Medicines are essential for treating diseases. But when it comes to rare diseases, they can be extremely expensive – or sometimes not available at all to patients. Why is that? And how are medicines for rare conditions actually developed?

What is a rare disease?

A disease is considered rare when it affects fewer than 5 in 10,000 people (according to the EU definition). So far, more than 7,000 rare diseases have been identified worldwide. Many are genetic, but some are rare infectious diseases. Approximately 5% of the Dutch population is affected by a rare disease.

For some of these diseases, therapies or medicines have already been developed. Unfortunately, for most rare diseases, there is (still) no treatment available.

Why orphan medicines can be so expensive

The high price of orphan medicines is often related to their monopoly position. Due to orphan drug designation and/or patents, competitors are excluded from bringing similar treatments to market for a certain period. As a result, doctors, pharmacists, and patients have no alternatives, and manufacturers have the freedom to set high prices. This can partly be justified: developing a medicine is expensive, and the market for rare diseases is small.

In practice, however, we also see high prices for medicines that have been in use for years — for example, as pharmacy-compounded preparations or as treatments for other indications that are later approved for a rare condition. What is considered ‘too expensive’ remains open to debate. Still, orphan drug prices often far exceed accepted norms, putting access under pressure in the Netherlands and other countries.

How are medicines developed?

Medicines must meet strict standards before they can be placed on the market. These rules exist primarily to protect patients: a medicine must be effective and as safe as possible. According to Dutch and EU law, a medicine may only be sold after receiving marketing authorisation from the national (CBG) or European (EMA) authority. Before a new medicine can be submitted for approval, it typically goes through three main development stages: laboratory, preclinical, and clinical testing.

1. Laboratory stage (in vitro): Researchers investigate how the drug interacts with other substances and cells. These experiments take place in a lab and do not involve animal testing.
2. Preclinical stage: The medicine is tested in living organisms, usually animals, to understand its behaviour in the body and to assess initial safety.
3. Clinical stage: This is where the medicine is tested on humans. Researchers assess whether the medicine is effective for the condition and determine the optimal dose. This stage is crucial and may only begin after approval by medical-ethical review committees (METCs), which assess whether all ethical requirements are met.

The clinical stage is typically divided into three phases, labelled with Roman numerals:

• Phase I: Testing in healthy volunteers.
• Phase II: Testing in a small group of patients.
• Phase III: Testing in a larger patient group to demonstrate effectiveness and safety.

After approval, additional research often continues in Phase IV (post-marketing) to monitor long-term safety and effectiveness in daily use.

Thorough, long-term testing for safety and effectiveness

In nearly all development trajectories, each of these stages is followed carefully to assess the quality, safety, and effectiveness of the drug. Only once sufficient evidence is available can marketing authorisation be requested.

These development phases often take many years. Step by step, more certainty is gained about safety, and risks are minimised. For example, researchers only scale up (to larger groups or higher doses) when there is enough evidence that it can be done safely.

Why medicine development is so costly

Developing a new medicine costs between $200 million and $2.6 billion. Phase III — large-scale testing in patients — is particularly expensive. And only 10–20% of medicines that enter clinical testing eventually reach the market; the rest are discontinued.

Companies often need to recover the cost of failed development programmes through the few products that do succeed. This is frequently cited to justify high prices, even for medicines that were relatively cheap to develop. In addition, large amounts of investment capital are required. Since development is high-risk and takes many years, the cost of financing adds significantly to overall expenses.

The application process and what follows

Assessing a marketing application can take more than a year. Regulatory agencies such as the EMA, CBG, or FDA evaluate all documents and often request additional information. Even after a medicine is approved, further research usually continues (Phase IV), such as monitoring side effects and studying the drug’s effectiveness in specific patient groups.

With marketing authorisation, the manufacturer can sell the drug in the Netherlands. However, inclusion in the basic health insurance package is not automatic. For expensive medicines, additional evidence is often required to confirm cost-effectiveness. Depending on the product, extra applications may be needed to secure reimbursement.

The added complexity for rare diseases

The development of medicines for rare diseases is even more challenging. Small patient populations make large-scale trials difficult. In addition, many rare diseases progress slowly, so it takes longer to demonstrate results. Collecting sufficient evidence for safety and especially effectiveness can therefore be difficult and time-consuming.

To address these challenges, the EMA offers several alternative approval pathways, such as exceptional circumstances, conditional approval, and additional monitoring. There is also the orphan drug designation.

Orphan drug designation and market access

The orphan drug designation (EU Regulation 141/2000) provides developers of medicines for rare diseases with certain incentives, including ten years of market exclusivity. During that time, no competitor may receive approval for a similar product for the same indication.

This regulation has led to the approval of over 200 orphan medicines in the EU — products that otherwise might never have been developed. This is a major gain for patients. At the same time, this exclusivity raises questions about affordability and accessibility.

Conclusion

The development of medicines for rare diseases is crucial, but also highly complex. It requires a careful balance between societal value, scientific evidence, affordability, and sustainable access. Policy measures, innovative funding models, and close cooperation between public and private sectors are essential to bridge the gap between unmet medical need and real-world availability.