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The granting of the orphan drug status is designed to encourage the development of drugs which are necessary but would be prohibitively expensive/un-profitable to develop under normal circumstances.
In the United States, an orphan drug is any drug developed under the Orphan Drug Act of January 1983, a federal law concerning rare diseases ("orphan diseases"), defined as diseases affecting fewer than 200,000 people in the United States or low prevalence is taken as prevalence of less than 5 per 10,000 in the community . This has been adopted as a subclause of the Food and Drug Administration (FDA) regulations. Because medical research and development of drugs to treat such diseases is financially disadvantageous, companies that do so are rewarded with tax reductions and a monopoly on that drug for an extended time (twenty years). Under the act many drugs have been developed, including drugs to treat glioma, multiple myeloma, cystic fibrosis, and snake venom. In the US, from January 1983 to June 2004, a total of 1,129 different orphan drug designations have been granted by the Office of Orphan Products Development (OOPD) and 249 orphan drugs have received marketing authorisation in the US.
A similar status exists in the European Union, administered by the Committee on Orphan Medicinal Products of the European Medicines Agency.
In 2003, the leading orphan drug by worldwide sales revenue was Amgen’s Epogen, with sales of $2.4bn.
Development of orphan drugs
Since few markets would naturally exist to create these goods, as the costs of developing, researching and producing this drug would likely exceed any revenues, government intervention is required, usually to establish such a market or to produce the goods itself. Critics of the free market often cite this as a market failure in free market economic systems. Free market advocates often respond that without government intervention development costs would be considerably lower.
The intervention by government can take a variety of forms:
- Tax benefits to companies who produce or research these drugs
- Granting of additional rights above and beyond those granted by the regular patent laws.
- Subsidizing and funding clinical research by universities and industry sponsors to develop medical products (including drugs, biological products, devices, and medical foods) for rare diseases.
- Creating a government-run company to research and produce drugs (see Crown corporation for an example of this type of solution).
External links
"Orphan drug"