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August 26 2012

Orphan Drugs Need a Strong Market, Not the Nanny State

Vicki E. Alger

My former colleague, John R. Graham, has just published an analysis that finds that new orphan drug laws aren’t likely to help patients with rare diseases.

“Orphan” drugs are those developed to help the 6 to 8 percent of people worldwide suffering with rare diseases, and they represent about 3 percent of the prescription drug market. The Orphan Drug Act of 1983 was enacted to incentivize the development of therapies for rare diseases. Yet only 250 of some 7,000 rare diseases have approved therapies today. The Food and Drug Administration Safety and Innovation Act (FDASIA) was enacted this summer to renew interest in orphan drugs. Yet Graham finds:

Despite these new laws, it is unlikely that they will help patients with rare diseases. Since the market for orphan drugs is so small, the price to buy them can cost somewhere in the neighborhood of $400,000. The current health care system does not incentivize insurance companies to cater to those with rare diseases, opting to cover the "median patient." A market-driven health insurance system that spreads over a large number of people is the best way to complement the new laws.

Government should not be in the business of micromanaging “innovation”—that’s not its job, and as history shows, government isn’t terribly good at it, either.

Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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