Financial benefits, faster approvals, and less stringent clinical data requirements are some significant benefits that regulatory agencies across the world offer as incentives for the development of orphan drugs for rare diseases. These countries include the US, Europe, Japan, Australia, South Korea, Brazil, and most recently, India.

These incentives have been so supportive and convincingly helpful that they have boosted the drug development across the world. Worldwide orphan drug sales are forecast to grow at a CAGR of 12.3% from 2019 to 2024, which is approximately double the rate forecast for the non-orphan drug market. By 2024, orphan drugs are expected to reach $242bn and capture one-fifth of worldwide prescription sales.

So, what are these special provisions in regulations for orphan drug development?

Let’s discuss the United States and European regulatory scenarios and benefits first. Review the next articles in this series for incentives and benefits in other countries for rare disease drug development, rare disease clinical trials, and orphan drug approvals for marketing.

Orphan drugs and rare diseases

An orphan drug is a pharmaceutical agent developed to treat orphan diseases or rare diseases which, because they are so rare, would not be profitable to produce without government assistance. Officially, it’s a designation given based on some considerations.

Rare diseases are defined a bit differently across various countries, though the basic consideration remains the same – i.e. the number of patients is very small.

United States – Orphan drug regulations

Drug or biologic may be designated as an orphan drug if it is to prevent, treat, or diagnose a disease/condition that occurs in <200,000 patients in the US.

Criteria for orphan designation status in the United States

  • A drug has not been approved earlier.
  • An agent with a new orphan indication.
  • A drug proved clinically superior over previously approved drugs of the same category.

Incentives or benefits for orphan drugs in the USA

  • Financial
    • Tax incentives: The Orphan Drug Tax Credit (ODTC): sponsors who have orphan designation can collect tax credits for expenses incurred after the issue of the designation for U.S. clinical trial costs on the orphan indication.
    • User fee: Orphan drugs and products are exempt from the usual new drug application or “user” fees charged by the FDA.
  • Regulatory benefits 
    • The Rare Pediatric Disease Priority Review Voucher Program says that a sponsor who receives approval for a drug or biologic for a “rare pediatric disease” may qualify for a voucher that can be redeemed to receive a priority review of a subsequent marketing application for a different product.
    • A fast-track procedure for the FDA to evaluate registration files.
    • Eligible to receive regulatory assistance and guidance from the FDA in the design of an overall drug development plan.
  • Clinical development benefits
    • Orphan Product Grant program provides funding for clinical testing of new therapies to treat and/or diagnose rare diseases that lower the cost of drug development.

Read more about Rare Diseases: Clinical Trials & Drug Development

  • Marketing benefits
    • Market exclusivity: 7 years of marketing exclusivity upon FDA approval of a specific orphan drug for a specific indication. The market exclusivity for a new chemical entity in the United States is typically five years after FDA approval; for orphan drugs, the FDA will not award market authorization for a generic drug for the rare disease for seven years post-approval; this incentive is superior to traditional IP patent protection and a substantial incentive.
    • The availability of orphan drugs to patients before being granted marketing approval is possible. In some cases of compassionate use, a Treatment Investigational New Drug (t-IND) may be obtained under specific conditions such as
      • The drug must be intended for the treatment of a serious or life-threatening disease.
      • No alternative drug or treatment must be available.
      • The product must be in the process of clinical trials and an active phase of marketing approval.

Understand how to manage the challenges faced in Clinical Trial Logistics for Rare Disease Clinical Trials

  • Medical device
    • The Humanitarian Use Device (HUD) program designates medical devices that are intended to benefit patients in the treatment or diagnosis of a disease or condition that affects or is manifested in not more than 8,000 individuals in the United States per year as eligible for Humanitarian Device Exemption. [1][2][3]

Process for orphan designation in the USA

Europe – Orphan drug regulations

A disease is considered rare if fewer than 5 in 10,000 people have it.

The EU offers several incentives to encourage companies in research and development of medicines for rare diseases that otherwise would not be developed. Companies to access these incentives can apply for orphan designation for their medicine, provided they meet certain criteria. 

Do you know the primary challenge in rare disease clinical trials and, a ready solution available to handle it?

Criteria for orphan designation status

  • The medicine must treat, prevent, or diagnose a disease that is life-threatening or chronically debilitating, or it is unlikely that the medicine will generate sufficient returns to justify the investment needed for its development.
  • The disease must not affect more than 5 in 10,000 people across the EU.
  • No satisfactory method of diagnosis, prevention, or treatment exists, or if such a method already exists, the medicine must be of significant additional benefit to those affected by the condition.

Process for orphan designation in Europe

Incentives or benefits for orphan drugs in Europe

  • Financial benefits
    • R & D: During an orphan medicine’s research and development, the company can benefit from incentives such as 
      • Scientific advice on study protocols, 
      • Various fee reductions and 
      • Access to EU grants. 
    • Small companies: The Agency encourages companies developing orphan medicines to check if they can be classified as a micro, small or medium-sized enterprise (SME). Such companies benefit from further incentives, including administrative and procedural assistance from the Agency’s SME office and fee reductions.
    • Companies applying for designated orphan medicines pay reduced fees for regulatory activities such as
      • For protocol assistance, 
      • Marketing-authorization applications, 
      • Inspections before authorization, 
      • Applications for changes to marketing authorizations made after approval, and 
      • Reduced annual fees.
    • Grants: The Agency does not offer research grants for sponsors of orphan medicines, but funding is available from the European Commission and other sources.
  • Regulatory benefits
    • Pediatric medicines: Medicines authorized across the EU with the results of studies from a pediatric investigation plan included in the product information are eligible for an extension of their supplementary protection certificate. For designated orphan medicines, the incentive is an additional two years of market exclusivity.
    • Centralized authorization procedure: All designated orphan medicines are assessed for marketing authorization centrally in the European Union. This allows companies to make a single application to the European Medicines Agency, resulting in a single opinion and a single decision from the European Commission, valid in all EU Member States. Sponsors may also have access via orphan designation to conditional approval, which is conducted under the centralized procedure.
    • Global benefits: The two authorities, EMA and FDA have also developed common procedures for applying for orphan designation and for submitting annual reports on the status of development of designated orphan medicines.
  • Marketing
    • Designated orphan medicines are eligible for conditional marketing authorization. And In some cases, designated orphan medicines may be allowed to be administered to patients under compassionate use, a treatment option that allows the use of an unauthorized medicine outside a clinical study.
    • 10 years of market exclusivity protection.: Orphan-designated medicines that eventually make it to the market, and for which it can be demonstrated that they fulfill the criteria for the designation, are granted 10 years of market exclusivity protection.
    • This period of protection is extended by two years for medicines that also have complied with an agreed pediatric investigation plan granted at the time of review of the orphan medicine designation. [4]

Global orphan drug sales are estimated to reach $262B by 2024; nearly double of that registered in 2018 with $138B. These statistics show the growing interest in rare diseases and the development of orphan drugs.

Comparison of US & EU regulatory incentives

Criteria USA Europe
Legal framework RegulationOrphan Drug Ac (1983)Committee for Orphan Medicinal Products (COMP)
Administrative authorities involvedOffice of Orphan Product Development (OOPD)Committee of Orphan Medicinal Products (COMP)
Prevalence of the disease (per 10,000 individuals), justifying the orphan status7.5 5
Marketing exclusivity7 Years10 Years
Tax credit or benefit50% for clinical studiesManaged by the member states
Grants for researchprograms of NH and othersFP6′ + national measures
Reconsideration of applications for orphan designation No Every year
Technical assistance for the elaboration of the application fileYesYes
Accelerated marketing procedureYesYes – Centralized procedure

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Way forward

Utilize these incentives to your advantages in the development of medicines for rare diseases, or orphan drugs, as they are commonly known as.

Interested in knowing more about these benefits from other countries?

Find out in the next articles in this series about incentives and support mechanisms for rare diseases in


  1. https://www.orpha.net/consor/cgi-bin/Education_AboutOrphanDrugs.php?lng=EN&stapage=ST_EDUCATION_EDUCATION_ABOUTORPHANDRUGS_USA
  2. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2631478/
  3. https://www.fda.gov/industry/developing-products-rare-diseases-conditions
  4. https://www.ema.europa.eu/en/human-regulatory/research-development/orphan-designation/orphan-incentives