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Provisions of the Orphan Drug Act
Congress passed the Orphan Drug Act of 1983 to stimulate the development of drugs for rare diseases. Prior to passage of this historic legislation, private industry had little incentive to invest money in the development of treatments for small patient populations, because the drugs were expected to be unprofitable. The law provides three incentives:
(1) 7-year market exclusivity to sponsors of approved orphan products
(2) A tax credit of 50 percent of the cost of conducting human clinical trials
(3) Federal research grants for clinical testing of new therapies to treat and/or diagnose rare diseases.
In 1997, Congress created an additional incentive when it granted companies developing orphan products an exemption from the usual drug application or “user” fees charged by the Food and Drug Administration (FDA). Companies also may be eligible for faster review of their applications for marketing approval if their products treat a life-threatening illness. Many orphan drugs treat a serious or life-threatening disease.
Congress amended the Act in 1984, 1985, and 1988. The 1984 amendment defined a rare disease as a condition affecting fewer than 200,000 people in the United States. The threshold was an arbitrary ceiling based on the estimated prevalence of narcolepsy and multiple sclerosis. The 1985 amendment extended marketing exclusivity to patentable as well as unpatentable drugs, and the 1988 amendment required sponsors to apply for orphan designation before submitting an application for marketing approval.
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