An orphan disease is a disease with a very low prevalence. Although there are 5000-7000 orphan diseases, only 50 orphan drugs (i.e. drugs developed to treat orphan diseases) were marketed in the EU by the end of 2008. In 2000, the EU implemented policies specifically designed to stimulate the development of orphan drugs. While decisions on orphan designation and the marketing authorization of orphan drugs are made at the EU level, decisions on drug reimbursement are made at the member state level. The specific features of orphan diseases and orphan drugs make them a high-priority issue for policy makers. The aim of this article is to identify and discuss several issues surrounding orphan disease and drug policies in Europe. The present system of orphan designation allows for drugs for non-orphan diseases to be designated as orphan drugs. The economic factors underlying orphan designation can be questioned in some cases, as a low prevalence of a certain indication does not equal a low return on investment for the drug across its indications. High-quality evidence about the clinical added value of orphan drugs is rarely available at the time of marketing authorization, due to the low number of patients. A balance must be struck between ethical and economic concerns. To this effect, there is a need to initiate a societal dialogue on this issue, to clarify what society wants and accepts in terms of ethical and economic consequences. The growing budgetary impact of orphan drugs puts pressure on drug expenditure. Indications can be extended for an orphan drug and the total prevalence across indications is not considered. Finally, cooperation needs to be fostered in the EU, particularly through a standardized approach to the creation and use of registries. These issues require further attention from researchers, policy makers, health professionals, patients, pharmaceutical companies and other stakeholders with a view to optimizing orphan disease and drug policies in Europe.