Orphan Drug Tax Credit

By Joanna Mechlinski

You’re a person living with a rare disease or disorder, chronic and potentially life-threatening. You desperately need medication to maintain your quality of life. But perhaps your disease is so rare that there is little incentive for a pharmaceutical company – which is, after all, for-profit – to invest the time and money into developing a drug.

That’s where the Orphan Drug Tax Credit comes in. Since 1983, the U.S. has offered pharmaceutical companies reimbursement on 50% of clinical testing costs, giving pharmaceutical companies an incentive to experiment with new medications for rare diseases, which are defined in the U.S. as any that affect fewer than 200,000 people. (In Europe, it is one that affects fewer than 1 in 2000 people.) In the years since the credit’s inception, the Food & Drug Administration (FDA) has approved nearly 600 orphan drugs. Comparatively, between 1973 and 1983, only 10 drugs were approved.

There are an estimated 7,000 rare diseases – often called “orphans” due to pharmaceutical companies’ reluctance to adopt them - affecting 25-30 million Americans.

In early November, House Republicans proposed eliminating this credit. After considerable negotiation, it was decided to keep the credit but lower it to 27.5%. What’s more, a past provision that had been scrapped – giving the credit to a company that repurposed an existing drug as an orphan – was restored.

According to an October report by health research company QuintilesIMS and the National Organization for Rare Disorders (NORD), orphan drugs comprised 7.9 percent of the total U.S. drug sales in 2016. While that percentage doesn’t seem like a lot, it is when one considers that Quintiles estimates Americans will spend $580-610 billion on prescription medications by 2021 (the United States constitutes some 40 percent of the global pharmaceutical industry). Patients’ spending increased 5.8 percent between 2015 and 2016 alone.

At this moment, it’s still unclear what the future will hold for the Orphan Drug Tax Credit. Thus, it’s important to join the fight while we still can. Contact Congress to share your story, or contact a patient organization for your disease or disorder – over 200 have expressed their support for maintaining the credit. Each of us may just be one person, but together, we can influence our future.