Amid tax reform plans, ACRO urges government to allow CRO tax credits

As of July 19, the Senate voted to approve President Donald Trump's nominees, Marvin Kaplan and William Emanuel, to the National Labor Relations Board.
The tax reform bill will be debated in the Senate.

Tax reform has become a major political issue and one that President Donald Trump would dearly like to see pass. But the CRO lobby group ACRO wants the government not only to look to the top line but also to drill down into what it can mean for research.

In a statement, ACRO says it hopes that, as the reform bill is debated in the Senate, it “hopes that attention will be given to a small but substantive issue: updating a tax code provision that has had strong bipartisan support for more than 30 years,” the tax credit allowed for research.

The R&D tax credit has been around since 1981, and used by life sciences to spend their money on their businesses, and less on tax; but ACRO says, while this has been “wonderfully successful,” it’s time for an update in order for it to keep up with the way, 36 years later, drugs and medical devices and developed: i.e., not internally from Big Pharmas, but increasingly from outsourced bodies.

ACRO explains: “When the R&D credit was enacted, a majority of clinical trials were conducted either in-house by pharmaceutical companies, or in academic medical centers. When the pharmas did the work themselves they could claim 100% of eligible expenses—typically their spending on research employees—for the R&D credit.”

It says that, when it would outsource its research to a tax-exempt academic organization, biopharma companies could claim 65% of expenses eligible for the R&D credit, but the remaining 35% “would simply disappear.”

Today, of course, much of the world’s biomedical R&D is done via contract research organizations (CROs), with over 110,000 employees in the U.S. alone, and employ more research and development professionals than pharma.

But, and this is the kicker for ACRO, CROs are excluded from claiming the R&D credit. “Because of this changed environment, the R&D tax credit is in desperate need of modernization if we want the US to maintain its leadership in biomedical research,” it argues.

“U.S. research companies believe that corporate tax reform is genuinely overdue,” said ACRO chairman John Hubbard, also president and CEO of Bioclinica.

“We think that adjusting the R&D tax credit to incentivize U.S. innovation and the conduct of clinical trials research in the United States is also overdue, and ACRO urges the Senate to adopt a proposal that will continue to fuel the development of the medical breakthroughs that patients need, and further strengthen U.S. leadership in research innovation.”