11/08/2025
The Orphan Drug Act:
>>Legal Overview and Policy Considerations
Just under half of all Food and Drug Administration (FDA) drug approvals between 2017 and 2021 were for orphan drugs, which are drugs used to treat rare diseases or conditions. Historically, orphan drugs received little attention from drug manufacturers, as their development was often financially infeasible due to high cost and an inability to recoup those costs as a result of small patient populations.
Congress enacted the Orphan Drug Act (ODA) (P.L. 97-414) in 1983 as a way to "facilitate the development of drugs for rare diseases or conditions." The ODA attempts to balance the competing interests of pharmaceutical companies and patients with rare diseases by creating financial incentives for companies to develop and market orphan drugs in the United States. The ODA amends the Food, Drug, and Cosmetic Act (FDCA) to create two primary mechanisms to encourage orphan drug development: orphan-drug designation (described in 42 U.S.C. § 360bb), and market exclusivity (described in 42 U.S.C. § 360cc). Since the ODA's enactment, the FDA has approved more than 500 orphan drugs. The mechanisms of designation and market exclusivity, explained further below, are designed to spur continued innovation in the orphan drug field.
>>Orphan-Drug Designation
Drug manufacturers or sponsors may apply to obtain an orphan-drug designation for drugs in development at any time before the drug receives FDA approval. If granted, designation enables a manufacturer to access various forms of financial assistance for drug research and development, including tax credits for clinical testing costs, grant funding to cover research expenses, and a waiver of the FDA's prescription drug user fee if the manufacturer submits an application for FDA approval of the drug.
Orphan-drug designations are granted by the FDA if the drug is currently being or will be investigated for a rare disease or condition and the approval or licensure of the drug would be for the treatment of that disease or condition. The FDCA defines "rare disease or condition" as one either that affects fewer than 200,000 people in the United States or for which a manufacturer has no reasonable expectation of recovering drug treatment research and development costs.
The ODA's orphan-drug designation was designed to encourage innovation and research in the orphan drug field. A manufacturer may seek an orphan-drug designation for either a previously unapproved drug or a new use of a drug that is already FDA approved. More than one manufacturer may be granted an orphan-drug designation for the same drug. Additionally, if the FDA has already designated and approved an orphan drug for a particular rare disease or condition, a manufacturer may receive a subsequent orphan designation for a drug with the same active ingredient or active moiety that is used to treat the same disease or condition if it can present a "plausible hypothesis" that the second drug is clinically superior to the first.
>>Orphan-Drug Exclusivity
The FDA may grant regulatory exclusivity to certain products upon approval or licensure. During the exclusivity period, the FDA may not approve another application for a competing product. For example, if a drug manufacturer receives FDA approval to market a drug designated as an orphan drug, the manufacturer is generally entitled to a seven-year market exclusivity period. During the exclusivity period, the FDA cannot approve an application from a different drug manufacturer to market the same drug for the same disease or condition.
Similar to the ODA's orphan-drug designation provisions, its market exclusivity provision was designed to spur innovation in the orphan drug arena. For example, the statute provides an exception to the seven-year exclusivity period so that the FDA may approve a competing orphan drug if it finds that the manufacturer of the original orphan drug cannot provide sufficient quantities of the drug to meet its demand. Following some litigation concerning the scope of the ODA's exclusivity provisions, Congress also codified the FDA's policy of clinical superiority. After the seven-year exclusivity period expires, the FDA will not grant another market exclusivity to a subsequent manufacturer of the same orphan drug for the same disease or condition unless the second drug is clinically superior to the first. This requirement ensures that the seven-year exclusivity is not perpetual, and it encourages manufacturers to continue researching new and improved treatments, which in turn is intended to benefit patients.
The FDA's implementing regulations have narrowly interpreted the ODA's exclusivity provision in Section 360cc. For example, the regulations state that exclusivity protects only the approved indication or use of a designated drug, and thus the FDA allows two different manufacturers to have orphan-drug exclusivity for the same drug for the same disease, if the drug is indicated for use in different patient populations. In other words, the FDA treats orphan-drug exclusivity as specific to the designated use or indication of the drug, rather than extending exclusivity to cover multiple indications for use. At least one federal circuit court has expressed disagreement with this interpretation of the ODA, which the FDA still uses (see, e.g., Catalyst Pharmaceuticals Inc. v. Becerra, 14 F.4th 1299 (11th Cir. 2021)). For more information on the Catalyst case, see CRS Report R47653, The Orphan Drug Act and Catalyst Pharmaceuticals, Inc., v. Becerra, by Hannah-Alise Rogers.
