Abstract Research in rare diseases has contributed substantially toward the current understanding in the pathophysiology of the common diseases. However, medical needs of patients with rare diseases have always been neglected by the society and pharmaceutical industries based on their small numbers and unprofitability. The Orphan Drug Act (1983) was the first serious attempt to address the unmet medical needs for patients with rare diseases and to provide impetus for the pharmaceutical industry to promote orphan drug development. The process of drug development for rare diseases is no different from common diseases but involves significant cost and infrastructure. Further, certain aspect of drug research may not be feasible for the rare diseases. The drug-approving authority must exercise their scientific judgment and ensure due flexibility while evaluating data at various stages of orphan drug development. The emergence of patent cliff combined with the government incentives led the pharmaceutical industry to realize the good commercial prospects in developing an orphan drug despite the small market size. Indeed, many drugs that were given orphan designation ended up being blockbusters. The orphan drug market is projected to reach $178 billion by 2020, and the prospects of research and development in rare diseases appears to be quite promising and rewarding.