Orphan drugs, defined in the Orphan Drug Act as drugs developed to treat rare diseases that affect fewer than 200,000 people in the U.S., have begun to make their mark for patients and drug companies. As the number of orphan drugs has increased over the past 30 years, many patients with rare diseases have benefited from new therapies for previously untreatable or difficult-to-treat cancers, enzymatic disorders, genetic diseases and chronic conditions. Much of this progress in research and drug development is attributable to passage of the Orphan Drug Act passed in 1983. The act provides incentives for developers of orphan drugs, including seven years of market exclusivity, tax credits equal to half the development cost, grant funding, fast-track approvals and waiver of Prescription Drug User Fee Act (PDUFA) fees.

Since the passage of the Orphan Drug Act, the FDA has approved almost 500 new drugs for rare diseases. More than 230 of these new medicines have been approved in the past decade, and more than 450 additional orphan drugs are in development. In 2014, 17 of 41 (41 percent) of new drugs approved were for rare diseases, and a record-high 293 drugs received orphan drug designation to start them on the pathway to approval.

Obtaining orphan drug designation can be a crucial factor for small companies that have a drug in development for a rare disease. For example, one of Premier Consulting’s clients sought orphan designation for a drug designed to treat a devastating genetic condition that causes congenital cognitive deficits in children and adults. There are no approved treatments for this condition. In several other notable cases, Premier Consulting has assisted clients in obtaining orphan designation for drugs that treat several endocrine conditions, acquired bleeding disorders, rare cancers and digestive diseases. In all these cases, there are no approved treatments, and patients must endure excessive monitoring and adverse effects associated with less than optimal treatments designed for other conditions. In each of these cases, Premier Consulting was able to help these companies obtain orphan drug designation, and this was usually critical to gaining investor funding for the ensuing clinical studies. Investment became attractive when the incentives of orphan designation, including seven years of marketing exclusivity, tax breaks and no PDUFA fees, were added to the ledger.

Premier Consulting has also obtained successful orphan drug designations for larger pharmaceutical companies seeking to expand their portfolios and to fulfill unmet medical needs in orphan populations. While larger companies often have their own regulatory teams, many see the benefit in outsourcing one-off orphan drug requests to an organization with specific experience in this regulatory area.

CROs are also benefiting from the boom in orphan drug development. Sixty percent of pharma, biotech, and medical device executives have said they outsource more than half of their orphan drug trials to CROs, and a quarter of them reported outsourcing 90 to 100 percent of the time. Analysts say this increased outsourcing is due to the fact that CROs are becoming more adept at identifying difficult-to-find patients with these rare diseases and setting up investigative sites at appropriate locations.

Investors have additional incentives for considering orphan drug projects. In terms of gaining investment, orphan drugs have historically been a tough sell due to the small markets associated with them. However, a recent MIT study made use of the observation that, taken collectively, rare diseases are not that rare and affect 25 to 30 million Americans. The team used data from 28 nonclinical orphan drug projects at the National Institute of Health’s National Center for Advanced Translational Sciences (NCATS) to assess the financial benefits associated with creating “megafunds” of orphan drug projects. The team’s idea was to provide hard data on risk and return associated with combining a large number of small projects into a single fund. They showed that by diversifying the risks associated with investing in orphan drugs, they could still achieve internal rates of return of 25 percent, similar to those seen with venture capital endeavors. With drugs currently available for only about 5 percent of rare diseases, the future is wide open for investment in orphan drug development projects. Indeed, Premier Consulting has worked on more than 20 drugs with orphan designation, and the number looks to increase as developers and investors alike recognize the commercial opportunity of these specialized therapies.