GOP tax re­form bill would re­peal or­phan drug re­search cred­its

Re­pub­li­cans on Thurs­day rolled out their new tax re­form bill, which among oth­er pro­vi­sions to low­er tax­es for Amer­i­cans and busi­ness­es, pro­pos­es to re­peal a pro­vi­sion that might cause the bio­phar­ma in­dus­try some con­cern.

Un­der the House bill’s Sub­ti­tle E, sec­tion 3401 would re­peal what amounts to half of the qual­i­fied clin­i­cal re­search costs for des­ig­nat­ed or­phan drug prod­ucts.

Back­ground

Un­der the Or­phan Drug Act of 1983, Con­gress sought to in­cen­tivize the de­vel­op­ment of drugs to treat rare dis­eases by of­fer­ing drug­mak­ers tax cred­its, fee waivers and a sev­en-year pe­ri­od of mar­ket­ing ex­clu­siv­i­ty for an ap­proved or­phan in­di­ca­tion. To qual­i­fy for the des­ig­na­tion, a prod­uct must be in­tend­ed to treat a dis­ease that af­fects few­er than 200,000 peo­ple in the US, or more than 200,000 if the drug­mak­er can show that it is not ex­pect­ed to re­coup its costs to de­vel­op and mar­ket the drug.

In terms of the tax cred­it, a spon­sor may claim half of the qual­i­fied clin­i­cal re­search costs for a des­ig­nat­ed or­phan prod­uct. The or­phan drug cred­it is avail­able for qual­i­fy­ing costs in­curred be­tween the date the Food and Drug Ad­min­is­tra­tion (FDA) des­ig­nates a drug as an or­phan drug and the date the FDA ap­proves the drug, though the re­search cred­it can be claimed for the de­vel­op­ment costs that are qual­i­fied re­search ex­pens­es re­gard­less of FDA des­ig­na­tion or ap­proval of the drug.

Crit­ics of the law claim it has al­lowed drug­mak­ers to charge ex­or­bi­tant prices for many or­phan drugs and ar­gue that drug­mak­ers take ad­van­tage of the in­cen­tives of the law.

Be­tween 1983 and 2016, FDA ap­proved 451 or­phan drugs for 590 rare dis­ease in­di­ca­tions, though some es­ti­mate that there are about 7,000 rare dis­eases, most of which have no ap­proved treat­ments.

In 2016, FDA’s Of­fice of Or­phan Prod­ucts De­vel­op­ment (OOPD) re­ceived 568 new re­quests for des­ig­na­tion – more than dou­ble the num­ber of re­quests re­ceived in 2012. And last June, FDA pledged to elim­i­nate the or­phan drug des­ig­na­tion back­log.

Tax Bill and Com­ments

The bill’s at­tempt to re­peal the or­phan drug re­search cred­it fol­lows the re­cent re­lease of an analy­sis con­duct­ed by the US De­part­ment of the Trea­sury find­ing that to­tal tax ex­pen­di­tures from the or­phan drug re­search cred­it are bal­loon­ing.

The ex­pen­di­tures are ex­pect­ed to in­crease from about $2.3 bil­lion in 2017 to al­most $6 bil­lion in 2022 to more than $15 bil­lion in 2027.

Al­though the ex­pen­di­tures and num­ber of or­phan drug ap­provals have risen in re­cent years, in­dus­try groups have been adamant about the im­por­tance of the tax cred­it in en­cour­ag­ing or­phan drug re­search.

Ac­cord­ing to an Ernst & Young re­port from 2015, 67 or­phan drugs, or 33%, would like­ly not have been de­vel­oped over the past 30 years if there had nev­er been an or­phan drug tax cred­it.

“If the ODTC [Or­phan Drug Tax Cred­it] were re­pealed, the re­sult­ing re­duc­tion in the num­ber of ap­proved new or­phan drugs could have a sig­nif­i­cant im­pact on Amer­i­cans with rare dis­eases,” the re­port said.

James Love

In­dus­try group BIO, which col­lab­o­rat­ed on the re­port, said in a state­ment on Thurs­day, “As Con­gress de­bates and re­fines this im­por­tant leg­is­la­tion, we look for­ward to work­ing with law­mak­ers to en­sure that our na­tion’s tax code most ef­fec­tive­ly en­cour­ages in­no­va­tion, in­vest­ment and Amer­i­can en­tre­pre­neur­ship. This would in­clude main­tain­ing the Or­phan Drug Tax Cred­it.”

In a let­ter sent to Reps. Paul Ryan (R-WI) and Kevin Brady (R-TX) last week, BIO, No­var­tis, Al­ler­gan and oth­er com­pa­nies said: “We sup­port your ef­forts to re­form Amer­i­ca’s cor­po­rate tax code to make the U.S. com­pet­i­tive on the glob­al stage, in­clud­ing your dri­ve to low­er the cor­po­rate tax rate. How­ev­er, pay­ing for rate re­duc­tion by elim­i­nat­ing the ODTC would se­vere­ly ham­per our abil­i­ty to bring life-sav­ing treat­ments for rare and dev­as­tat­ing dis­eases to pa­tients. Thus, we strong­ly sup­port pre­serv­ing the ODTC in any tax re­form leg­is­la­tion.”

But the will­ing­ness of Re­pub­li­cans to take a stance against the bio­phar­ma in­dus­try al­so sig­naled to some that more re­form may be com­ing in some form.

James Love, KEI Di­rec­tor, told Fo­cus in a state­ment: “The GOP pro­pos­al to elim­i­nate the Or­phan Drug Tax Cred­it may cre­ate a new op­por­tu­ni­ty to re­form the in­cen­tives for rare dis­eases, even if the tax bill fails or the tax cred­it sur­vives. The GOP tax bill shows there is weak­er sup­port for the ex­ist­ing regime than many thought.”


First pub­lished here. Reg­u­la­to­ry Fo­cus is the flag­ship on­line pub­li­ca­tion of the Reg­u­la­to­ry Af­fairs Pro­fes­sion­als So­ci­ety (RAPS), the largest glob­al or­ga­ni­za­tion of and for those in­volved with the reg­u­la­tion of health­care and re­lat­ed prod­ucts, in­clud­ing med­ical de­vices, phar­ma­ceu­ti­cals, bi­o­log­ics and nu­tri­tion­al prod­ucts. Email news@raps.org for more in­for­ma­tion.

Author

Zachary Brennan

managing editor, RAPS

Brent Saunders [Getty Photos]

UP­DAT­ED: Ab­b­Vie seals $63B deal to buy a trou­bled Al­ler­gan — spelling out $1B in R&D cuts

Brent Saunders has found his way out of the current fix he’s in at Allergan $AGN. He’s selling the company to AbbVie for $63 billion in the latest example of the hot M&A market in biopharma.

Endpoints News

Basic subscription required

Unlock this story instantly and join 53,600+ biopharma pros reading Endpoints daily — and it's free.

Sanofi/Re­gen­eron mus­cle ahead of a ri­val No­var­tis/Roche team, win first ap­proval in key rhi­nos­i­nusi­tis field

Re­gen­eron and their part­ners at Sanofi have beat the No­var­tis/Roche team to the punch on an­oth­er key in­di­ca­tion for their block­buster an­ti-in­flam­ma­to­ry drug Dupix­ent. The drug team scored an ac­cel­er­at­ed FDA ap­proval for chron­ic rhi­nos­i­nusi­tis with nasal polyps, mak­ing this the first such NDA for the field.

An­a­lysts have been watch­ing this race for awhile now, as Sanofi/Re­gen­eron won a snap pri­or­i­ty re­view for what is now their third dis­ease in­di­ca­tion for this treat­ment. And they’re not near­ly done, build­ing up hopes for a ma­jor fran­chise.

Af­ter rais­ing $158M, this up­start's founders have star back­ers and plans to break new ground in gene ther­a­py

Back in 2014, Stephanie Tagliatela opted to take an early exit out of her PhD program after working in Mark Bear’s lab at MIT, where she specialized in the synaptic connections between neuronal cells in the brain. She never finished that PhD, but she and fellow MIT student Kartik Ramamoorthi — who was on the founding team at Voyager — came away with some ideas for a gene therapy startup.

Today, fully 5 years later, she and Ramamoorthi are taking the wraps off of a $104 million mega-round designed to take the cumulative work of their preclinical formative stage for Encoded Therapeutics into human studies. They’ve now raised $158 million since starting out in Illumina’s incubator in the Bay Area, and they believe they are firmly on track to do something unique in gene therapy.

Endpoints News

Basic subscription required

Unlock this story instantly and join 53,600+ biopharma pros reading Endpoints daily — and it's free.

Novotech CEO Dr. John Moller

Novotech CRO Award­ed Frost & Sul­li­van Best Biotech CRO Asia-Pa­cif­ic 2019

Known in the in­dus­try as the Asia-Pa­cif­ic CRO, Novotech is now lead CRO ser­vices provider for the grow­ing num­ber of in­ter­na­tion­al biotechs se­lect­ing the re­gion for their stud­ies.

Re­flect­ing this Asia-Pa­cif­ic growth, Novotech staff num­bers are up 20% since De­cem­ber 2018 to 600 in-house clin­i­cal re­search peo­ple across a full range of ser­vices, across the re­gion.

Novotech’s ca­pa­bil­i­ties have been rec­og­nized by an­a­lysts like Frost & Sul­li­van, most re­cent­ly with the pres­ti­gious Asia-Pa­cif­ic CRO Biotech of the year award for best prac­tices in clin­i­cal re­search for biotechs for the fifth year. See oth­er awards here.

Richard Gonzalez testifying in front of Senate Finance Committee, February 2019 [AP Images]

Ab­b­Vie's $63B buy­out spot­lights the re­turn of ma­jor M&A deals — de­spite the back­lash

Big time M&A is back. But for how long?

Over the past 18 months we’ve now seen three major buyouts announced: Takeda/Shire; Bristol-Myers/Celgene and now AbbVie/Allergan. And with this latest deal it’s increasingly clear that the sharp fall from grace suffered by high-profile players which have seen their share prices blasted has created an opening for the growth players in big pharma to up their game — in sharp contrast to the popular bolt-on deals that have been driving the growth strategy at Novartis, Merck, Roche and others.

Endpoints News

Basic subscription required

Unlock this story instantly and join 53,600+ biopharma pros reading Endpoints daily — and it's free.

Two biotech uni­corns swell pro­posed IPOs, eye­ing a $600M-plus wind­fall

We’ve been wait­ing for the ar­rival of Bridge­Bio’s IPO to top off the wave of new biotech of­fer­ings sweep­ing through Nas­daq at the end of H1. And now we learn that it’s been sub­stan­tial­ly up­sized.

Ini­tial­ly pen­ciled in at a uni­corn-sized $225 mil­lion, the KKR-backed biotech has spiked that to the neigh­bor­hood of $300 mil­lion, look­ing to sell 20 mil­lion shares at $14 to $16 each. That’s an added 5 mil­lion shares, re­ports Re­nais­sance Cap­i­tal, which fig­ures the pro­posed mar­ket val­u­a­tion for Neil Ku­mar’s com­pa­ny at $1.8 bil­lion.

No­var­tis holds back the copy­cat brigade's at­tack on its top drug fran­chise — for now

A fed­er­al judge has put a gener­ic chal­lenge to No­var­tis’ block­buster mul­ti­ple scle­ro­sis drug Gilenya on hold while a patent fight plays out in court.

Judge Leonard P. Stark is­sued a tem­po­rary in­junc­tion ear­li­er this week, forc­ing My­lan, Dr. Red­dy’s Lab­o­ra­to­ries and Au­robindo Phar­ma to shelve their launch plans to al­low the patent fight to pro­ceed. He ruled that al­low­ing the gener­ics in­to the mar­ket now would per­ma­nent­ly slash the price for No­var­tis, even if it pre­vails. 

Top an­a­lyst finds a sil­ver lin­ing in Ab­b­Vie’s $63B Al­ler­gan buy­out — but there’s a catch

Af­ter get­ting beat up on all sides from mar­ket ob­servers who don’t much care for the lat­est mega-deal to ar­rive in bio­phar­ma, at least one promi­nent an­a­lyst now is start­ing to like what he sees in the num­bers for Ab­b­Vie/Al­ler­gan.

But it’s go­ing to take some en­cour­age­ment if Ab­b­Vie ex­ecs want it to last.

Ab­b­Vie’s mar­ket cap de­clined $20 bil­lion on Tues­day as the stock took a 17% hit dur­ing the day. And SVB Leerink’s Ge­of­frey Porges can see a dis­tinct out­line of an up­side af­ter re­view­ing the fun­da­men­tals of the deal.

Endpoints News

Basic subscription required

Unlock this story instantly and join 53,600+ biopharma pros reading Endpoints daily — and it's free.

While Ako­rn works to re­vive its for­tunes, the FDA hits it with an­oth­er warn­ing let­ter

Ako­rn just can’t dig it­self out of its hole.

The spe­cial­ty gener­ic drug­mak­er has re­ceived yet an­oth­er warn­ing let­ter from the FDA this year. With­out dis­clos­ing any specifics, the Lake For­est, Illi­nois-based drug­mak­er on Wednes­day said the US reg­u­la­tor had is­sued the let­ter, cit­ing an in­spec­tion of its Som­er­set, New Jer­sey man­u­fac­tur­ing fa­cil­i­ty in Ju­ly and Au­gust of 2018. The com­pa­ny’s shares $AKRX dipped about 1.7% to $4.65 be­fore the bell.