Proposed 'grant-and-access' program with price caps could stimulate development of drugs for very rare diseases

The 1983 Orphan Drug Act created incentives for the development of orphan drugs. Despite its successes, including a substantial increase in new drugs, approved orphan drugs still treat fewer than 5 percent of registered rare diseases. In addition, concerns have arisen about the high prices of many of these therapies, which can cost hundreds of thousands of dollars per patient each year. In this article, we propose a new "grant-and-access pathway," in which drug developers could opt to compete for federal grants to subsidize the costs of clinical testing. In return for the grant funding, companies would no longer claim orphan drug tax credits and would agree to price caps for marketed products based on the duration and costs associated with drug development, expected market size, and target rate of return. We identify scenarios in which such a policy could provide a net benefit to society.