Does Misery Love Company? Evidence from pharmaceutical markets before and after the Orphan Drug Act

With substantial fixed costs of drug development, more common conditions can support more products. If additional pharmaceutical products are beneficial, they will attract greater consumption and promote better health, e.g. greater longevity. We ask how market size – measured by condition prevalence – affects consumption and longevity. We document in condition cross sections that both the tendency to use a drug and longevity are higher for individuals with more prevalent conditions. We also make use of the 1983 Orphan Drug Act (ODA), which promoted development of drugs for the treatment of rare conditions. Both prescription drug consumption and longevity of people with rare diseases has increased more, since the ODA, than prescription drug consumption and longevity of people with common diseases.