Do not repeal the orphan drug tax credit

Do not repeal the orphan drug tax credit

In the U.S. House, Republicans have introduced their long-awaited tax reform proposal. Their plan is to move the bill quickly through the process, pass it and get it to the Senate as soon as possible.

The bill is vast and, as with any tax reform, there will be winners and losers in this battle. But it is hard to understand why anyone would target patients and families suffering from rare diseases to help pay for tax cuts.

Since 1983, drug companies both large and small who have been willing to invest in discovering and developing treatments for rare diseases – those that affect fewer than 200,000 people in the US – have been able to claim a U.S. tax credit and other benefits. These incentives are designed specifically to encourage companies to focus on rare diseases that might not make sense to invest in otherwise. It has worked. In fact, it may be working too well.

Supporters of repeal point to a recent U.S. Treasury study that shows total tax expenditures from the orphan drug tax credit will “balloon” from $2.3 billion in 2017 to an estimated $15.3 billion in 2027. House Republicans say that is out-of-control. But why?

There are an estimated 7000 rare diseases. Since 1983, the FDA has approved orphan drugs to treat 590 rare disease indications. That leaves well over 6000 diseases for which there is no approved treatment. Doesn’t the increase in expected expenditures for the tax credit show that investors and companies are turning their attention to rare disease? Isn’t an acceleration in research and discovery to help children and families suffering and dying from rare and ultra-rare disease a good thing? Apparently not.

More questions. Could the orphan drug tax credit be working more efficiently? Yes. Have there been instances where the credit and the other provisions that come with orphan drug designation have been abused, especially by “Big Pharma?” Certainly. But according the Mike Lantheir, an operations research analyst at the U.S. FDA, “the Orphan Drug Act has been a successful catalyst for rare disease development.” Lantheir says that abuses are uncommon, that most drugs are initially approved for orphan indications (not the other way around), and that most drugs that are first approved as orphan products are never approved for an additional indication.

The National Organization for Rare Disorders (NORD) and others commissioned a study which showed that fully 1 of 3 orphan drugs approved since 1983 would not have been developed without the orphan drug tax credit. Does anyone really want to slow the development of treatments for rare disease?

And here is the biggest concern: if the tax credit is eliminated this year, it will be nearly impossible to restore it next year or soon thereafter. Repeal is not the way to reform the orphan drug tax credit. Repeal is repeal.

Rare diseases do not discriminate between rich and poor or Democrat, Republican and Independent. Rare diseases often strike children and, too often, kill them. No one should believe that, by eliminating this critical incentive, they are “doing something about drug prices.” They are not. They will only be dooming children and families — today and for years to come – to an even more uncertain future and a longer wait… a wait they may not survive… for treatments and cures for rare diseases.

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