How can policymakers incentivize innovators to invest in new treatments for rare diseases? One solution policymakers invoked was enacting the Orphan Drug Act of 1983 which provided a number of benefits–including lower tax rates–for innovators who created drugs to treat rare diseases.
Was it effective? According to a paper by Miller and Lanthier (2016), the answer is yes.
Before 1983 only 10 drugs had been approved to treat a rare disease, but as of November 2015 over 450 additional new orphan indications (both new drugs and secondary indications for previously approved drugs) had been approved.
This clearly is a large increase. The question is, were these simply “me too” drugs or do these drugs represent significant advances in care.
Over 50 percent of the drugs were first in class, and 78 percent received a priority review. Drugs approved as either therapeutic or supportive therapies for rare cancers represented the highest proportion of these drugs (35 percent)
Part of the increase here was due to thee identification of genomic subgroups in oncology. Further, this study does not evaluate whether the government funds invested in the Orphan Drug Act were worth the cost. Nevertheless, it is clear that this piece of legislation did incentivize innovators to invest more R&D funds in rare diseases.