The figures contrast sharply with the USA, where there are more incentives - 1,100 drugs and biological products were designated orphan products there between 1983 and 2002 of which 231 were approved.
"It's difficult to find a balance between the urgent need for drugs for patients with rare diseases and guaranteeing their quality, efficacy, safety and, where necessary, making comparisons with existing drugs," said co-author Professor Silvio Garattini from the Mario Negri Institute for Pharmacological Research in Milan, Italy.
"The lack of reliable methods for evaluating 'orphan drugs' in a small number of people probably explains the poor quality of the applications."
The study, published in the latest British Journal of Clinical Pharmacology, detailed during the same period, more than 79 per cent of the other drug applications submitted to the European Agency for the Evaluation of Medicinal Products (EMEA) were approved.
This suggested that less stringent criteria was acceptable for orphan drugs than for drugs for more common diseases, particularly in view of the small number of patients.
Between August 2000, when new legislation came into force, and December 2004, EMEA's Committee on Orphan Medical Products reviewed 255 possible drugs for rare diseases that affect less than five people in 10,000.
Only 18 orphan drugs were approved on the basis of epidemiological data, medical plausibility and potential benefit.
During the same period the EMEA received 193 marketing authorisation applications for non-orphan drugs and 153 of these were approved.
"However, ten of the 18 orphan drugs approved were authorised under exceptional circumstances which means that the dossier was not complete and the Committee required additional studies in order to maintain the marketing authorisation," said Garattini.
Rare diseases covered by the approved drugs included two rare forms of leukaemia, Fabry disease, which affects the body's ability to break down lipids and Wilson's disease, in which copper build-up can damage vital organs.
"In the last 20 years international efforts have been made to encourage companies to develop orphan drugs by providing incentives like tax credits and research aids, simplifying marketing authorisation procedures and extending market exclusivity," added Jeffrey Aronson, chair of the journal's editorial board. Only the last of these incentives is available in Europe.
"The experience in Europe also contrasts sharply with the USA, where there are more incentives - 1,100 drugs and biological products were designated orphan products there between 1983 and 2002 and 231 were approved."
Dr Aronson, reader in Clinical Pharmacology at Oxford University, said that the UK National Institute for Health and Clinical Excellence (NICE) does not generally approve drugs for National Health Service use unless their costs are below £30,000 (€24 000) per Quality Adjusted Life Year. Orphan drugs are likely to cost more than that.
"This study suggests that we need more incentives in Europe to develop orphan drugs and to develop them cost-effectively, so as not to compromise our ability to manage other diseases," he adds.
"The tension between equity and affordability is unbearable and pulls in both directions - those with rare diseases deserve to be treated but those with common diseases should not be expected to subsidise them."