The rare disease industry – including patients, researchers, and biotech companies – are concerned that a key financial provision in the Orphan Drug Act of 1983 may soon be removed. These financial incentives have been key driver for biotech companies to pursue treatments for diseases that afflict small populations.
Congressional Republicans are considering removing the orphan drug tax credit, which has been successful in motivating the pharmaceutical industry to develop medicines that may be used by small patient popultions. Right now, the bill erases the credit entirely, which would save $54 billion over the next decade, while the Senate bill would cut the credit in half.
The law, intended to spur development of medicines for rare diseases, also gives seven years of market exclusivity for drugs that treat a specific condition that affects fewer than 200,000 people. The Senate Finance Committee, led by Sen. Orrin Hatch, R-Utah, put the tax credit back into the tax legislation. After some negotiations, the committee settled on reducing the credit to 27.5% of the costs of preapproved clinical research, compared with the current 50%. The committee also restored a provision that would have eliminated any credits for drugmakers who repurpose a mass-market drug as an orphan.
Last month, the National Association for Rare Disorders (NORD) held a rally on Capitol Hill to protest repeal of the credit. Rare diseases affect 30 million Americans — about one-tenth of the population — the group emphasizes. It has also sent letters to congressional leaders asking them to retain the credit.
The battle over the tax credit is the latest controversy for the FDA’s orphan drug program. FDA Commissioner Scott Gottlieb announced a “modernization” plan for the agency this summer, closing a pediatric testing loophole and eliminating a backlog of corporate applications for orphan drug status.
Meanwhile, the Government Accountability Office has launched an investigation of the orphan drug program. The GAO’s review was sparked by a letter from top Republican Sens. Hatch, Chuck Grassley, R-Iowa, and Tom Cotton, R-Ark., asking the agency to investigate whether drugmakers “might be taking advantage” of the drug approval process.