Despite the inherently small market for orphan drugs, orphan drug development has recently undergone significant growth, with global sales of over $100 billion in 2015. In 2015, more than 20 new drugs were approved by the U.S. Food and Drug Administration (FDA) and 18 new drugs were approved by the European Medicines Agency (EMA) for orphan indications. In addition to the incentives provided by the U.S. Orphan Drug Act of 1983 and similar legislation in the European Union (EU), there are several financial and competitive advantages of orphan drug development.

However, there are also significant challenges in the orphan drug space, including obstacles to study execution, regulatory hurdles, and a changing reimbursement environment. With proper strategic planning, sponsors seeking orphan drug designation and approval can more skillfully navigate these clinical, regulatory, and financial challenges. This article provides an overview of the incentives, advantages, and challenges of developing therapies for rare diseases and offers three proven strategies that sponsors can employ to address obstacles on the pathway of orphan drug development.