Rare Diseases

Tax Overhaul Looks Set to Cut Credits for Drugs Targeting Rare Diseases

Tax overhaul legislation being considered by Republicans in Congress would likely reduce tax credits that help pharmaceutical companies develop drugs aimed at small groups of patients who have rare diseases.
Tax overhaul legislation being considered by Republicans in Congress would likely reduce tax credits that help pharmaceutical companies develop drugs aimed at small groups of patients who have rare diseases.

A tax overhaul bill being hammered into its final form by Senate and House Republicans is all but certain to cut tax credits designed to encourage development of “orphan drugs” meant to treat rare diseases afflicting limited numbers of patients.

Since 1983, a federal law has allowed fledgling companies to write off 50% of the cost of human clinical studies to develop drugs aimed at small markets of patients who wouldn’t otherwise have access to drugs specifically designed for their ailments. The law was designed to address crippling diseases afflicting a few thousand, or fewer, adults and children.

The economics of developing costly drugs for such small populations are often challenging without the credits, but the question now is how much those credits will be cut as congressional Republicans move to reconcile separate House and Senate tax overhaul bills that their party pushed through both chambers in recent weeks.

The current House of Representatives version of the tax legislation would do away with the orphan-drug tax credit entirely. The Senate-passed bill would cut the credit by nearly half to 27.5% of research costs from the current 50%. The idea is to help offset the cost of cuts to business taxes, among other priorities. Over 10 years, the Senate bill would save $30 billion, while the House version would save $54 billion.

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