aside some potentially beneficial, innovative products, for example, if they expect or encounter difficulties in obtaining answers to questions or advice on trial design or if the review of their applications for approval of a product is slow or inconsistent across FDA review divisions. When companies consider regulatory costs and uncertainties in addition to the expected size of the market, candidate drugs that could meet the needs of small populations may be particularly vulnerable.

Recognizing that regulations to protect the public’s health may also create barriers to market entry for new drugs and medical devices, Congress has created a variety of policies to encourage the development and speed the evaluation of innovative products to meet serious unmet health needs. A leading example is the Orphan Drug Act (P.L. 97-414), which provides protection from competition (i.e., exclusive marketing rights), tax credits for certain clinical development expenses, grant support, and other incentives for sponsors to develop drugs for people with rare diseases. Sponsors are usually for-profit pharmaceutical or biotechnology companies, but not-for-profit research organizations and even state agencies have occasionally sponsored applications for the designation and approval of an orphan drug. For example, the California Department of Health Services created the product, conducted the clinical trials, and received approval to market botulism immune globulin (BabyBIG) for treatment of infant botulism, a rare condition caused by Clostridium botulinum (Masiello and Epstein, 2003; Arnon, 2007). Development of the drug was supported by an FDA orphan products grant.

Policies on orphan drug development operate within the broader framework of FDA regulations. This chapter, therefore, begins by reviewing the basics of drug and biological product regulation before discussing policies to encourage the development of drugs for small populations, specifically the Orphan Drug Act of 1983. The latter discussion also compares patent protections with protections provided by market exclusivity as defined below and presents summary data on orphan drug designations and approvals. After a review of concerns about the adequacy of agency resources in relation to its responsibilities, the chapter concludes with recommendations that focus on the consistency and quality of FDA guidance and review of orphan drugs and the need to ensure that product development research funded by the National Institutes of Health (NIH) is designed and conducted to meet FDA requirements.

Because the regulation of medical devices differs significantly from that for drugs, Chapter 7 examines the regulation of medical devices and policies to encourage the development of devices for small populations. That discussion covers policies on diagnostic devices, including policies on the codevelopment of drugs and companion diagnostics and policies on combination products (e.g., those combining a drug and a device).

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