[Ip-health] Republican bill would get rid of tax credits for rare disease drugs

Kim Treanor kim.treanor at keionline.org
Thu Nov 2 12:57:07 PDT 2017


Republican bill would get rid of tax credits for rare disease drugs
Emma Court in MarketWatch on 2 November 2017

The new Republican tax bill, which was unveiled on Thursday, proposes to
get rid of tax credits that are used to develop rare disease drugs.

Under current policy, pharmaceutical and biotech companies are allowed a
tax credit of up to 50% of certain research costs for rare disease drugs.

The new tax bill, if passed, would repeal the credit “for certain drugs,
for rare diseases or conditions” starting after this year. The change would
save the U.S. $54 billion in revenue over the next decade, according to the

The tax credit falls under the Orphan Drug Act, which provides financial
incentives for drugmakers to develop products for rare diseases such as
Huntington’s disease, muscular dystrophy and Lou Gehrig’s disease, which
have small patient populations, limiting the commercial potential of drugs.

While the act has promoted development in these areas, not all the drugs
benefiting from it have been niche products.

AbbVie Inc.’s ABBV, -1.56%  rheumatoid arthritis product Humira, which is
the world’s best-selling drug, was one; so was Bristol-Myers Squibb Co.’s
BMY, -0.02%  blockbuster cancer drug Opdivo. (The Food and Drug
Administration said earlier this fall that it plans a stricter review of
which drugs benefit from the program.)

Drug companies have also charged extremely high prices for resulting rare
disease drugs — prompting additional criticism by patient activists.

Still, the tax bill targeting the credits comes as a surprise under a
Republican administration that has shown little interest, other than
rhetoric, in addressing high drug prices.

Industry group Biotechnology Innovation Organization said that it supports
the tax bill’s “dedication to pro-growth tax reform” but that orphan drug
tax credits should remain.

The group said it looks “forward to working with lawmakers to ensure that
our nation’s tax code most effectively encourages innovation, investment
and American entrepreneurship. This would include maintaining the Orphan
Drug Tax Credit,” according to the statement.

Meanwhile activists said they supported an overhaul of the program,
especially with regard to drug prices.

The orphan drug program is “a mess” and not transparent, said Knowledge
Ecology International founder and director Jamie Love.

Though “it’s not a bad approach for the government to be subsidizing
clinical trials... there should be some connection between the subsidy and
how drugs are priced,” he said.

However, “you’d be better off having the money be available as just direct
subsidies for clinical trials, tied to some condition about pricing,” or
limiting the revenue a company can make from the drug, he said.

The SPDR S&P Pharmaceutical ETF XPH, -1.42%  dropped 1.3% in heavy
afternoon trade Thursday, compared with a 0.1% decline in the S&P 500 SPX,
+0.02%  and a 0.5% decline in the Health Care Select Sector SPDR XLV,
-0.49%  .


Kim Treanor
Knowledge Ecology International
kim.treanor at keionline.org
tel.: +1.202.332.2670

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