Rare Disease Therapies: From Niche Experiment to Strategic Growth Engine

Rare diseases, defined in the United States as conditions affecting fewer than 200,000 patients, collectively represent one of the largest areas of unmet medical need in modern healthcare. More than 7000 rare diseases affect an estimated 25–30 million people in the US and more than 400 million globally (1,2). Despite decades of scientific progress, however, only approximately 5% of rare diseases currently have an FDA-approved therapy (2). The clinical, economic, and societal burden of these conditions is substantial: on a per-patient basis, rare diseases generate healthcare costs nearly 10 times higher than non-rare diseases, driven largely by delayed diagnosis, fragmented care, and avoidable morbidity and mortality (3).

For much of the pharmaceutical industry’s history, these realities did not translate into meaningful investment in drug development. Small patient populations, limited disease understanding, and uncertain reimbursement made rare diseases appear commercially unattractive. Instead, capital flowed toward large, prevalent indications such as cardiovascular disease, diabetes, and oncology, where scale and drug pricing justified risk. Even when scientific hypotheses existed, investors and manufacturers alike questioned whether development costs could ever be recovered in ultra-small markets (4).

That perception has changed fundamentally. Over the past four decades, rare diseases have shifted from a marginal pursuit to a core pillar of biopharmaceutical innovation and growth. Today, roughly one-third of FDA-approved drugs carry an orphan designation, and rare disease assets are sought-after in business development and licensing (BD&L) transactions (2,5). This transformation was not accidental. It emerged from a repeatable formula built on the convergence of three forces: supportive policy incentives, scientific breakthroughs, and durable and consistent commercial validation. These elements reshaped the risk–reward profile of rare disease development and established a model that continues to attract capital and strategic focus.

This article, Part one of a four-part rare disease thought-leadership series, examines how that winning formula emerged and why it continues to underpin rare disease development and investment. Part two will explore the pricing and access landscape of rare disease assets in the US and key global regions.

Which policy incentives were the catalyst for rare disease development?

The modern rare disease era began with a deliberate policy intervention. The US Orphan Drug Act (ODA) of 1983 fundamentally altered the economics of developing therapies for small patient populations by introducing a package of incentives designed to reduce financial and regulatory risk (6). These included seven years of market exclusivity, tax credits for clinical research, and waivers of certain FDA fees. At the time, the legislation was viewed as an experiment, an attempt to correct a market failure by encouraging investment where traditional commercial development had fallen short for patients with the highest unmet need (Figure 1).

The impact was profound. By lowering barriers to entry, the ODA enabled small biotechnology companies and academic spinouts to pursue programs that previously had been considered commercially untenable. Importantly, the ODA did not operate in isolation. Over time, additional regulatory mechanisms further accelerated rare disease development. FDA’s Accelerated Approval pathway allowed therapies to reach patients based on surrogate endpoints reasonably likely to predict clinical benefit, particularly relevant in rare disease where large, long-duration trials are impractical (7). The Biologics Price Competition and Innovation Act (BPCIA) later extended exclusivity for biologics to 12 years, reinforcing incentives for novel modalities (8).

Supplementary programs, such as the Rare Pediatric Disease Priority Review Voucher (PRV), provided additional financial upside by allowing companies to monetize expedited FDA review of future assets, often for sums exceeding $100 million on the secondary market, and further justifying unknown clinical development pathways (9). Although PRV was allowed to sunset in 2024, as of Jan. 27, 2026, the Mikaela Naylon Give Kids a Chance Act, which would reinstate the PRV, has passed the House of Representatives and is awaiting Senate approval (10).

US leadership also catalyzed global adoption. Japan implemented orphan drug incentives in the early 1990s, followed by the European Union’s orphan regulation in 2000 (11). Today, more than 50 countries have some form of orphan drug legislation, creating a broadly harmonized global framework that supports rare disease innovation across regions.

Collectively, these policies did more than stimulate development volume. They reset expectations around what constituted an acceptable development risk and signaled long-term regulatory commitment to rare disease innovation. Without this foundation, many subsequent scientific breakthroughs would likely have remained confined to academic interest rather than translating into approved therapies.

Development realities in rare diseases: smaller trials, different risks

Rare disease development is often assumed to be more expensive and riskier than development in common indications. In practice, the picture is more nuanced. Clinical trials in rare diseases are smaller by necessity, frequently rely on surrogate endpoints, and increasingly employ adaptive or single-arm designs. These features reduce enrollment requirements but introduce distinct operational challenges related to patient identification, recruitment, and endpoint validation.

Analyses comparing orphan and non-orphan drugs show that, on average, clinical development costs for orphan drugs are lower, not higher. Estimates place the average cost per approved orphan drug at approximately $166 million, compared with $291 million for non-orphan drugs, with capitalized costs following a similar pattern (12). For new molecular entities, orphan development costs are roughly half those of non-orphans. Longer trial durations, driven by recruitment challenges, partially offset these savings, but overall economics remain favorable.

Market research with industry experts further highlights that development difficulty varies meaningfully across rare disease therapeutic areas (Figure 2). Experts ranked challenges related to trial execution, particularly patient identification and recruitment, are consistently ranked as both the most difficult and most costly barriers (data not shown). Scientific uncertainty and lack of validated endpoints add complexity, while manufacturing and logistics emerge as disproportionately costly relative to perceived difficulty. These findings underscore that rare disease development is not monolithic; execution risk depends heavily on disease biology, diagnostic infrastructure, and therapeutic modality.

Innovations in trial design and evidence generation continue to mitigate these risks. Decentralized trials, expanded access programs, and the increasing use of real-world data have all played growing roles in regulatory submissions, particularly where randomized controlled trials are infeasible (13,14). In several orphan approvals, data from expanded access programs contributed pivotal efficacy evidence, further illustrating regulatory flexibility in high-unmet-need settings.

Commercial validation: proving the model works

Ultimately, it was commercial success, not policy or science alone, that cemented rare diseases as a sustainable strategic focus. A growing number of rare disease therapies have achieved blockbuster status, disproving the notion that small patient populations inherently limit revenue potential. Two complementary commercial models have emerged: high-chronic-revenue therapies, such as Spinraza, and ultra-premium, potentially curative therapies, such as Zolgensma.

Beyond spinal muscular atrophy, multiple rare disease therapies have crossed the $1 billion annual sales threshold, including Soliris for PNH and Cerezyme for Gaucher disease. More recently, gene therapies such as Elevidys for Duchenne muscular dystrophy are emerging as blockbuster candidates despite ongoing safety scrutiny, reflecting strong physician demand in high-unmet-need populations (data not shown, accessed from Global Data, September 2025).

Revenue analyses of orphan-designated drugs approved between 2000 and 2024 show that approximately 14% achieve blockbuster status, with an additional 12% reaching high-tier revenues of $500 million to $1 billion annually (Figure 3). While the majority of orphan drugs remain mid-tier or niche products, many still generate positive lifetime returns due to limited competition and reduced exposure to generic or biosimilar erosion.

Comparative analyses of early post-launch performance further illustrate the advantage of orphan strategies. Drugs approved exclusively for orphan indications demonstrate steady growth in the first three years post-launch, whereas non-orphan drugs approved over the same period show declining early revenues, reflecting crowded markets and intense competition (data not shown). These patterns reinforce the strategic appeal of rare diseases as a way to achieve earlier and more predictable commercial traction.

Commercialization, however, is not without cost. Industry expert research indicates that rare disease launches require a consistently high-touch model, with significant investment in patient services, diagnostics, field teams, and evidence generation (data not shown). Notably, commercialization spending converges across therapeutic areas, reflecting shared structural challenges rather than indication-specific dynamics. Over a five-year window surrounding launch, total commercialization investment often approaches $250 million, underscoring the importance of disciplined portfolio planning and sequencing.

What is the rare disease treatment winning formula?

Taken together, four decades of experience reveal a consistent formula underlying rare disease success. Policy incentives catalyzed initial investment. Scientific advances proved feasibility. Flexible development pathways reduced execution risk. Commercial validation attracted further capital. Each element reinforced the others, creating a self-sustaining cycle that continues to define the sector today (Figure 4).

Patient advocacy has played a central role throughout this evolution. Advocacy organizations generate natural history data, facilitate trial enrollment, and influence regulatory and reimbursement decisions, effectively reducing development risk and accelerating adoption. In rare diseases, patient centricity has moved from aspiration to operational necessity.

This model has also shaped industry structure. Small and mid-cap biotech companies typically drive early discovery and proof-of-concept, while large pharmaceutical companies scale manufacturing, commercialization, and global access through partnerships or acquisitions. Capital markets have reinforced this sequencing: orphan designation announcements are associated with positive abnormal returns, and orphan-focused assets consistently command valuation premiums in M&A transactions.

Looking ahead: from success to sustainability

What began as a policy experiment has matured into a cornerstone of biopharmaceutical growth. Yet the rare disease model now faces new questions. Rising launch prices, expanding multi-indication strategies, increasing payer scrutiny, and an emerging value-access paradox where regulators and payers are requiring different evidence standards, raise concerns about long-term sustainability. These issues will be addressed in Part 2 of this series, which examines the global pricing and access landscape for rare disease therapies. The rare disease winning formula remains intact, but its next phase will be defined not by whether it works, but by how responsibly and strategically it is applied.

References

1. Schieppati, A.; Henter, J. I.; Daina, E.; and Aperia, A. Why Rare Diseases Are an Important Medical and Social Issue. Lancet 2008 371(9629), 2039–2041.
2. Han, Q.; Fu, H.; Chu, X.; Wen, R.; Zhang, M.; You, T.; Fu, P., Qin, J.; and Cui, T. Research Advances in Treatment Methods and Drug Development for Rare Diseases. Frontiers in Pharmacology 2022 13, 971541.
3. Andreu, P.; Karam, J.; Child, C.; Chiesi, G.; Cioffi, G. The Burden of Rare Diseases: An Economic Evaluation. Chiesi Global Rare Diseases White Paper. 2022.
4. Miller, K. L. Do Investors Value the FDA Orphan Drug Designation? Orphanet Journal of
   Rare Diseases, 2017 12(1).
5. Chambers, J. D.; Clifford, K. A.; Enright, D. E.; and Neumann, P. J. Follow-On Indications for Orphan Drugs Related to the Inflation Reduction Act. JAMA Network Open, 2023 6(8), e2329006.
6. H.R.5238 - 97th Congress (1981-1982): Orphan Drug Act. (1983, January 4). https://www.congress.gov/bill/97th-congress/house-bill/5238
7. FDA. Accelerated Approval Program. NDA and BLA Approvals. United States Food and Drug Administration. 1992. 21 U.S.C. § 356
8. FDA. Biologics Price Competition and Innovation Act. Center for Drug Evaluation and Research (CDER). FDA, 2009. 42 U.S.C. ch. 6A § 201 et seq.
9. Rare Pediatric Disease Priority Review Voucher. Food and Drug Administration Safety and Innovation Act. 2012. 21 U.S.C. ch. 9; Pub. L. 112-114. 126 Stat. 993-1132.
10. Mikaela Naylon Give Kids a Chance Act. 2025. 119^th Congress. S.3302.
11. Costa, E., Vijayalekshmi Ajith, Al, A. F., Antonella Isgrò, Lee, K. J., Riccardo Luigetti, Pasmooij, A. M. G., Stoyanova-Beninska, V., Trachsel, E., Vaillancourt, J., & Steffen Thirstrup. Addressing Global Regulatory Challenges in Rare Disease Drug Development. Drug Discovery Today, 2025 104462–104462.
12. Jayasundara, K.; Hollis, A.; Krahn, M.; Mamdani, M.; Hoch, J. S.; and Grootendorst, P. Estimating the Clinical Cost of Drug Development for Orphan versus Non-Orphan Drugs. Orphanet Journal of Rare Diseases, 2019 14(1).
13. Polak, T. B.; van Rosmalen, J.; and Uyl-de Groot, C. A. Expanded Access as a Source of Real-World Data. British Journal of Clinical Pharmacology. 2020.
14. Moore, J.; Goodson, N.; Wicks, P.; and Reites, J. What Role Can Decentralized Trial Designs Play to Improve Rare Disease Studies? Orphanet Journal of Rare Diseases, 2022 17(1), 240.

Methodology

Figures 1 and 3: Analysis was conducted using data accessed from Global Data (September 2025), following the subsequent methodologies. Total Orphan Designations reflects the total count of unique drugs that received an FDA Orphan Designation for any indication, organized by the year in which their first designation was received; excludes drugs which pursued any indication in which they did not receive an Orphan Designation. Orphan Approvals by Year reflects the total count of unique drugs that received an FDA Orphan Designation for any indication and were approved in that indication, organized by the year in which their first approval was received; also excludes drugs which pursued any indication in which they did not receive an Orphan Designation. Further sub-divided based on molecule type was performed using the dichotomous classification of Small Molecule and Biologic based on manufacturer reported mechanism of action and drug classification. The total number of unique drugs that received an FDA Orphan Designation for any indication and were subsequently approved in that indication between the years 2000 and 2024; excludes any drugs for which sales data was not available. This sample is further subdivided by peak annual sales into Blockbuster (≥$1B), High-tier ($500M–<$1B), Mid-tier ($250M–<$500M), Small ($100M–<$250M), and Niche (<$100M) and represented as the number of drugs within each category of peak annual sales as a percentage of the overall sample.

Figure 2: Data was collected through an online survey designed to capture quantitative insights into the clinical development and commercialization of products in the rare disease space. Respondents were required to meet specific qualification criteria, including holding a senior position title, having a minimum of 5 years industry experience, and possessing strong or extensive knowledge of the costs associated with clinical and commercial development. The survey comprised 15 closed-ended questions utilizing multiple choice, matrix tables, and ranking formats. The survey was conducted between September 19 and September 25, 2025, and included a final sample of 31 qualified respondents (n=31). All data shown represents averages across respondents.

About the author

Nathan Edwards, PhD, specializes in business development, new product planning, and early brand strategy. He helps companies lay the foundation for successful launches through data-backed strategies spanning indication assessment to portfolio strategy. With a strong background in pricing and market access, Nathan integrates both commercial and access insights into early asset development to maximize market opportunity.

About Ayra Consulting Partners

Arya Consulting Partners is a global, full-service boutique consulting firm that partners with biopharma companies to navigate complexity and support growth. We combine deep therapeutic expertise, real-world insights, and end-to-end commercialization capabilities with a people-first approach. Our mission is simple: deliver strategies that create measurable results and lasting impact for our clients, our people, and the communities we serve.