Congress Considers Eliminating Incentives for Orphan Drugs in New Tax Bill

The Republican tax plan includes a proposal to end tax credits for the development of drugs for rare diseases. Ending the credit, which is part of the 1983 Orphan Drug Act, could save the government an estimated $54 billion over the next decade. Under current law, companies that develop drugs for rare diseases can receive a tax credit for half of the cost of their clinical trials and seven years of exclusivity, during which the drug is protected from competition.

Over the last decade, the number of new drugs to treat rare diseases has proliferated, in part because drug companies have found new ways to profit from diseases that were once seen as unworthy of corporate investment. In 2016, nine of the 22 new drugs approved by the U.S. Food and Drug Administration (FDA) were for rare diseases; in 2015, 21 of the 45 drugs approved fell into that category.

While many rare-disease approvals bring advances for patients, critics say, companies have taken advantage of the program by seeking the designation for drugs that would be profitable anyway. For example, the drug manufacturer AbbVie won multiple approvals for rare-disease uses for its top-selling drug Humira (adalimumab), ranging from a form of juvenile arthritis to an eye disease. Earlier this year, FDA Commissioner Scott Gottlieb, MD, announced that the agency is implementing several new policies to improve the Orphan Drug Act to prevent pharmaceutical manufacturers from exploiting this “orphan-drug loophole.”

Source: The New York Times, November 8, 2017.

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