[Ip-health] How Congress may change the orphan drug tax credit. What you need to know

Kim Treanor kim.treanor at keionline.org
Thu Nov 30 09:08:49 PST 2017


How Congress may change the orphan drug tax credit. What you need to know
Erin Mershon in Stat News on 29 November 2017

WASHINGTON — As congressional Republicans race toward a vote on their tax
code overhaul, a key tax credit for biotech and pharmaceutical companies —
the so-called orphan drug tax credit — is on the line.


Rare disease groups and biotechnology companies are fighting to keep the
tax credit on the books, flying patients in to meet with Republican
senators and staff and blasting their membership with emails encouraging
them to call or tweet at their lawmakers.

The pharmaceutical industry and its lobbyists, however, aren’t pulling out
all the stops to defend the credit — partly because they see the Senate
bill, which weakens the credit, as an improvement on the full repeal in the
House bill. And the larger companies that don’t rely as heavily on the
credit are also far happier with other provisions in the tax bill, several
industry lobbyists told STAT.


The credit is relatively popular with drug makers. Companies claimed an
average $43 million to $51 million per clinical trial under the credit,
according to an analysis of Treasury Department data between 2010 and 2016
by James Love, the director of the nonprofit Knowledge Ecology
International. And companies are increasingly seeking the “orphan drug”
designation at the Food and Drug Administration — in 2016, the agency
received 568 such requests, more than double the 2012 total.


The credit, along with other federal incentives for orphan drug
development, has come under increasing scrutiny this year as drug makers
ratchet up prices for rare disease treatments more rapidly than for
non-orphan drugs. The average cost of an orphan drug is $140,443, compared
with $27,756 for a normal prescription medication, according to the market
research firm EvaluatePharma. That same company found that orphan drugs
make up more than 17 percent of global drug sales, up from 6 percent in


If the Senate bill proceeds, the current language on the orphan drug tax
credit will almost certainly remain as-is, several biotechnology and
pharmaceutical industry lobbyists told STAT.

Partly that’s because the provision offers attractive savings for an
overall tax package that has already drawn the ire of deficit hawks.
Scaling back the changes to the tax credit would cost more money.


Kim Treanor
Knowledge Ecology International
kim.treanor at keionline.org
tel.: +1.202.332.2670 <(202)%20332-2670>

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