Without proper incentives, the economic equation of undertaking R&D to treat a small number of patients simply doesn’t match the years needed to bring new drugs to market.
That puts policy front and center in the rare disease conversation as a means to incentivize difficult development programs for patients who would otherwise fall by the wayside. But the pressure is growing amid increased political uncertainty and a risky financial environment, said Josh Trent, CEO of healthcare consulting company Leavitt Partners and a former White House recruiter, HHS deputy director and congressional counsel.
About 95% of rare diseases do not have treatments approved by the FDA, according to a white paper from the Health Capital Group. Although policies like the 1983 Orphan Drug Act incentivize development, the number of approved treatments has dropped significantly in that time as changes in policy have diminished the scale of those incentives, UCB recently reported.
And while rare disease R&D took a hit from recent efforts to dramatically slim down the federal government, policy remains a critical part of the orphan drug infrastructure, Trent said.
“One of the realities of discovering and developing treatments for Americans with rare disease is that being able to do it successfully depends on a robust ecosystem with multiple factors that present challenges,” said Trent, who contributed to the UCB report. “Some of the challenges are policy-related, some of them market-related, and others are just inherent in understanding the etiology of a particular rare disease and the life cycle of development.”
The goal now is to push for policies that will continue to make rare disease drug development attractive for the industry and other stakeholders.
Diminishing returns
The FDA approved only a few rare disease drugs per year ahead of the Orphan Drug Act, Trent said, but then as a result of the policy, the rate shot up to 252 drugs between 2011 and 2020. Now, in an unstable investing environment, that number has leveled out with 27 drugs approved in 2022, according to UCB.
While there’s bipartisan support for improvements to rare disease drug development incentives, successful policies have a hard time seeing the light of day, Trent said.
“We’ve seen Congress get gummed up on how to ultimately get these across the finish line — it’s less about finding consensus on the policy and more about finding consensus on the process for enacting it,” Trent said. “Business decisions are being made on a daily basis, and businesses and investors take clues from the degree of regulatory uncertainty and act accordingly. That tends to be a bad thing for patients over a longer period.”
“The efficiency argument is important, and every administration, everyone in Congress, wants to be a good steward of taxpayer dollars — the opportunity we have now is the science, and good policy will result in less irrational utilization and more cost savings.”
Josh Trent
CEO, Leavitt Partners
In many cases, the difficulty of bringing new incentives to the table is a matter of procedural complications and “the nature of policymaking,” Trent said.
“One of the challenges for policymakers, and I have experienced this myself in Congress, is that life is lived looking forward, but understood looking backward,” Trent said. “The nature of policymaking is trying to be informed by what has worked in the past but recognizing that the future will be different — that’s particularly challenging in innovation, because it can be easy to overindex the issue of the moment.”
As technology platforms and market dynamics shift, policymakers have to look ahead five or 10 years without knowing for certain how the overall landscape could change. But if multiple stakeholders across the rare disease ecosystem are aligned — and there is overwhelming support to do so, Trent said — then patients will ultimately be put first.
“The great thing is there are some clear, concrete, bipartisan opportunities to improve the policy environment,” Trent said.
Policy paths forward
Despite the many challenges, several opportunities exist, and they all carry a good deal of support among stakeholders including pharma companies, payers, lawmakers and patients.
One of the ways to protect rare disease drug development would be to amend exclusions for orphan drugs from Medicare price negotiations under the Inflation Reduction Act, Trent said.
Currently, the IRA excludes drugs that treat only one orphan condition, “discouraging rare disease research and development from further exploring promising research that could lead to additional treatment options,” according to an email from the Rare Disease Company Coalition.
“This creates a roadblock to rare disease innovation, and in turn, the development of treatments for the more than 95% of rare diseases without approved therapies,” the RDCC wrote, pointing to the Orphan Cures Act introduced by a bipartisan team of lawmakers that would do away with the exclusion. “By expanding the single-orphan exclusion, the Orphan Cures Act would open the door for the research and development of existing products that could help find treatments.”
Another potential policy driver of rare disease drug development is the rare pediatric disease priority review voucher program, which once provided vouchers for companies that bring new rare disease drugs to market. The program lapsed at the end of last year and has been reintroduced in 2025 by U.S. Rep. Michael McCaul (R-Texas) in the Give Kids a Chance Act, but has not yet been passed.
“There’s a lot of unity in the rare disease community about the priority and importance of that, and I think it will get done,” Trent said. “It has proven harder to get done in the current environment, however.”
One more way to incentivize rare disease drug development? Restoring the Orphan Drug Tax Credit to its original 50% after tax reforms in 2017 brought it down to 25%, Trent said, calling it a “concrete opportunity.”
Overall, the burden of rare disease is too great for policymakers to ignore the opportunities that come from lowering the bar for new drugs to enter the market, Trent said.
“From an efficiency perspective, we are already paying for rare disease in the form of direct care, but a lot of it is spending that could be more efficient and optimized,” Trent said. “The efficiency argument is important, and every administration, everyone in Congress, wants to be a good steward of taxpayer dollars — the opportunity we have now is the science, and good policy will result in less irrational utilization and more cost savings.”
