Institutional Affiliation: University of Michigan
NBER Working Papers and Publications
|August 2018||The Orphan Drug Act at 35: Observations and an Outlook for the Twenty-First Century|
with Benjamin Berger, Amitabh Chandra, Craig Garthwaite, Ariel D. Stern
in Innovation Policy and the Economy, Volume 19, Josh Lerner and Scott Stern, editors
On the 35th anniversary of the adoption of the Orphan Drug Act (ODA), we describe the enormous changes in the markets for therapies for rare diseases that have emerged over recent decades. The most prominent example is the fact that the profit-maximizing price of new orphan drugs appears to be greater today than it was in 1983. All else equal, this should reduce the threshold for R&D investment in an economically viable product. Further, the small size of patient populations for orphan drugs, together with the increasing prevalence of biologics among orphan drugs, have created a set of natural monopoly-like markets in which firms face little competition, even after the end of formal periods of patent protection and market exclusivity. Additionally, the evolving technologies of drug develop...