Healthcare in a Changing Climate 2025

The accelerated approval by the US Food and Drug Administration (FDA) of COVID-19 vaccines88 demonstrates how flexible regulatory frameworks can expedite critical healthcare solutions. During COVID, regulators and the biopharmaceutical industry worked together to reduce red tape to accelerate the development, evaluation, authorization and supply of vaccines. These regulatory arrangements89 were a key factor in enabling rapid patient access to vaccines and limiting COVID’s most negative impacts to less than two years.90 This experience provided important lessons on how regulatory systems may be adapted to support innovation and timely patient access to vaccines at all times, not just during emergencies.Government incentives for investment in rare diseases The rare disease landscape offers a clear example of how coordinated policy and regulatory action can transform a previously unattractive investment therapeutic area into one of high innovation and growth. Historically, rare or “orphan” diseases were considered financially unattractive91 for pharmaceutical companies to invest in due to their small patient populations, making it difficult to recoup the high costs associated with drug development. To address these challenges, governments have introduced a variety of incentives to stimulate investment in orphan drugs, including the Orphan Drug Act in the US (see Box 1). The ODA provides pharmaceutical companies with key benefits, including seven years of market exclusivity, tax credits for clinical trials, fee waivers and access to research grants.Orphan Drug Act – turning risk into opportunity BOX 1 The Orphan Drug Act (ODA), signed into US law in 1983, provides financial incentives to pharmaceutical companies to develop drugs for rare diseases that affect a limited population of Americans. Since the ODA was passed, the orphan drug market, once seen as unviable, has become a major growth sector92 in pharmaceuticals, valued at over $170 billion93 globally by 2023. By the end of 2024, it is expected94 to reach $204 billion and grow with a CAGR of approximately 8.8% to reach $340 billion by 2030. Venture capital and private equity investment into rare disease biotech firms has increased significantly,95 as investors see the potential for high returns through these incentives. The ODA provides pharmaceutical companies with key benefits,96 including seven years of market exclusivity for drugs developed for approved orphan diseases, tax credits for clinical trial expenditures, fee waivers and access to research grants through the Office of Orphan Development. These incentives are aimed at reducing financial risk and increasing the potential return on investment for drug developers. In the US, the number of FDA-approved orphan drugs skyrocketed after the ODA was passed (see Figure 5). Over 599 approvals were achieved by mid-2020,97 representing a significant jump from only 38 approvals prior to the ODA. Notably, in 2023, 51% of novel FDA-approved drugs98 were orphan drugs compared to 20% in 1985, demonstrating the growing importance of orphan drugs in the pharmaceutical pipeline. In terms of health impact, the potential years of life lost to rare diseases before age 65 declined by 3.3% annually from 1999 to 2007, compared to an estimated 0.9% annual increase without new drug approvals. The ODA also had implications for medical devices as it spurred follow-on regulation, including the introduction of the class of humanitarian use devices (HUDs)100 from the FDA. This allows manufacture of medical devices with less proof of efficacy if these devices serve a small number of impacted individuals. However, orphan device regulation remains limited101 globally and, as a result, so do innovations to meet needs in these areas. More recently, the FDA instituted an accelerated approval pathway for drugs that fill an unmet medical need within serious conditions. Additionally, companies have been offered exemptions from mandatory drug discounts implemented with the Affordable Care Act (ACA) if the product has orphan designation. Similar frameworks102 have followed in other market, such as the European Union’s Orphan Regulation of 2000. These policies are designed to lower the financial risks and enhance the potential profitability for drug developers, encouraging them to enter this niche field. These efforts have led to transformative outcomes103 and demonstrate how thoughtful regulatory support and financial incentives can transform an underfunded, high-risk area such as rare diseases into a high-investment sector, resulting in both economic growth and life-saving treatments for patients. Healthcare in a Changing Climate: Investing in Resilient Solutions 25