Description: A set of incentives included extended market exclusivity introduced by government to encourage the creation of drugs which affect a small number of people.
Start date: Enacted in 1983.
Status: Operational.
The US Orphan Drugs Act of 1983 created a premium pricing model for drugs with a small market. Specifically it targeted rare diseases affecting fewer than 200,000 people.1
To incentivise drugs companies to develop drugs for such diseases, the ODA offers companies extended exclusivity on any such drugs created, on the condition that the drugs are of sufficient quantity and quality. Companies are also granted tax credits in exchange for developing such drugs.
Before 1983, only 10 orphan drugs were made. From then until 2014, over 200 were developed.2
Scope: The ODA targets only diseases which affect a small number of people. This obviously limits its potential health impact. It applies to America, and affects the licensing of drugs (rather than directly funding research).
Access: The ODA functions to increase the price of drugs because it extends market exclusivity. There is a provision in the act that a sufficient quantity of an orphan drug must be produced, and beyond this there is no distribution incentive.
Innovation: Incentives are not linked to health impact.
Efficiency: The ODA is not a particularly costly scheme to create or administer. It requires the drugs covered to be defined, but other than this no in depth measurement. It is not market-based.
Governability: The ODA is administered by the FDA.
Political Feasibility: ODAs have been successfully implemented in the USA and elsewhere. Pharmaceutical companies are supportive.
Other ODAs have been implemented by the EU, Japan, Australia and Singapore.3
The ODA includes tax credits. The Vaccines Research Relief programme in the UK also offered tax credits on R&D expenditure towards vaccines in neglected areas.4
The ODA primarily functions through extended market exclusivity. Another way of using market exclusivity to incentivise particular behaviours is Transferable Intellectual Property Rights (TIPR), where exclusivity is granted on a drug of choice in exchange for the creation of a neglected drug.
In 1997, under the Modernisation Act, the US introduced the Paediatric incentive scheme. This is very similar to ODA: it grants market exclusivity on drugs for adult consumption in exchange for trailing the drug on children. Rather than incentivising the creation of drugs, the paediatric incentive actually functions to incentivise drugs trials.5
Targeted at:
Stakeholders on board:
The US government
The FDA
Pharmaceutical companies
Patient network website: “Orphanet.” Accessed July 6, 2017. http://www.orpha.net/consor/www/cgi-bin/index.php?lng=EN.
Information about the ODA:
Commissioner, Office of the. “Developing Products for Rare Diseases & Conditions.” WebContent. Accessed July 13, 2017. https://www.fda.gov/ForIndustry/DevelopingProductsforRareDiseasesConditions/default.htm.
Interagency Task Force to the Secretary of Health, Education and Welfare. “Significant Drugs of No Commercial Value,” 1979. [https://rarediseases.info.nih.gov/files/1979_Interagency_Task_Force_Report_on_Significant_Drugs_of_Limited_Clinical_Value.pdf]{.underline}](https://rarediseases.info.nih.gov/files/1979_Interagency_Task_Force_Report_on_Significant_Drugs_of_Limited_Clinical_Value.pdf).
“Orphan Drug Act: Background and Proposed Legislation in the 107th Congress.” Library of Congress Congressional Research Service, 2001. http://digital.library.unt.edu/ark:/67531/metadc805930/.
Assessment of ODA:
Braun, M. Miles, Sheiren Farag-El-Massah, Kui Xu, and Timothy R. Coté. “Emergence of Orphan Drugs in the United States: A Quantitative Assessment of the First 25 Years.” Nature Reviews Drug Discovery 9, no. 7 (2010): 519–22.
Haffner, Marlene E. “Adopting Orphan Drugs—two Dozen Years of Treating Rare Diseases.” New England Journal of Medicine 354, no. 5 (2006): 445–47.
Debate on ODA:
Asbury, Carolyn H. “Orphan Drugs: Medical versus Market Value,” 1985. https://repository.library.georgetown.edu/handle/10822/806391.
Drummond, Michael F., David A. Wilson, Panos Kanavos, Peter Ubel, and Joan Rovira. “Assessing the Economic Challenges Posed by Orphan Drugs.” International Journal of Technology Assessment in Health Care 23, no. 1 (2007): 36–42.
Gottlieb, Joshua. “Orphan Drugs : Future Viability of Current Forecasting Models, in Light of Impending Changes to Influential Market Factors.” Thesis, Massachusetts Institute of Technology, 2011. http://dspace.mit.edu/handle/1721.1⁄65521.
Grabowski, Henry. “Increasing R&D Incentives for Neglected Diseases - Lessons from the Orphan Drug Act,” 2003.
Henry Grabowski. “INCREASING R&D INCENTIVES FOR NEGLECTED DISEASES – LESSONS FROM THE ORPHAN DRUG ACT,” 2003. http://public.econ.duke.edu/Papers//Other/Grabowski/Orphan_Drug.pdf.
Villa, Stefano, Amelia Compagni, and Michael R. Reich. “Orphan Drug Legislation: Lessons for Neglected Tropical Diseases.” The International Journal of Health Planning and Management 24, no. 1 (March 2009): 27–42. doi:10.1002/hpm.930.
Wellman-Labadie, Olivier, and Youwen Zhou. “The US Orphan Drug Act: Rare Disease Research Stimulator or Commercial Opportunity?” Health Policy 95, no. 2 (2010): 216–28.
General information:
Hoffman, Steven J., and Karen So. “Assessing 15 Proposals for Promoting Innovation and Access to Medicines Globally.” Annals of Global Health, Tropical Medicine in the Era of Global Connectivity, 80, no. 6 (2014): 432–43. doi:10.1016/j.aogh.2015.02.004.
Fehr, Angela, Petra Thürmann, and Oliver Razum. “Expert Delphi Survey on Research and Development into Drugs for Neglected Diseases.” BMC Health Services Research 11 (2011): 312. doi:10.1186⁄1472-6963-11-312.
Towse, A. “A Review of IP and Non-IP Incentives for R&D for Diseases of Poverty. What Type of Innovation Is Required, and How Can We Incentivise the Private Sector to Deliver It?,” 2005. http://www.who.int/intellectualproperty/studies/A.Towse.pdf?ua=1.
