The price tag of orphan drugs has been known to raise quite a few eyebrows - given the drugs are developed to treat ultra-rare diseases, it is not surprising that pharmaceutical companies will charge premium prices to ensure a healthy return-of-investment on their products. So how much do these truly cost?

But how much do orphan drugs truly cost us?

Results from a recently published study put this figure at 8.9% of total U.S. pharmaceutical spending (approximately $30 billion), a sharp increase compared to 4.8% of total pharmaceutical spending in 2007 ($15 billion). Researchers from IMS Health who conducted the study also predicted that spending on orphan drugs will continue to grow in the coming years, albeit possibly at a slower growth rate(1).

Since the enactment of the Orphan Drug Act (ODA) by the U.S. Congress in 1983, the pharmaceutical sector has witnessed a rapid expansion in orphan drug development. Prior to the passing of the ODA, ultra-rare diseases (also known as orphan diseases) were largely disregarded by the pharmaceutical industry since the tiny patient population did not guarantee a minimum revenue to overcome the high costs of drug development. The pharmaceutical industry is, after all, a profit-seeking business and such aversive behaviour was not at all surprising.

Substantial gaps in treatment options for orphan diseases

The lack of enthusiasm from the pharmaceutical industry led to substantial gaps in available treatments for orphan diseases. Patients with these illnesses, adults and children alike, had very limited options to explore. The plight and the seeming hopelessness of these patients gained both public and political attention in the U.S. in the early 1980s. On 4th January 1983, U.S. President Ronald Reagan signed the Orphan Drug Act (ODA)(2) which aimed to address these challenges by incentivising pharmaceutical companies to invest in orphan drugs development through tax incentives and enhanced patent protection.

However, some critics of the ODA have pointed out many unintended consequences of these incentives. Two of the most fiercely debated issues is the negative impact orphan drugs has on pushing drug prices upwards, and also the rampant abuse of the act by pharmaceutical companies to profit financially. Another related study has pointed out additional interesting findings as well. Out of 46 drugs which have been granted the orphan drug indications, those that were used exclusively for orphan diseases had a modest increase in price (12%) but other drugs with concurrently non-orphan indications saw the largest price hike (37%) (3).

Seven out of ten best-selling drugs in 2014 carried the “orphan” indication

The study also uncovered the surprisingly low usage of these drugs for orphan diseases. The number went from less than 5% of all prescription to not being prescribed at all (3). Similarly, researchers from Johns Hopkins Medicine also pointed out that seven out of ten best-selling drugs in 2014 carried the “orphan” indication (4). These findings are contradictory to the original spirit of the ODA, which sought to improve patient accessibility to better treatment. The seemingly rampant abuse of the legislative loopholes by pharmaceutical companies should be carefully investigated and addressed promptly.

"The industry has been gaming the system by slicing and dicing indications so that drugs qualify for lucrative orphan status benefits." said Dr Martin Makary, professor of surgery at Johns Hopkins (4). MIMS

Read more:
Orphan Diseases and Orphan Drugs: What a pharmacist should know
What does a Trump presidency mean for pharmaceutical prices?
Soaring Drug Prices: Why does it cost so much?
The future of pharmaceutical’s pricing model

1. Divino V, DeKoven M, Kleinrock M, Wade RL, Kaura S. Orphan Drug Expenditures In The United States: A Historical And Prospective Analysis, 2007-18. Health Aff. 2016 Sep 1;35(9):1588–94.
2. Scheindlin S. Rare Diseases, Orphan Drugs, and Orphaned Patients. Mol Interv. 2006 Aug 1;6(4):186–91.
3. Joszt L. Non-Orphan Use of Orphan Drugs Drives Up Cost [Internet]. AJMC. 2016 [cited 2016 Nov 21]. Available from:
4. McMains V, Nelson L. “Orphan Drug” Loophole Needs Closing, Johns Hopkins Researchers Say [Internet]. Johns Hopkins Medicine. 2015 [cited 2016 Nov 21]. Available from: