An Evaluation of the Demand for Orphan Drugs as a Response to Promotional Expenditures

Orphan drugs describe a subset of medicines which aim to serve rare diseases and therefore do not have a sizeable demand. As the market for these drugs is small, pharmaceutical companies do not have an incentive to manufacture this genre of drugs. However, in the USA, the Orphan Drug Act provides various incentives to manufacturer of these drugs. The USA is also one of the few countries that allow drugs companies to advertise “prescription only” drugs. This gives the opportunity to disseminate information about rare diseases and its potential cures to people who would not otherwise have known about these options. In our paper, we examine how the demand for orphan drugs has been influenced by these promotional expenditures. We examine the demand in response to the promotional expenditures for different companies, both by examining orphan drugs as a sub-set of all prescription drugs, as well as differentiating between different types of orphan drugs themselves. The results have potential implications for public policy about this important sector of health and medicine.