Drug development, like any other business, is influenced by the effects of supply and demand. A pharmaceutical company that develops a successful treatment for a common disease can reasonably expect that they will sell more of their product than a treatment for a rare condition. This leads to an issue for many less prevalent diseases – it can be difficult to generate the massive investment required to support drug research and development when a treatment only has the potential to be sold to a relatively small segment of the population.

To help counteract this effect and support research for less common diseases, Congress passed the Orphan Drug Act in 1983. The purpose of this law is to provide benefits for companies to invest in “orphan diseases” – defined in the U.S. as any disease that affects less than 200,000 people at any time. The law provides several economic incentives, such as tax credits, fee waivers, and extended patent coverage periods for drug companies, intended to help them generate higher profits from drugs sold to relatively few people.

Why the Orphan Drug Act Was Necessary

In 1962, 21 years before the passage of the Orphan Drug Act, Congress passed the Kefauver–Harris Amendment – the first law requiring the drug manufacturers to prove the safety and efficacy of their products before bringing them to market. At the time, the necessity of this kind of regulation had been made apparent by a national tragedy involving the drug thalidomide. Sold as a treatment for pregnant women experiencing morning sickness in the late 1950s and early 1960s, the drug caused birth defects and death in thousands of children across the county.

The law created the modern system of Food and Drug Administration (FDA) approval for therapeutics in the US. These new regulations required pharmaceutical companies to conduct much more rigorous studies to gather data showing their products were effective and safe. This was an important step in protecting people from harmful products, but it also greatly increased the cost of drug development.

As a result, many companies narrowed their focus to diseases that affect large numbers of people, and therefore had the biggest markets and best chance of providing a return on investment. This meant that diseases that affect relatively smaller populations – like ALS – attracted little attention or investment from the pharmaceutical industry. The term “orphan disease” was soon adopted to describe these conditions that had been effectively abandoned by the pharmaceutical industry. While each individual disease in this category might have affected a relatively small number of people, combined, they represented millions of Americans in need of treatments and cures.

What Does the Orphan Drug Act Do?

The passage of the Orphan Drug Act was meant to incentivize the pharmaceutical industry to focus on developing treatments for rarer diseases. It created criteria by which a condition that affects less than 200,000 people in the US can be designated an “orphan disease.” A company developing a drug for one of these diseases could now apply to the FDA for an “orphan drug designation” for their treatment. This designation is not the same thing as approval – an orphan drug still needs to go through the same process of preclinical testing and clinical trials as a normal drug. However, a treatment given this designation will receive certain benefits including:

  • Tax Credits, covering up to 50% of research and development costs.
  • Increased Market Exclusivity: A new drug patent typically comes with a period of “market exclusivity” – a time in which no one other than the patent holder is allowed to manufacture or market the treatment. This period normally expires after 20 years, after which other companies can manufacture “generic” versions of the drug, creating competition and driving down prices. Drugs that have received an orphan designation, however, receive an additional seven years of exclusivity, giving their manufacturers nearly 30 years before they will face any competition for their product.
  • Eligibility for grants to cover research and development costs, awarded by the FDA’s Office of Orphan Product Development.
  • A pathway to accelerated approval for treatments in certain diseases with unmet need.
  • A waiver of fees normally associated with applications for FDA review.

Effect of the Orphan Drug Act in ALS

The effect of this law on treatments over the past 41 years have been profound. Before the bill’s passage in 1983 only 38 drugs were approved in the US for treating rare diseases, according to the National Organization for Rare Disorders. By 2023, that number had risen to over 1,100, with more than 7,000 diseases having received orphan designation.

One of those 7,000 diseases is amyotrophic lateral sclerosis (ALS). Orphan drug designation is an important tool for institutions conducting ALS research. Like all orphan diseases, the relatively small population of people with ALS means that any company marketing a treatment for the disease without financial incentives would likely struggle to make a profit. By obtaining an orphan drug designation, a company can give itself a much better chance at profitability if its drug is approved – making it easier to attract the outside investment that is almost always necessary to cover the extremely high cost of clinical trials.

Of the three drugs currently approved by the FDA and marketed for treating ALS, all were developed under an orphan drug designation. Nearly all other investigational treatments for the disease have or will eventually apply for this designation as well. However, despite the incentives provided by the Orphan Drug Act, it has still been difficult to drive the investment needed to develop effective treatments for most people living with ALS. That’s why the ALS Therapy Development Institute (ALS TDI) exists as one of the world’s only nonprofit biotech companies.

As a nonprofit, ALS TDI is free to pursue any avenue of ALS research that we believe will help people with the disease, regardless of its potential to generate a monetary return on investment. We can do this because our research is primarily funded by donations from the ALS community. This has allowed us to focus exclusively on better understanding the disease and developing potential treatments for more than 25 years, and we will not stop until there are treatments for every person living with ALS.

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