The Food and Drug Administration’s (FDA) orphan drug designation provides incentives for the development of drugs intended to treat rare diseases. It is expensive to develop experimental drugs, more expensive to test them in clinical trials, and only a small percentage of experimental drugs end up receiving FDA approval. As a result, drug developers tend to focus on diseases that affect large numbers of patients as these are areas with high profit potential. Rare diseases by definition have smaller populations making it challenging to have a return on investment. As a result, many rare diseases have historically been ignored or “orphaned” by drug developers.

In order to encourage the development of drugs for rare diseases, Congress passed the Orphan Drug Act in 1983. The law provides incentives for industry investment into treatments for rare conditions, including tax credits for clinical trials and extended market exclusivity. The use of expedited programs by the FDA and drug Sponsors has also aided the development of orphan drugs, providing additional FDA resources for the development and review of drugs targeting unmet medical need.