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

Grow­ing ac­cep­tance of ac­cel­er­at­ed path­ways for nov­el treat­ments: but does reg­u­la­to­ry ap­proval lead to com­mer­cial suc­cess?

By Mwango Kashoki, MD, MPH, Vice President-Technical, and Richard Macaulay, Senior Director, of Parexel Regulatory & Access

In recent years, we’ve seen a significant uptake in the use of regulatory options by companies looking to accelerate the journey of life-saving drugs to market. In 2018, 73% of the novel drugs approved by the U.S. Federal Drug Administration (FDA) were designated under one or more expedited development program categories (Fast Track, Breakthrough Therapy, Priority Review, and Accelerated Approval).ᶦ

Take­da swoops in to buy lit­tle biotech part­ner and its celi­ac drug poised to 'change stan­dard of care'

Having spent three years carefully grooming PvP Biologics and its drug for celiac disease, Takeda is happy enough with the proof-of-concept data to buy it all.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 73,100+ biopharma pros reading Endpoints daily — and it's free.

Bio­gen touts new ev­i­dence from the gene ther­a­py com­pa­ny it wa­gered $800M on

A year ago, Biogen made a big bet on a small gene therapy company. Now they have new evidence one of their therapies could work.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 73,100+ biopharma pros reading Endpoints daily — and it's free.

Mi­cro­bio­me Q&A: New study maps the vagi­na's 'op­ti­mal mi­cro­bio­ta' — and its im­pli­ca­tions for bio­phar­ma

The widely-held notion that the “optimal” vaginal microbiota is dominated by one strain of lactic-acid producing bacteria has now been challenged in a new paper, published in Nature Communications on Wednesday, which used advanced gene sequencing methods to map out the most comprehensive gene catalog of the human vaginal microbiome.

Things have changed in the more than 50 years since the concept of vaginal microbiota transplants was proposed and subsequently tainted by a Texas-based gynecologist who transplanted the vaginal fluid of women who had bacterial vaginosis into healthy females, suspecting he had isolated the bacteria responsible for the condition.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 73,100+ biopharma pros reading Endpoints daily — and it's free.

In at least one life-sci hub, gen­der and di­ver­si­ty ini­tia­tives haven’t made a dent

Gender and racial diversity at the top of UK life science companies has hardly budged over the last seven years despite repeated advocacy efforts, according to a new report.

The report, from the recruiting firm Liftstream, found that 14.8% of directors on life sciences boards were women and 21.1% of top executives were women. That’s a modest bump from the 9.8% of directors and 18.1% of executives Liftstream identified in their last report from 2014. The percentage of women CEOs moved from 8% to 9.8%.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 73,100+ biopharma pros reading Endpoints daily — and it's free.

Will a 'risk-of­f' mind­set has­ten cell ther­a­py M&A? Io­vance surges on buy­out chat­ter

Is it time for some cell therapy M&A?

Investors of Iovance Biotherapeutics certainly thought so, sending its stock $IOVA up as much as 40% after Bloomberg reported that the cancer-focused biotech is talking to potential buyers.

While 2019 saw a number of high-profile gene therapy company takeovers — led by Roche’s $4.3 billion bid of Spark as Astellas went for Audentes, Biogen snapped up Nightstar and Vertex absorbed Exonics — large players appeared to prefer partnering on the cell therapy front, particularly when it comes to cancer. Hal Barron put his weight behind Rick Klausner’s startup as he rebuilt GlaxoSmithKline’s cancer pipeline. Takeda turned to MD Anderson to license their natural killer cell therapy.

One less ri­val for Im­muno­vant, as Alex­ion aban­dons FcRn in­hibitor

Less than one year after Alexion parted with $25 million upfront to secure access to a second anti-FcRn asset, it is abandoning the experimental drug. The discontinuation, disclosed at the SVB Leerink Global Healthcare Conference in New York during a fireside chat, bodes well for rival Immunovant.

The drug (ABY-039), partnered for development with Sweden’s Affibody, was forsaken on the basis of early-stage data that was not viewed favorably, Baird and SVB Leerink analysts noted.

Clin­i­cal tri­al spon­sors have to dis­close decade’s worth of un­re­leased da­ta, fed­er­al judge rules

A decade’s worth of unreleased trial data may soon see the light of day.

A New York federal judge ruled this week that the FDA and the NIH have for years misinterpreted a law that would require companies, universities and other clinical trial sponsors to release trial data from studies completed between 2007 and 2017. The ruling covers drugs and medical devices that were experimental when the study was completed but have since been approved, potentially putting hundreds of sponsors out of compliance if they don’t put their results on clinicaltrials.gov.

Laurie Glimcher and Ansbert Gadicke (Justin Knight, Dana-Farber Cancer Institute)

Ty­ing ba­sic sci­ence to spin­outs, Dana-Far­ber de­buts sis­ter funds to­tal­ing $126M with MPM Cap­i­tal

As one of the most prestigious cancer institutes in the US, Dana-Farber has enjoyed considerable support for its entrepreneurial pursuits, spinning out about 30 companies in the past 12 years.

“Now where we’ve always struggled — where every cancer center struggled — is support of basic science,” Barrett Rollins, chief scientific officer emeritus, told Endpoints News.

And then two of its trustees had an idea. What if they tied philanthropy to investment in Dana-Farber startups, requiring a donation to basic science as a condition for accessing its brightest biotech venture ideas?