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Hard to swallow

Industry says cutting tax credit will make orphan drug research unviable

Removing the federal tax credit for orphan drug development will leave pharmaceuticals companies with 'no choice but to divert research dollars elsewhere.' says Francois Nader.

When NPS Pharmaceuticals received federal approval to sell Gattex earlier this year, it was great news for those who suffer from short-bowel syndrome — a very rare disease.
It also was great news for the Bedminster company, which stands to benefit from $50 million in tax credit for developing this so-called orphan drug.

NPS, however, is not celebrating as much as you think.

The Orphan Drug Tax Credit is on the tax reform chopping block — and instead of waiting to see what happens in Washington this fall, NPS CEO Francois Nader and others are going on the offensive to save it.

“If the Orphan Drug Tax Credit were removed, biopharmaceutical companies would have no choice but to divert research dollars elsewhere to focus on medicines to treat larger patient populations with potentially greater and more certain financial returns,” Nader said in an email.

NPS has another orphan drug in the works: It’s developing Natparra as a treatment for hypoparathyroidism, a disorder that causes blood calcium levels to fall.

What’s spurring concern for the industry is the input being sought by the Senate Finance and House Ways and Means committees on comprehensive tax reform. The committees are expected to consider wide-ranging proposals that would eliminate numerous tax credits in exchange for lower rates and a simpler code.

The National Organization for Rare Disorders, which is leading efforts to save the Orphan Drug Tax Credit, petitioned the committees in July to preserve the credit, which allows companies to deduct 50 percent of clinical testing expenses from developing such medicines. Groups in the nation’s biotech clusters also are organizing to protect the credit.

Diane Dorman, NORD’s vice president of public policy, said whatever the merits of broader tax reform, circumstances involving rare diseases warrant special consideration.

“We’re not talking about tea bags and sugar here,” Dorman said. “We’re talking about credits for people with desperate conditions. There’s a real human element.”

Count BioNJ among the trade groups closely watching developments.

“We’ll do whatever it takes when the time is right,” said its president, Debbie Hart. “We’ll write the letters, make the phone calls, and let our companies know when the time is right to make phone calls.”

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