An orphan drug can be defined as a product that treats a rare disease, although different countries have slightly different definitions. For example, the FDA defines a rare disease as a disease with an incidence of less than 1:5,000 of the general population, while the European Union defines it as a disease with a prevalence of 5:10,000.
Historically, rare diseases received little attention from pharmaceutical companies as the small target audience could not justify the huge investment needed for drug development. The U.S. was the first nation to propose a legal framework to encourage development and availability of orphan drugs; the Orphan Drugs Act (ODA) was approved in the U.S. in 1983.
Early on, big pharma was not interested in the benefits provided by ODA; it was more focused on areas with blockbuster potentials. The biotech sector, however, realized the benefits of ODA right from the beginning. Many successful biotech companies came into the market with orphan drugs, which provided these companies a space of their own, free of competition from big pharma.
Incentives offered under the ODA such as tax breaks, grants, and market exclusivity were extremely important for the survival and growth of these start-ups. In addition, the smaller patient populations for rare diseases made clinical trials relatively easier, cheaper, and hence, more manageable by small firms.
Currently biotech drugs are the key drivers of the rapidly growing orphan drug market. A recent report published by BCC estimated the market size of the orphan drug sector at $59 billion in 2006, with 7% CAGR growth expected to propel the market to $82 billion by 2011.
Biologics accounted for approximately 60% of the global orphan drug market in 2006, and over 50% of the leading orphan drugs were biologics. Some of the most promising categories within biologics are monoclonal antibodies, interferons/interleukins, growth hormones, and plasma products (Figure).