Orphan Drug Credit Faces Reform or Repeal

Nov 13, 2017

Last week, House Republicans proposed to end the tax breaks offered by the 1983 Orphan Drug Act. The Senate’s proposal, however, seeks to modify the credit by limiting qualifying expenses.

Since 1983, pharma companies have been able to claim a 50 percent tax credit for the cost of clinical trials of orphan drugs — treatment for diseases affecting fewer than 200,000 people. The Treasury Department estimates that, if the law was left unchanged, the U.S. would grant nearly $2.8 billion in orphan drug tax credits to companies next year.

The Senate's proposal, explains a RAPS article, seeks to limit the orphan drug credit to 50 percent of qualified clinical testing expenses for the taxable year that exceeds 50 percent of the average qualified expenses for the previous three taxable years. Congressperson Kevin Brady’s Tax Cuts and Jobs Act seeks to completely repeal the tax credit that companies can claim for rare disease clinical trials.

Industry organizations strongly oppose either decision; The National Organization for Rare Disorders said there will be 33 percent fewer orphan drugs coming to market if the tax credit is eliminated. Supporters of the Orphan Drug Act say the incentives have led to the approval of more than 500 new and much-needed drugs.

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