The Orphan Drug Act of 1983 


by Niall O’Donnell, Ph.D.

Managing Director of RiverVest Venture Partners

Big Impact on “Small” Disease Therapies

(June 14, 2023) ­— Although their diseases are rare, their numbers are mighty; more than 30 million Americans suffer from a rare (also known as orphan) disease. This equates to roughly one in 10 Americans whose medical needs are complex and, most likely, unmet. At RiverVest, we build and invest in companies that focus on addressing some of the 7,000+ orphan diseases that afflict them.


In this article, RiverVest Managing Director Niall O’Donnell, Ph.D. discusses the law that transformed orphan drug development and how one actor’s starring role in its passage spurred 40 years of prolific, life-saving innovation that continues today.

Unbeknownst to viewers tuning into the popular television drama Quincy on October 27, 1982, they were about to witness the show’s leading actor Jack Klugman change the course of history for drug development.


Impassioned by his brother Maurice Klugman’s diagnosis with a rare bone cancer, Jack leveraged his role as the mercurial Dr. R. Quincy M.E. to highlight the impediments to rare disease research.

Real-life Orphan Drug Act supporters on the set of the television drama Quincy in 1982.

The 48-minute episode was a blistering polemic against pharmaceutical companies for focusing on “popular Top 40” diseases while ignoring rare “orphan” diseases (defined as diseases that afflict fewer than 200,000 American citizens).  In a pivotal scene, Quincy confronts a fictitious senator over his refusal to help a child with a rare muscular disorder.  Quincy directs the senator to look out his window where a crowd of 500 real-life orphan disease sufferers had assembled with signs exclaiming, “We Want the Orphan Drug Act.”


Chastened, the senator relents, and Quincy saves the day, both on-screen and off. 

The Orphan Drug Act of 1983

Three big incentives to drug makers:


  1. A lighter regulatory burden for developing new orphan drugs. Rather than multiple long, double-blinded clinical trials, researchers could perform single, smaller studies to demonstrate a drug’s safety and efficacy.
  2. Seven years of market exclusivity, which would create an attractive, monopolistic market for the drug makers.
  3. Tax credits to offset the cost of clinical trials, which would significantly lower the financial barriers to entry for drug companies of all sizes.

The impact would be a regulatory “balance-of-the-evidence” argument in favor of patients with a financial upside for drug makers willing to innovate “small” disease therapies.


The bill, sponsored by Henry Waxman of California, had sailed through the House of Representatives but was stalled in the Senate. Thanks in part to the activism of Jack and Maurice Klugman, opposition in the Senate lessened, and the Orphan Drug Act was signed into law by President Ronald Reagan on January 4, 1983.

The cost of discovering and developing a new drug is often staggering. By definition, an orphan drug is one that treats a disease that affects 200,000 or fewer individuals — and, from an economic perspective, groups that small do not now justify the kind of research expenditures that companies must make.

The bill that I am signing today helps to cure that problem and consequently, we hope, some of the diseases as well.

RONALD REAGAN, January 4, 1983

Frenzy of Innovation

The new law was a game-changer in the development of therapies for unmet medical needs, unleashing a frenzy of innovation in treatments for multiple sclerosis, cystic fibrosis (CF), and a host of rare pediatric cancers.


Prior to 1983, only a few dozen drugs had been developed for rare diseases. Today, more than 1,000 new drugs have been approved, addressing many of the 7,000 or so identified orphan diseases. 


As a result, the lives of hundreds of thousands of adults and children have been immeasurably improved. Instead of a death sentence, real hope and potential cures can be offered. For example, in 1978, a child with CF could not expect to become a teenager; today, CF patients can reasonably expect to be blowing out the candles on their 50th birthday cake thanks to several disease-modifying drugs for CF.


Similarly, prior to 2000, a diagnosis of chronic myelogenous leukemia (CML) was terminal, but with the approval of Gleevec in 2001, most CML patients now live a full and normal life. Since Gleevec’s approval, six new CML therapies have been launched.


While the successes are many, abuses of the Orphan Drug Act’s incentives do exist. Several companies have taken advantage of the lower barrier for “orphan approval” as a backdoor to expedite drug development for larger, less severe patient populations. Others have sought to use the de facto monopoly status given through the orphan protections to block competition, prevent access to patients for future clinical trials, and charge hard-to-justify prices. Fortunately, these practices have been the exception rather than the rule; more than 75% of orphan drugs maintain a pure orphan-only label and fewer than 5% cost more than $500,000 a year.

Significant Unmet Need

Even with the Orphan Drug Act, there are still many diseases without an effective therapy. Working together with patients, parents, and entrepreneurs, RiverVest is developing new ways to address significant unmet medical needs.


We have helped build over a dozen rare disease companies over the last decade, scoring notable successes such as the first drug approval for the grave pediatric liver disease Alagille syndrome (Mirum), as well as four acquisitions and three IPOs in our “orphan portfolio” shown below. 


Currently, RiverVest and our syndicate partners are funding ongoing clinical trials in mitochondria myopathies, glycosylation disorders, and adrenal hyperplasia.

RiverVest’s Portfolio of Companies Developing Orphan Drugs


Inflation Reduction Act of 2022


A discussion of orphan diseases would be incomplete without acknowledging the potential challenges posed by a fairly recent change in federal policy.


Under the Inflation Reduction Act of 2022, the criteria for a drug to qualify for the favorable treatment allowed under the Orphan Drug Act have become more restrictive. Most notably, if a company applies for FDA approval for a drug in a second therapeutic indication, the company will forfeit its rights to the privileges afforded it under the Orphan Drug Act for the drug altogether.


Like many in the life sciences arena, we are concerned about this change. Innovators need to see economic justification in developing a drug for a small market, and being able to apply the same drug to multiple needs has often been the way that companies could justify such investments.


We at RiverVest are watching this matter closely and hoping that a refinement in the policy will lead to additional innovations, giving patients with rare diseases the best possible chance to receive life-saving therapies. We look forward to continued success in the compelling sphere of orphan drug development on behalf of patients, entrepreneurs, and investors.

About Niall O'Donnell

Niall joined RiverVest in 2006 as a Kauffman Fellow and became a managing director in 2014. He focuses on biopharmaceutical opportunities as well as building and operating RiverVest portfolio companies. Niall is both a co-founder and board member of Reneo Pharmaceuticals (NASDAQ: RPHM) and Mirum Pharmaceuticals (NASDAQ: MIRM). He also serves as a board member of Avalyn Pharma, Glycomine, Inc., Sparrow Pharmaceuticals, and Spruce Biosciences (NASDAQ: SPRB). He was interim CEO of Reneo Pharmaceuticals and was interim chief medical officer at Lumena Pharmaceuticals prior to the company’s acquisition by Shire Plc (now part of Takeda America Holdings) in 2014. 


In 2018, Niall helped spin the Lumena assets out of Takeda Pharmaceutical, after Takeda’s acquisition of Shire, and drove the creation of Mirum Pharmaceuticals. In 2021 the FDA approved Mirum’s LIVMARLI for the treatment of Alagille Syndrome. Niall also helped co-found and seed Excaliard Pharmaceuticals, Inc., developing the company’s clinical strategy. The company was subsequently acquired by Pfizer, Inc.


Prior to joining RiverVest, Niall spent five years as an immunologist at Johnson & Johnson Pharmaceutical Research and Development in San Diego. He co-authored the first paper validating the newly discovered histamine H4 receptor as a key regulator of immune pathologies. Niall was also a member of the scientific advisory board of Ziarco Ltd., a developer of H4 receptor antagonists that was acquired by Novartis International AG in 2016.


Niall earned a Ph.D. in Biochemistry from the University of Dundee, Scotland, and an M.A. in Biochemistry from Pembroke College, Oxford. He also received an M.B.A. from the Rady School of Management of the University of California, San Diego. His professional affiliations include the American Thoracic Society and American Association of Immunologists.