatively small populations — generally less than a quarter of a million people — or whose prevalence in the national population is at a rate of less than 5 per 10,000 individuals. Such diseases are often identified as “orphan diseases,” in accordance with the drugs developed to treat them.

Additional incentives of the ODA include the following:

  • Tax credits for research conducted which can cover up to a maximum of 50% of total development costs

  • Drug developers can apply for exclusive marketing rights for the drug aside from its primary approved use

  • Orphan drugs are not subject to drug approval application fees and annual FDA product fees
Companies that choose to engage in the costly development and research of such drugs are rewarded with tax deductions and exclusive rights to marketing a given drug for a period of seven years. These guidelines have led to a large number of new drugs hitting the market over the last two decades, including many positioned as remedies to the following ailments: glioma, multiple myeloma, cystic fibrosis, phenylketonuria, and snake venom. The Office of Orphan Products Development (OOPD) officially lists a total of 1,129 orphan drug designations as having been granted from January 1983 to June 2004. 249 of these orphan drugs have also been granted marketing rights in the United States.

The most lucrative of orphan drugs according to worldwide sales was Amgen’s Erythropoietin (Epogen), which generated a total of $2.4 billion in 2003.

Orphan drugs must adhere to the same standards are regularly formulated drugs, meeting the established criteria of stability, safety, and efficacy. The only substantive differences lie in the gathering of data and the attendant statistical variance.

Government intervention (and thereby influence) is a natural condition of the orphan drug industry, which relies heavily on federal dollars to execute drug development. This policy has over the years generated a wealth of criticism from free market opponents who maintain that government involvement should be kept to an absolute minimum in private industry and that such involvement demonstrates a failure of the system. Advocates counter with the argument that government is necessary in the matters of drug development and safety testing, without which many drugs would have a much more difficult time coming to the market, in some instances not developing beyond the initial stages at all.
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