Congress Overrides Court Ruling, Limits Orphan Drug Exclusivity to Approved Indications

Congress enacted the Consolidated Appropriations Act of 2026 on February 3, 2026, resolving uncertainty around the scope of orphan drug exclusivity by limiting the seven-year protection to specific approved uses or indications rather than entire disease categories. The legislation overrides a 2021 federal court decision and codifies the FDA's longstanding interpretation of the Orphan Drug Act.

The Orphan Drug Act provides a seven-year period of market exclusivity for drugs designed to treat rare diseases or conditions affecting fewer than 200,000 patients in the United States. Before the recent amendments, once FDA approved an application for a drug that had received orphan designation for a rare disease or condition, the statute prevented FDA from approving another sponsor's application for "the same drug for the same disease or condition" until seven years after the orphan drug's approval.

FDA had long interpreted this statutory language to mean that orphan drug exclusivity only blocks approval of another product for the same approved use or indication. However, in Catalyst Pharmaceuticals, Inc. v. Becerra, the U.S. Court of Appeals for the Eleventh Circuit found that the statutory language foreclosed FDA's interpretation and held that the orphan drug exclusivity for Catalyst's drug barred approval of another company's drug for all indications falling within the orphan-designated disease. The 11th Circuit's decision in 14 F.4th 1299 (11th Cir. 2021) created uncertainty and prompted additional litigation.

Although FDA indicated that it would continue to apply its existing interpretation and regulations outside the scope of the Court's order, the Catalyst decision created uncertainty. FDA agreed to comply with the court's order with respect to the particular drugs at issue in Catalyst but announced its intention "to continue to apply its regulations tying the scope of orphan-drug exclusivity to the uses or indications for which a drug is approved to matters beyond the scope of that order."

The 2026 Act settles this uncertainty in favor of FDA's position by providing that orphan drug exclusivity only blocks approval of "the same drug for the same approved use or indication within [the orphan designated] rare disease or condition." Congress replaced the statute's language of "same disease or condition" with the new language of "same approved use or indication within such rare disease or condition." Congress also specified that the amendment applies to all orphan designated drugs, regardless of when they receive designation or FDA approval.

The newly narrowed scope may open the door for generic companies seeking approval for uses or indications that differ from those of the original orphan drug. Generic companies may no longer need to consider the possibility of a Catalyst-style suit. This clarification may affect lifecycle planning, indication strategy and litigation risk assessments for both innovator and follow-on sponsors, and companies should consider whether existing exclusivity analyses or pipeline positioning warrant reevaluation.

The Consolidated Appropriations Act, 2026 also reauthorizes the rare pediatric disease priority review voucher program, which Congress had previously allowed to sunset for products not designated for rare pediatric diseases by December 20, 2024. Under this program, if FDA approves a sponsor's qualifying drug or biological product application for a rare pediatric disease, the sponsor receives a voucher, which can then be redeemed to obtain priority review of a different product. Vouchers may be sold or transferred and have historically commanded significant market value, often selling for prices between $100 and $200 million.

Unless Congress acts again to extend authority for the program, FDA will be unable to award priority review vouchers for products approved after September 30, 2029. Companies with rare pediatric disease development programs and potential investors in those programs should evaluate how priority review voucher eligibility could impact financial strategy.

The 2026 Act also mandated increased transparency in FDA's qualitative and quantitative sameness determinations for certain generic drugs. For certain generic drugs, typically topicals, parenterals and the like, FDA requires the abbreviated new drug application applicant to show that its product is qualitatively and quantitatively the same to the reference product. Generic manufacturers should monitor for FDA guidance on these determinations and other updates on the agency's implementation of new transparency requirements, while innovators should revise their strategic planning to account for the potential of facing generic applicants at an earlier point in time.