The Orphan Drug Act (ODA), passed in 1983, is a landmark bill that incentivizes the development of treatments and cures for rare diseases. The bill extends tax, marketing, and exclusivity incentives to companies pursuing therapies for diseases with an orphan designation, or those intended to treat, diagnose, or prevent a rare disease or condition affecting fewer than 200,000 people in the U.S.
The ODA and other incentive policies are designed to make rare disease therapy development a more favorable enterprise for drug manufacturers to invest in.
- Orphan Drug Tax Credit: The ODA established a tax credit of 50% of clinical testing costs. The Tax Cuts and Jobs Act (H.R. 1) cut the orphan drug tax credit to 25% in 2018. There is proposed legislation in the House called Cameron’s Law which would restore the orphan drug tax credit to 50%.
- Exclusivity: The FDA can’t approve another drug for the same indication for 7 years after it is approved.
- Grants: The Orphan Products Grant Program funds natural history studies and clinical trials to support the development of safe and effective medical products for rare diseases.
- The Rare Pediatric Disease Priority Review Voucher Program (PRV): The PRV Program incentives companies to develop treatments for rare pediatric diseases by offering a voucher to companies that obtain approval for a rare pediatric treatment. The voucher can be used by the company to receive faster review on a future application, or it can be sold to another company, raising critical revenue to invest in developing new rare disease treatments. Visit our dedicated page about the PRV Program to learn more.
- Regulatory Assistance: The FDA generally provides additional assistance to navigate the regulatory process.
- Fee Waivers: Most orphan drugs are exempt from paying the user fees established by the Prescription Drug User Fee Act, which are renegotiated every 5 years.
- Exemptions: Orphan drugs are exempt from standard requirements for pediatric testing established in the PREA. They are also exempt from the 340b program, which requires drug manufacturers to sell drugs at a discount to safety-net providers serving low-income patients.
