Half of newly developed drugs are the result of this 1983 Law

“Orphan” drugs were once a market almost no company wanted. Four decades later, they make up more than half of the new drugs the Food and Drug Administration approves.

In 2024, the FDA’s drug center approved 50 new medicines. More than half of them (26 in all) were built to treat a rare disease.

That would have stunned anyone working in medicine in the early 1980s. Back then, rare diseases were a part of the market that drug companies avoided. The patient groups were too small, the costs too high, and the payoff too uncertain.

In the decade before 1983, fewer than 10 drugs for rare conditions reached the market. Only 38 such drugs had ever been approved in the United States at all.

Then Congress passed the Orphan Drug Act, signed into law on Jan. 4, 1983. Forty-plus years later, treating the rare has become one of the most active and closely watched areas in all of drug development.

This is the story of how that happened, developed by Kivo, a quality management system and RegOps platform for life sciences teams.

What The Orphan Drug Act Changed

The Orphan Drug Act did something really simple. It provided significant financial incentives to companies that could develop treatments for rare diseases.

The law applies exclusively to drugs meant to treat a rare disease, which the FDA defines as a condition affecting fewer than 200,000 people in the United States. If a drug qualifies, its maker can apply for an “orphan designation,” a tag that comes with significant financial rewards, including:

• Seven years of exclusive rights to sell the drug once it is approved
• Tax credits to help cover the cost of clinical trials
• Eligibility for research grants

These incentives leveled the financial playing field by significantly lowering the costs and raising the rewards for developing rare disease treatments. As a result, companies slowly began turning their attention toward this category of treatments.

A 4-Decade Development Explosion

The response built slowly at first, then took off.

From 1983 through 2022, the FDA granted 6,340 orphan drug designations, covering drug development for 1,079 different rare diseases. Of those designations, 882 went on to earn at least one FDA approval, delivering treatments for 392 rare conditions.

The pace picked up further in each progressive decade. Designations more than doubled from the 1980s to the 1990s. They nearly doubled again from the 1990s to the 2000s. And they nearly tripled from the 2000s to the 2010s.

That number continues to climb each year.

The share of all new drugs that are orphan drugs tells the same story from another angle. In the late 1980s, orphan drugs made up just 17% of all FDA approvals. By the late 2000s, that share had roughly doubled to around a third. In 2024, it crossed half. Rare disease drugs went from a small minority to the single largest category of new medicines the FDA clears.

Where The Money Goes

The boom has not spread evenly across all rare diseases. It has concentrated heavily in one area: cancer.

Seven of the 10 most-designated and most-approved rare diseases over the past four decades were rare cancers. Pancreatic cancer alone drew 185 orphan designations, the most of any single disease. Seven diseases topped 100 designations each. Beyond oncology, the biggest growth has come in rare neurological diseases and in conditions that begin in childhood.

Recent approvals show the range. In 2024, the FDA cleared new treatments for rare conditions that had no approved therapy at all, including Niemann-Pick disease type C and a rare immune disorder called WHIM syndrome. It also approved a new option for Duchenne muscular dystrophy, a severe muscle-wasting disease that mostly affects young boys.

There is a clear logic to the clustering. Rare cancers often share biology with more common ones, so research can build on work already underway. Childhood genetic diseases have well-organized patient groups that push hard for treatments. And advances in genetics have made it far easier to understand what goes wrong in a rare disease and to design a drug that targets it.

Many Gaps Still Remain

The focus on cancer and childhood genetic diseases means that despite this shift, thousands of gaps in rare disease treatments still remain.

Scientists have identified somewhere between 7,000 and 10,000 rare diseases, and only about 5% of them have an FDA-approved drug. Up to 15% have at least one drug that has shown promise in treatment, diagnosis, or prevention.

That leaves the vast majority of rare diseases (~80%) with no approved treatment at all.

Rare diseases affect more than 30 million Americans, or roughly 1 in 10. No single condition is common, but taken together, they touch families in every state. A disease that strikes only a few thousand people is still a life-altering event for each of those families, and for most of them, the pharmacy shelf is still empty.

Who Is Developing These Drugs?

The orphan drug pipeline runs in large part on smaller companies.

Small and midsize firms have long made up a big share of the sponsors behind orphan drugs. Earlier reviews of the field found that small firms alone accounted for more than half of orphan drug sponsors, and that small and midsize firms together made up around three-quarters.

Many of these companies are launched by parents seeking treatments for their kids, like Terry Pirovolakis, who founded Elpida Therapeutics to develop a gene therapy for his son Michael.

Rare disease research has become a common path for emerging biotech companies, which can focus on a single condition, move quickly, and rely on the law’s incentives to make a small market viable.

Larger drugmakers have followed the trend as well, and some have built entire divisions around rare diseases. But the steady stream of designations, many for diseases most people have never heard of, reflects an ecosystem where smaller and newer companies do much of the early work.

Debate Around Drug Pricing

The orphan drug boom is widely seen as one of the most successful health laws in modern American history. One area of criticism and debate is over the drug prices that emerge from these development pipelines.

Because orphan drugs serve small patient groups and enjoy years of protected sales, they are often extremely expensive, and some rank among the costliest medicines in the world.

Supporters argue that high prices are the only way to fund research for tiny markets.

Critics counter that the costs strain patients who are often already navigating difficult life circumstances, the government is already providing financial incentives to drugmakers, and in many cases, developed treatments are only partially effective while still being prohibitively expensive.

A second concern is how incentives are used. Some companies have won orphan status for narrow slices of a drug that also treats common conditions, a practice critics say is designed to game the rules. The share of orphan approvals that were secondary uses of an existing drug has risen sharply over the decades, climbing from about 19% in the 1980s to roughly 47% in the 2010s.

There are also questions about how much these drugs improve care. One analysis of orphan approvals found that the share rated as major therapeutic improvements fell from about half in the mid-2000s to well under a fifth by the early 2020s.

That doesn’t invalidate the benefits for patients who now have options where none existed. But it does suggest that a rising count of approvals is not the same thing as a rising count of breakthroughs.

The Bottom Line

Four decades in, the verdict on the Orphan Drug Act is mostly a success story. A law meant to coax a handful of treatments out of a market no one wanted has helped produce hundreds of them and turned rare disease into a central focus of drug development. Emerging biotech companies keep the pipeline full, and more than half of new drugs now carry an orphan tag.

But the system isn’t perfect. Thousands of rare diseases still have no treatments available. New treatments are often priced beyond the reach of those in need. And the law likely needs to be adjusted to prevent companies from gaming the system.

The next 40 years of the law will be judged less by how many designations it produces and more by whether it can close that gap for the millions of Americans still waiting on treatment for rare diseases.

This story was produced by Kivo and reviewed and distributed by Stacker.

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