top of page

Congress Attempts to Alter the Orphan Drug Tax Credit

On November 2nd, 2017 the House Ways and Means Committee released a draft of the Tax Cuts and Jobs Act. The proposal has created a stir in the rare disease community because the impact it has on a decades-old tax credit intended to incentivize development of rare disease treatments. This post explains what’s making the rare disease community anxious and what our vEDS community can do about it.

History of the Orphan Drug Act and Orphan Drug Tax Credit:

Prior to the 1980’s few drug companies invested in the discovery of treatments for rare disease. Having such small patient populations made it difficult to recover the extreme costs of drug research and development. The Orphan Drug Act of 1983 attempted to fix this issue by incentivizing pharmaceutical companies to invest time, energy and resources on rare diseases.

Incentives included drug exclusivity (exclusive rights to sell the drug) as well as the Orphan Drug Tax Credit (ODTC) which gives drug developers the ability to claim a tax credit of 50 percent of the costs of clinical research and testing of orphan drugs.

Prior to the Orphan Drug Act, only 34 orphan drugs were FDA approved. Since its enactment, more than 200 new orphan drugs have been approved by the FDA!

What is currently happening to the Orphan Drug Tax Credit?

On November 2nd, 2017 the House Ways and Means Committee released a draft of the Tax Cuts and Jobs Act. This is a comprehensive proposal which attempts to reform the U.S. tax code. Part of this overhaul includes changes to the Orphan Drug Tax Credit.

As noted by the National Organization for Rare Disorders (NORD), ‘this proposal would alter the calculation for determining the tax credit, effectively cutting the incentive in half. Additionally, this proposal aims to limit which orphan therapies could qualify for the credit, disregarding the possible benefit they might bring to the rare disease community. Finally, this proposal would go into effect immediately, greatly interfering with critical clinical trials already underway’.

Why does it matter? Why is the Orphan Drug Tax Credit so important?

The Orphan Drug Tax Credit is one of the most important incentives for developing new drugs for individuals with rare disease.

In 2015, a report was commissioned by NORD and the biotechnology trade group to evaluate just how beneficial the Orphan Drug Tax Credit has been. It estimated that if the tax credit were removed, the number of rare disease drugs approved over the next decade would decline by 33%! It also estimated that the number of orphan drugs which have been developed over the last 30 years would have been reduced by 67 drugs.

By definition, each rare disease affects less than 200,000 patients. When combined, 30 million Americans are afflicted with a rare disease. Despite all of the positive advances the Orphan Drug Act has provided, over 95% of Americans with a rare disease are still waiting for the development of a treatment. Now is not the time to be removing pharmaceutical incentives to develop rare disease treatments.

What can you do to help?

Join the cause and let your voice be heard.

There, you will find information on how to contact your representative from Congress to emphasize the importance of supporting orphan drug development. We also encourage you to forward this blog post to other members of our vEDS community so they too may show their support.

4 views0 comments

Recent Posts

See All


bottom of page