|The Food and Drug Administration (FDA) grants orphan drug status to encourage the development of drugs for treatment of rare diseases whose cost of research, development or manufacture is unlikely to be recovered from the sales revenue. In normal conditions the development of such drugs would be a prohibitively expensive and unviable proposition
The Orphan Drug Act of 1983 seeks to address the challenges posed by rare diseases and conditions.
A rare disease is one that affects less than 2, 00,000 persons in the US or whose frequency is lower than 5 out of every 10,000 in the population.
The Food and Drug Administration through its Office of Orphan Products Development funds the development of orphan drugs through research grants for clinical studies and experimentation. There is no possibility of orphan drug development without such assistance.
As further incentive the sponsor of an orphan drug enjoys seven years of exclusive marketing rights over the same following the approval of the product by FDA. Moreover, there are tax credits and incentives for expenditure on clinical research and these tax credits may be carried forward to subsequent years like any other business tax credit.
A comparable statute is also in force in the European Union administered by the European Medicines Agency (EMEA). Since late 2007 a common application could be used for obtaining orphan drug status of both the agencies thereby saving time and resources of the concerned product sponsor. Despite common application, the approval process of both the agencies is separate.
(More : http://www.fda.gov/orphan/progovw.htm