Congress Enacts FDA Drug Reforms on Vouchers, Orphan Exclusivity, and Generic Transparency

The Consolidated Appropriations Act, 2026, enacted on February 3, includes several FDA reforms that affect drug development incentives and competitive dynamics. These include measures renewing FDA's authority to award rare pediatric disease priority review vouchers (PRVs), addressing uncertainty around the scope of orphan drug exclusivity (ODE) and increasing transparency around FDA's qualitative and quantitative sameness (Q1/Q2) determinations with the goal of speeding up the generic drug approval process.

The 2026 Act reauthorizes the rare pediatric disease PRV 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. This makes PRV eligibility a potentially important consideration in financing or partnering strategies.

Unless Congress acts again to extend authority for the program, FDA will be unable to award PRVs for products approved after September 30, 2029.

The 2026 Act also made a change to resolve uncertainty around the scope of ODE—a powerful regulatory exclusivity that blocks approval of certain competing products to incentivize drug development for rare diseases. Before the recent amendments, once FDA approved an application for a drug (including a biologic) 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. Often, the "disease or condition" for which a product originally receives orphan drug designation is broader than the specific indication for which the product is ultimately approved, and FDA had long interpreted this statutory language to mean that ODE only blocks approval of another product for the same approved use or indication.

But in Catalyst Pharmaceuticals, Inc. (Catalyst) 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 ODE for Catalyst's drug barred approval of another company's drug for all indications falling within the orphan-designated disease. 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 and prompted additional litigation.

The 2026 Act appears to settle this uncertainty in favor of FDA's position—providing that ODE only blocks approval of "the same drug for the same approved use or indication within [the orphan designated] 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. This clarification may affect lifecycle planning, indication strategy and litigation risk assessments for both innovator and follow-on sponsors.

A reform to promote generic competition also made it into the 2026 Act. For certain generic drugs (typically, topicals, parenterals and the like), FDA requires the abbreviated new drug application (ANDA) applicant to show that its product is Q1/Q2 to the reference listed drug. The 2026 Act mandates increased transparency in FDA's Q1/Q2 determinations with the goal of speeding up the generic drug approval process.