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An "ORPHAN DRUG" is one that treats a rare disease affecting less than 200,000 Americans. Since the Orphan Drug Act was signed into law on January 4, 1983, over 100 orphan drugs and biological products have been brought to the market. The purpose of the Orphan Drug Act is to stimulate the research, development, and approval of products that treat rare diseases.

As defined in the United States, any drug developed under the Orphan Drug Act of January 1983 ("ODA") is an orphan drug. The ODA is a federal law concerning rare diseases ("orphan diseases") that affect fewer than 200,000 people in the United States or are of low prevalence (less than 5 per 10,000 in the community).

A disease or disorder that affects fewer than 5 in 10,000 citizens is the definition for rare in Europe(Orphan Drug Regulation 141/2000). At first glance, this may seem a small number, but by this definition, rare diseases can affect as many as 30 million European Union citizens. According to EURORDIS (European Organization for Rare Diseases) the number of rare diseases numbers from about 6000 to 8000, most of which have identified genetic conditions, with medical literature describing approximately five new rare conditions every week.

Any disease with fewer than 50,000 prevalent cases (0.4‰) is Japan's definition of rare. Market exclusivity is allowed through the orphan drug plan following approval.

In order to attain the status of "orphan drug," the drug's must be intended for the treatment, prevention, or diagnosis of a rare disease.  The sponsor must also demonstrate that it is not commercially viable to supply the product in order to treat, prevent or diagnose other diseases or conditions. The Therapeutic Substances Regulations do not define a rare disease or orphan indication in terms of numbers of patients, other than saying that it must not be intended for use in more than 2000 patients a year if it is a vaccine or in vivo diagnostic. In order to attain the orphan designation, "the application must show why the medicine is an orphan drug." In Australia, orphan drugs are drugs used to treat diseases or conditions affecting fewer than 2000 individuals at any one time (0.2‰)

Canada has no official “orphan disease” status, however, based on international standards, it could be defined as diseases with a potential patient population numbering between 3,300 (Australian standards) to 22,500 (US definition).