Republican tax reforms could abolish the orphan drug tax credit

Tue, 2017 / 11 / 14

A new Republican tax bill intends to cut the U.S. tax rate on corporations from a 35 percent rate to 20 percent. The broader tax overhaul proposal includes the abolishment of a tax credit, enacted within the Orphan Drug Act in the 1980s, which allows pharmaceutical companies to claim a tax credit of 50% for costs incurred during clinical testing, which is determined mandatory by the FDA for drugs that treat rare diseases.

The established incentives turned the development and sales of orphan drugs into a huge business – the lack of alternative treatment options combined with the high willingness of the SHI’s to pay promised to be a thriving business. Nevertheless, the political stimulation of the orphan drug market also led to contrary results: according to a study by Wesley Yin (2009), some companies exploited and abused the tax credit advantage to subsidize regular mass-market medication.

The association BIO (Biotechnology Innovation Organization) praised the bill, expecting it to improve the international competitiveness of the U.S. economy. Yet, BIO demands to maintain the orphan drug tax credit. The NORD (National Organization for Rare Disorders) claims that the repeal of the tax credit is „utterly unacceptable“ – „95% of the estimated 30 million Americans with rare diseases require a suitable treatment“, remarked NORD, „the repeal would directly result in 33 percent less orphan drugs coming onto the market“.

The U.S. Chamber of Commerce supports the reform bill considering it to be a „significant improvement of the American economy “. Yet „a lot of work remains to be done“ until the law is finally enacted.

To read more background information please click on the following links:

https://www.fiercebiotech.com/biotech/republican-tax-reforms-could-hit-rare-disease-research?mkt_tok=eyJpIjoiT1RkbVptRXdZamhoTjJRMSIsInQiOiJ4NGlyWlFRbDdGVHdUTVFYYVNzV0pEUFFaOVRMZ1wvK0RydW0wdStqMllNZU50NUZOOHJWbnltWjBTaHE5MGxQY2hYejYzeVoxZHJkNmliTHoyaE8ySGFJTTR4WXJYZG1oZXIxaTErRER0ZTh4KzV0eXZFUGJ6U3FGYld1VkpsY1QifQ%3D%3D&mrkid=695240&utm_medium=nl&utm_source=internal

https://www.bloomberg.com/news/articles/2017-11-02/drugmakers-rare-disease-r-d-incentives-are-cut-in-gop-tax-bill