Orphan drugs are therapeutics designed to target rare life-threatening or debilitating diseases (e.g., affecting fewer than 200,000 people in the United States). Because the potential market is small and cost recovery difficult, pharmaceutical companies have typically avoided the development of orphan drugs.
To address this problem, regulatory agencies like the FDA have resorted to offering incentives to companies to work in this field, including:
- Federal funding for clinical trials;
- Significant tax breaks for clinical trial costs;
- An accelerated approval process (often); and
- Extended periods of more stringent product exclusivity.
This isn't necessarily a charity case, however, as just because a drug starts with orphan status doesn't mean it won't be adopted down the road for other disease indications that can put it into blockbuster status ($1B+ annual sales). Recent examples include: Fosamax ($3.2B in 2005), Gleevec ($2.6B in 2006) and Epogen ($2.5B in 2006).