Is Rare Disease Policy a Stress Test of US Health Care?

Four-plus decades after the bipartisan Orphan Drug Act was signed into law on January 4, 1983, by then-President Ronald Reagan,¹ rare disease research has accelerated dramatically. At the time when the legislation was spearheaded by Sen Orrin Hatch (R, Utah) and Rep Henry Waxman (D, California), approximately 6000 rare diseases had been identified as affecting 25 million individuals in the US.² Since then, major milestones have emerged, including the accelerated approval pathway, the Rare Diseases Act, the completion of the Human Genome Project, the first gene therapy approval, and the founding of the National Organization for Rare Disorders. The number of treatments on the market for rare diseases also has grown exponentially, from 34 to approximately 800,^2-4 with more than 1300 approved indications and over 7500 designations, according to an FDA database search conducted on January 29, 2026.⁵

Rare Disease Month, acknowledged each year in February, is a platform for the scientific breakthroughs and patient experiences that help inform the innovations meant to bring advancement to this space. Among Americans, rare diseases are diseases seen in less than 200,000 individuals, and there are currently more than 10,000 of them affecting more than 30 million people in the US.⁶ Yet access to diagnosis, treatment, and coordinated care now are shaped less by clinical need than they are by coverage restrictions and decisions, as well as payment models designed for common conditions. The result is a system where innovation outpaces implementation and FDA approval is frequently mistaken for automatic treatment access.

Policy debates now center on whether the Orphan Drug Act’s incentives remain aligned with unmet need, leaving patients, their caregivers, and their care teams to navigate a patchwork of prior authorization requirements, benefit exclusions, and inconsistent definitions of medical necessity. These tensions expose a broader truth: Value-based care models, regulatory evidence standards, and data infrastructure were not built for small, heterogeneous populations. As policy makers and advocates push for accountability, efficiency, and equity across the health care universe, rare diseases offer a critical stress test, revealing where policy frameworks fall short, where they succeed, and where reform could meaningfully change patient outcomes.

The Evolution of the Marketplace

In the 1980s, explained Kristi Martin, former chief of staff and senior advisor to the deputy administrator in the Center for Medicare, the most expensive drug on the market cost approximately $1000, compared with cell and gene therapies now costing millions. For example, the most expensive drug on the market today is atidarsagene autotemcel (Lenmeldy; Orchard Therapeutics) for early-onset metachromatic leukodystrophy, approved in 2024,⁷ with a price of $4.25 million for its 1-dose administration.⁸ In addition, average prices for orphan drugs have risen as average prices for nonorphan drugs have dropped.² Figures from 2023 show an average price of $218,872 for an orphan drug and $12,798 for a nonorphan drug⁹ compared with $118,820 and $23,331 from 2014¹⁰—meaning the price gap between orphan and nonorphan drugs has widened from 5 times to 17 times.

In an interview with The American Journal of Managed Care^® (AJMC^®), Martin, who is also a Washington, DC–based policy strategist and implementer, explained that although the Orphan Drug Act has held up remarkably well—“treatments have been brought to market that I don’t think would have been brought to the market by private sector if it hadn’t been for the law being in place,” she said—it must be viewed through a contemporary lens and there is a need to periodically reassess laws to ensure incentives align with current development realities.

“The world is always changing around us and other laws are passing,” she stated. “And so, as other laws are passing, you have to take a look at the ones that are there and ask, ‘OK, what do we need to adapt this law? Because we just passed this other one that changes the system.’”

Phil Waters, JD, director of federal public policy for Blood Cancer United, expressed similar thoughts on the Orphan Drug Act’s 40-plus year success. He explained to AJMC that the law’s original intent has largely been a success, in that it has addressed concerns from decades ago that rare diseases and conditions lacked pharmaceuticals for treatment. The act accomplished this by including tax credits to defer clinical testing costs, grants for research expenses, and an exemption from the FDA’s fee for a new rare disease drug application.

Still, Waters also argued that the law requires modernization, as although these incentives have facilitated a successful rare disease drug pipeline, most rare diseases still do not have any FDA-approved treatments. Research from late 2025 shows this to be almost 95% of rare diseases, meaning that only 4% to 6% or rare diseases have FDA-approved treatments on the market.²

The Oncology Dominance

One of the most significant shifts in the history of the Orphan Drug Act is its heavy concentration in oncology. Unlike a rare disease, a cancer is considered a rare cancer if it is seen in fewer than 6 persons per 100,000 population.¹¹ Individually, these cancers are scarce, but collectively they do account for close to a quarter of new cancer diagnoses.

Further, oncology is 1 of 4 areas that together make up more than half of orphan drug applications received by the FDA each year, along with neurology, hematology, and gastroenterology/liver.² In contrast, the other half of orphan drug applications comprises 37 therapeutic areas, which breaks down to 5% of all orphan drug applications at most per area. The result is a disproportionate impact on rare oncology development, with up to one-third of all orphan drug approvals being for a rare cancer. Between 1983 and 2022, there were 2355 orphan drug designations that were related to rare oncology indications,¹² for 181 rare cancers overall and 92 rare cancers with at least 1 approval. Rare hematologic cancers benefited the most as an oncology subgroup of the 181 rare cancers, Waters explained, with 19 initial approvals for multiple myeloma alone through 2022.

Martin explained that this dominance is driven by both scientific advancement and financial strategy. Diagnostic innovations, such as the ability to now identify BRCA-positive cancers, permit more distinct disease classifications, making oncology fertile ground for orphan drug designations with improved mortality trends and marking a sharp contrast to the decades before the Orphan Drug Act’s passage in which effective cancer treatments were limited, especially for pediatric patients. There has also been significant investment by the National Institutes of Health and the National Cancer Institute that had helped to catalyze pipeline development. In addition, the successes of oncology blockbuster drugs—a blockbuster drug is one that generates at least $1 billion in annual manufacturer revenue^13,14—have served as incentives for manufacturers to prioritize oncologic drug development. Three examples of such drugs in the oncology space are daratumumab (Darzalex; Johnson & Johnson), approved for multiple myeloma,¹⁵ with total global annual sales for 2025 of $14.4 billion¹⁶; nivolumab (Opdivo; Bristol Myers Squibb), approved for renal cell carcinoma, urothelial carcinoma, and esophageal cancer among others,¹⁷ with 2025 sales of $1.92 billion¹⁸; and pembrolizumab (Keytruda; Merck), approved for non–small cell lung cancer, melanoma, and triple-negative breast cancer among others,¹⁹ with projected 2025 sales of $32 billion.²⁰

The Health Care Policy Impact

The Orphan Drug Act has had a notable impact on several prominent pieces of legislation, most notably the Inflation Reduction Act and Medicare Drug Price Negotiation Program, according to Martin and Waters. Where these intersect has become a primary focus for reform.

The Inflation Reduction Act excluded orphan drugs and biologics from price negotiation if they were indicated for a single rare disease or condition and approved for that rare disease or indication.²¹ If, however, an orphan drug or biologic was indicated for a second rare disease, it would lose orphan drug exclusion status even if it wasn’t approved for a non–rare disease indication,²² and CMS would use the first date of approval to determine eventual price negotiation status.²¹

As it stood, experts, including Blood Cancer United per Waters, expressed concern of a possible halt to rare disease innovation due to the removal of incentives to research and develop drugs for rare indications under the Inflation Reduction Act. For example, the orphan tax credit for a rare disease drug was 50% under the first Trump administration, but this was reduced to 25% in 2017, according to Martin. Other top incentives for orphan drug development under the act were an exemption from FDA user fees, 7 years of market exclusivity for a small-molecule drug product, or 11 years of market exclusivity for a small-molecule biologic product.²²

Changes incorporated into HR 1, commonly called the One Big Beautiful Bill Act, address some of these concerns, Martin and Waters explained. Experts had been asking for clarification that the number of orphan designations granted to a product should not matter for negotiation exclusion, that only FDA approvals should count, Waters noted. The ORPHAN Cures Act provision of the new bill included 2 significant changes regarding this: Drugs can have more than 1 indication for a rare disease or condition, and a rare drug will only become eligible for price negotiation starting with the date of the first nonorphan indication.

Drilling down to Medicare Part B and Part D for patients with blood cancers, Waters noted, the updated provision under the ORPHAN Cures Act means that drugs for these patients that may have become eligible for negotiation no longer would be. The cost implications of this move for patients with Part D coverage remained mostly unchanged, as a result of the out-of-pocket spending cap for Part D drugs under the Inflation Reduction Act.

For individuals receiving medications not covered under Part B, however, Martin says this: “There are so many more drugs that are not going to be negotiated, and it's billions of dollars that would have been saved. Keep in mind, also for Medicare beneficiaries, they're doing coinsurance on those drugs, because those are very-high-cost drugs, so instead of somebody paying thousands of dollars on their 20% because they have coinsurance, they could have been paying maybe hundreds of dollars.”

Conclusions

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More than 40 years after its passage, the Orphan Drug Act has fundamentally reshaped the rare disease landscape—fueling scientific innovation, expanding therapeutic pipelines, and transforming once-neglected conditions into active areas of research and development. But its success has also exposed fault lines: rising prices, uneven access, and policy frameworks that struggle to accommodate small, heterogeneous patient populations.

The central challenge is no longer whether therapies for rare diseases and conditions can be developed, but can systems of coverage, payment, and regulation deliver them equitably and sustainably? The intersection of the Orphan Drug Act with modern policy tools—value-based care models, Medicare negotiation, and benefit design—has turned rare diseases into a proving ground for broader health system reform. Rare disease policy is no longer a niche issue—it is a stress test for the future architecture of US health care.