Orphan drug laws and attractiveness for pharmaceutical companies

An article in Bloombergbusinessweek (Nov 5, 2011) describes the Orphan Drug Act, a competition free seven year period for manufacturers of drugs to treat diseases affecting less than 200,000 patients.  This exclusive period enables drug prices for dosages to reach up to $300,000 and provides the requisite market size to refover costs.  The article describes the attraction of such low volume high price drugs for large pharma companies whose drugs are going off patent. Should patients rare diseases, who would be exposed to high prices, be offered relief through government interventions through subsidies ? Rather than protection against competition, would cost subsidy for manufacturers, in return for margin constraints,  provide the incentive to reign in prices ? Are the ther contexts where such monopoly protection will provide the incentive for innovation, as has been seen in this context ?

About aviyer2010

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