Updated: House Passes GOP Tax Overhaul With Orphan Drug Tax Credit Repeal Included

The US House of Representatives on Thursday passed a bill to reform the US tax code by a vote of 227 to 205, with all Democrats voting against it and all but 13 Republicans voting for it.

The House-passed bill includes several provisions that would be attractive to the biopharma industry, though industry groups BIO and the National Organization of Rare Disorders took issue with a provision to repeal the orphan drug tax credit, which amounts to half of all qualified clinical research costs for designated orphan drugs that treat rare diseases.

Background

The tax credit, along with other provisions including a seven-year period of marketing exclusivity for an approved orphan indication (meaning a product intended to treat a disease that affects fewer than 200,000 people in the US) have pushed a growing number of companies to develop these rare disease treatments.

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.

House vs. Senate

Unlike the House orphan drug tax credit repeal, the Senate bill would reform the credit.

The Joint Committee on Taxation (JCT) estimates the Senate plan would save about $29.7 billion in tax expenditures from 2018 to 2027, though the House’s full elimination of the credit would save about $54 billion. That compares with an October Treasury department  estimate of expenditures of $75 billion over the same period, based upon tax law enacted 1 July 2017.

Julia Lawless, communications director for Senate Finance Committee Chairman Orrin Hatch (R-UT), told Focus: "Chairman Hatch has been a strong advocate of this [orphan drug tax credit] initiative, which is why the mark [modified 15 November] does not repeal the orphan drug tax credit, but rather makes modifications to it. However, as with any major reform, tough choices have to be made." 

The committee voted late Thursday 14-12 along party lines to forward Hatch's proposal on to the full Senate. 

Editor's note: Story updated 11/17/17 with quote from Hatch and committee vote.