The research and development process for a new drug takes an average of 10 to 15 years—and, it’s not cheap.¹ According to the Pharmaceutical Research and Manufacturers of America (PhRMA), the cost to develop a biologic in 2006 was estimated to be $1.2 billion.

Considering the lengthy development time and with so few potential blockbusters in the making at the moment, the pharmaceutical industry needs to look for new avenues to remain viable. Their solution: Go after the niche markets and begin developing or acquiring what’s become known as “orphan drugs.”

Officially, “orphans” (or rare diseases) are classified as those that affect fewer than 200,000 in the United States.² According to estimates, 47% of rare disorders affect fewer than 25,000 people in the U.S.2 Because the respective patient populations are so small, big pharmaceutical companies historically have had little financial incentive to invest in drug development for these rare diseases. In fact, the term orphan was originally coined to reflect the pharmaceutical industry’s lack of interest in this class of drugs.²  

In 1983, however, things started to change. It was at that time that Congress passed the Orphan Drug Act (ODA). The ODA contained incentives for the pharmaceutical industry to develop new products to treat rare diseases. It also provided provisions that granted patients better access to these treatments. In the decade prior to 1983, fewer than 10 treatments for rare diseases were commercialized.³ Today, more than 1,700 products in the United States have received orphan drug designation from the FDA.²

Despite the increase, orphan drug markets—at least in the United States and Europe—are still a relatively new phenomenon. And, until recently, orphan drug development interested only smaller biotechnology and specialty pharmaceutical companies. However, big pharma’s interest in orphan drug development is clearly on the rise. In fact, Pfizer, maker of Xalatan (latanoprost), announced in July 2010 that it was creating a new division to focus exclusively on new treatments for rare diseases. And, other ophthalmic companies are showing interest in developing or acquiring niche drugs too.

Why? The attraction to orphan drugs are many. Orphan drugs are more profitable because the clinical trials tend to be significantly smaller because you are dealing in rare diseases. In fact, sometimes, you can even get conditional approvals for orphan drugs. In addition to lower development expenses, there’s very limited competition, which translates into much more leeway in terms of pricing—and therein lies much of the controversy surrounding the ODA.

Pedro Cuatrecasas, M.D., formerly an executive at Parke Davis Warner Lambert and currently at the University of California, San Diego, argued that “some companies now apparently feel that desperate patients (and society) will pay whatever is charged.”4 In fact, the costs of most treatments for rare diseases range from $200,000 to $500,000 per patient.²

On the other hand, orphan drug manufacturers contend that, because of the small patient populations that they serve, they have little choice but to set prices high to recover their development and commercialization costs.²

Whatever the cost, however, there is no disputing that big business’s interest in this sector raises awareness where once there was none—and that’s good news for patients and practitioners like you who are engaged in providing specialty care. 

1. Pal S. Trends in NDA Approvals. US Pharm. 2008;33 (10):8.
2. Orphan Drugs: Big Pharma’s Next Act? Available at: www.lifescienceleader.com/index.php?option=com_jambozine&layout=article&view=page&aid=4113 (Accessed: February 2011).
3. Ariyanchira S. Big Pharma Steps Into Orphan Drug Market. Genetic Engineering and Biotechnology News: Jun 15, 2010 (Vol. 30, No. 12).
4. Big Pharma Adopting Orphan Drug Strategy. Available at: www.genengnews.com/analysis-and-insight/big-pharma-adopting-orphan-drug-strategy/71053206/ (Accessed: February 2011).