The Economics of Orphan Drug Policy in the U.S.

Can the Legislation Be Improved?

Published In: PharmacoEconomics, v. 8, no. 5, Nov. 1995, p. 374-384

Posted on on January 01, 1995

by John Peabody, Allen Ruby, Peter Cannon

Read More

Access further information on this document at

This article was published outside of RAND. The full text of the article can be found at the link above.

Uses an economic model to review the U.S. Orphan Drug Act (ODA) of 1983. An orphan drug is one that is used to treat diseases that affect fewer than 200,000 people. It is believed that, because of the small population to which they apply and because there is no reasonable expectation of recouping development and marketing costs through sales revenue, these drugs would not be developed without some official act by the U.S. Congress. The article concludes that a guarantee of market exclusivity, which plays an essential role in encouraging firms to pursue the development of orphan drugs, should be retained. In addition, the authors recommend that tax credits, research grant programs, and targeting of priority diseases should be expanded. They conclude that, although the ODA has been a valuable legislative initiative, it could be strengthened with some simple extensions of its current incentives.

This report is part of the RAND Corporation External publication series. Many RAND studies are published in peer-reviewed scholarly journals, as chapters in commercial books, or as documents published by other organizations.

Our mission to help improve policy and decisionmaking through research and analysis is enabled through our core values of quality and objectivity and our unwavering commitment to the highest level of integrity and ethical behavior. To help ensure our research and analysis are rigorous, objective, and nonpartisan, we subject our research publications to a robust and exacting quality-assurance process; avoid both the appearance and reality of financial and other conflicts of interest through staff training, project screening, and a policy of mandatory disclosure; and pursue transparency in our research engagements through our commitment to the open publication of our research findings and recommendations, disclosure of the source of funding of published research, and policies to ensure intellectual independence. For more information, visit

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.