Since the U.S. Congress passed the Orphan Drug Act in 1983, approval of drugs for rare diseases, meaning those affecting fewer than 200,000 persons, has been on the rise. The benefits of having a drug with orphan designation include 7-year FDA-administered market exclusivity, tax credits of up to 50% of R&D costs, R&D grants, waived FDA fees, and protocol assistance. Orphan drugs also have the advantages of focused patient populations and high price points.

The orphan oncology drug Rituxan is the worlds’ second most profitable drug, just behind mainstream blockbuster Lipitor. Several other orphan drugs, such as Soliris, cost patients hundreds of thousands of dollars per year. Given the developmental incentives and market potential, several large pharmaceutical companies, which traditionally have pursued drugs for common disease states, have begun to pursue development of orphan drugs for rare diseases. However, although the successes have been notable, systematic analyses of the economics of orphan drugs have been lacking.

In a peer-reviewed article, “Orphan Drug Development: An Economically Viable Strategy for Biopharma R&D,” published in Drug Discovery Today, researchers with Thomson Reuters Life Sciences Professional Services and Pfizer compared—for the first time—the economics of orphan versus non-orphan drugs. The results of the comparison suggest the lifetime revenue potential of orphan drugs is not only comparable to non-orphan drugs—it may be greater.

Using proprietary information solutions and benchmark data, the authors compared the total value of 86 orphan drugs with 291 non-orphan drugs from 1990 to 2030. The orphan drug market was calculated as being worth just over $50 billion globally at the end of 2011. Between 2001 and 2010, the compound annual growth rate of the orphan drug market was 25.8%, compared with only 20.1% for the non-orphan drugs. Of the 86 orphan drugs, 25 (29%) were blockbusters, meaning they had annual sales greater than $1 billion. The authors concluded, “the revenue-generating potential of orphan drugs is as great as for non-orphan drugs, even though patient populations for rare diseases are significantly smaller.”

In addition, orphan drugs have several advantages that give them the potential to have even more profitability than non-orphan drugs. These include government financial incentives, smaller clinical trial size, shorter clinical trial time, and higher rates of regulatory success. A high number of orphan drugs are biologicals, which are currently less susceptible to generic erosion as compared with small molecules.

While the opportunities are abundant, orphan drug development is not without challenges. With small patient populations, it can be difficult to recruit patients and keep logistics of clinical trials simple.

However, many rare diseases have debilitating—and often fatal—outcomes. With thousands of rare disease states lacking in therapeutics, the economic benefits are underscored by the benefits of aiding patient populations with great needs and few treatment options.

Clinipace’s “Maintaining Momentum in Orphan Drug Development” whitepaper is a great resource for anyone interested in a more in-depth analysis.  To download a copy, visit http://ow.ly/eJIXr.