What is orphan drug status?
Orphan drug status gives companies researching cures for rare diseases a seven-year window of tax reduction and the exclusive right to develop a cure for a specific condition. Orphan drug status can be granted to new drugs, already approved drugs, or drugs that are already on the market. However, if the drug is already approved, the sponsor must present a plausible hypothesis about how the drug is clinically superior to older drugs or undeveloped drugs.
- Orphan drug status gives companies exclusive marketing and development rights along with other benefits to recoup research and development costs for drugs to treat rare diseases.
- The Orphan Drug Act was designed to encourage companies to develop drugs for rare diseases.
- The FDA can revoke orphan drug status.
- However, pharmaceutical companies prefer to treat less expensive diseases and conditions rather than expensive and rare ones.
Understanding the status of orphan drugs
In 1982, the United States Food and Drug Administration (FDA) recognized the lack of incentives for pharmaceutical companies to develop cures for rare diseases. From this understanding, the Orphan Drug Act of 1983 was born. The plan was to attack diseases that affect fewer than 200,000 people in the United States.
The Orphan Products Development Office (OOPD) encouraged companies to exercise their rights under the Orphan Drug Act of 1983. The OOPD develops and awards grants to companies, biologists, physicians, and researchers who wish to develop products and drugs to treat these rare diseases. . The law refers to these groups of people as sponsors.
The Orphan Drug Act was amended several times to include products other than drugs, such as biologicals, medical devices, and medical foods (primarily prenatal foods).
It is well known that pharmaceutical companies are businesses first and healers second. Pharmaceutical companies annually spend billions of dollars on R&D. As an example, Pfizer (PFE) had $ 41.908 billion in revenue in 2020. R&D spending was approximately $ 9.4 billion for the year. That equates to 22.4% of revenue spent exclusively on R&D.
The development of new drugs is also a risky business if a company does not receive a patent. There is also stiff competition from counterfeits and generic or similar drugs. Many companies go where it is relatively easy to make money.
Advantages and disadvantages of orphan drug status
In addition to exclusive rights and tax credits for research, FDA will assist with technical assistance for orphan drug applications, possible reductions in approval waiting period, and discounted registration fees. The state also offers a 25% tax credit on the cost of clinical trials.
Orphan drug status is not designed for sponsors to recoup all the costs of drug development, but rather as a mechanism for cost reduction and regulatory streamlining. The FDA can easily revoke orphan drug designations. Common reasons include: any false statements or information omitted from your application for designation, or if the FDA believes that the disease or condition will affect more than 200,000 people in the future.
The development of drugs to treat a large number of diseases in the world is a line of business that can generate great fortunes. However, in the pharmaceutical industry, the greatest fortunes are often made by developing drugs that become the standard for curing common illnesses. From a business perspective, having a large market ensures that a company can quickly recoup the development cost, making the highest possible profit.