The orphan drug tax credit is crucial to assist and encourage pharmaceutical companies to develop therapies for rare diseases!
History
- An Orphan Drug is a pharmaceutical that is created in order to treat a rare disease. The orphan drug tax credit (ODTC) is a federal tax credit available to life science companies working to find cures for diseases that affect small populations. The credit is designed to encourage the development of treatments for rare diseases.
- Between 1983 and 2018, the orphan drug tax credit provided a 50% credit for qualified clinical trials with human subjects, and research grants to promote the development of new treatments for orphan diseases.
- A 2017 overhaul of the tax code under the Trump administration reduced the credit from 50% to 25% beginning in 2018.
- The ODTC has led to approvals for more than 780 products to treat more than 250 rare diseases (most of which are cancer treating therapies). However, there are more than 7,000 rare diseases and only a few hundred have therapies that are indicated for their disease.
- The central rationale behind this piece of legislation was to provide an incentive to invest resources into developing drugs to treat an extremely small patient pool
- Since the FDA grants orphan drug status to a specific use of a particular drug, it’s possible to obtain orphan drug status for multiple uses of the same drug.
Current Situation
On November 19, the US House of Representatives passed the Build Back Better Act (H.R. 5673) by a vote of 220-213. Unfortunately, the final bill passed by the House contained the provision (Section 138141) that would limit the Orphan Drug Tax Credit (ODTC) to "the first use or indication with respect to which a drug for a rare disease or condition is designated under section 526 of the Federal Food, Drug, and Cosmetic Act." Thereby drastically reduce the therapeutic options available for the 25-30 million rare disease patients in America. Currently, the Orphan Drug Act allows orphan drug developers to qualify to receive a tax credit for 25% of their clinical trial costs for new orphan drugs. The law only specifies that clinical testing must be for a rare disease or condition. But section 138141 of House Bill would amend the Orphan Drug Act so only the first approved uses or indications for orphan drugs can qualify for the Orphan Drug Tax Credit. Clinical testing expenses for any drugs that have been approved for any other use or indication would not qualify for the credit. Rare disease organizations point out that limiting the tax credit could impede innovation and development of rare disease drugs that are direly needed for the 7,000 rare diseases, 95% of which have no therapies. This on top of the Orphan Drug Tax Credit already being slashed from 50% to 25% in 2017 under the Tax Cut and Jobs Act, is a huge blow to patients and industry. With the high risk to develop such drugs and the low return on investment and the difficulty in accessing treatments due to delays in diagnosis, reimbursement policies and restrictive labeling many in Congress and outside groups including PWSA | USA are fighting hard to repair this in the final legislation. We would like to thank ALL of you for your outpouring of support to have this language stripped from the final bill, but our job is not yet done. While we were unsuccessful in having this provision removed from the House version, we still have an opportunity to have the Senate strip it from their version.
Thank you for your help!