As originally rolled out by House Republicans on November 2, the tax reform bill proposes to repeal a tax credit for clinical research costs that will effectively cut the current funding for orphan drugs by half in  a move that is of serious concern for the biopharma industry, as well as for patients with rare diseases and their advocacy groups.

The Orphan Drug Act was meant to encourage the development of drugs for diseases affecting less than 200,000 patients per year in the US, or for drugs affecting more than 200,000 patients if it could be demonstrated that the cost of developing and bringing the therapy to market could not be reasonably recouped.

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Despite the statistics demonstrating that the Orphan Drug Act has led to significant increases in the development of drugs for rare and orphan diseases, the act has come under fire for a variety of reasons.  Between 1967 and 1983, the year of the Act’s inception, approximately 34 drugs for orphan diseases were approved. From 1983 to 2016, that number increased to 451 drugs being approved for 590 rare disease indications.  The major criticisms of the Act are that it has allowed developers to overcharge for drugs and take advantage of the incentives by seeking additional approvals in further disease subtypes or indications that do not qualify for orphan disease status.  However, the issue of exorbitant drug prices is not unique to therapies being developed for rare diseases, and could possibly be addressed in ways that are less damaging to the original intent of the Act.  In addition, the FDA has provided data showing that three quarters of the initial 374 therapies that were approved under the Orphan Drug Act were never approved for additional non-rare disease indications, thus weakening the validity of that particular criticism.

At stake is a successful and worthwhile government program that is meant to support the development of therapies for rare and orphan diseases, which according to the National Institutes of Health collectively affected approximately 25–30 million individuals in the US in 2016.  Unfortunately, those patients will be caught in the crossfire of proposed legislation that may be based on misguided objectives.  If drug developers are unable to draw a reasonable return on costs and are not offered certain incentives for pursuing development of these therapies, the pace of approvals for orphan drugs will slow considerably.

The tax reform bill is currently making its way through Congress, and the outcome is eagerly awaited by various stakeholders.  While the original bill, as introduced by Republicans in the House of Representatives, calls for eliminating the tax credit for orphan drug clinical research, the Senate has put forth a proposal that will modify the credit instead of doing away with it entirely.  This alternative proposal is a reasonable compromise, as it is targeted toward addressing the issue of developers that are attempting to repurpose drugs that were originally approved for non-rare indications.  If the Senate’s proposal passes, the development of orphan disease drugs will still be affected, but in a less detrimental way for patients as well as the biopharma industry.