Department of Health and Human Services, OFFICE OF INSPECTOR GENERAL MAY 2001
PURPOSE: The purpose of this inspection was to assess the implementation of the Orphan Drug Act of 1983 and its impact on industry and patients.
Congress passed the Orphan Drug Act of 1983 to stimulate the development of drugs for rare diseases. A rare disease is defined as a disease that affects fewer than 200,000 people in the United States. 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 7-year marketing exclusivity to sponsors of approved orphan products, a tax credit of 50 percent of the cost of conducting human clinical testing, and research grants for clinical testing of new therapies to treat orphan diseases. Exclusive marketing rights limit competition by preventing other companies from marketing the same version of the drug, unless they can prove clinical superiority.