Biotech rallies behind tax incentive for orphan drug research

Biotech companies have set out to keep U.S. tax credits pinned to costs of developing drugs for rare or "orphan" diseases, seeking to escape the mammoth budgetary ax of Congress on Capitol Hill. The argument for preserving the 30-year-old tax incentive follows a flood of pharma and biotech activity in the rare-disease field.

Yet advocates argue that the tax credits, which are good for 50% of certain R&D expenses, have been one of the keys to keeping companies engaged in developing orphan drugs. The tax credits come from the 1983 Orphan Drug Act, which provided a slate of incentives to kick-start development of drugs against diseases that afflict 200,000 or fewer patients.

In the past 30 years, orphan drug research has gone from a biopharma backwater to one of the hottest areas of pharma research, fueling multibillion-dollar businesses such as Alexion Pharmaceuticals ($ALXN) and Vertex Pharmaceuticals ($VRTX), as well as the rare-disease juggernaut at Genzyme. Their drugs cost hundreds of thousands of dollars per patient annually, making them some of the most expensive in the world.

The National Organization of Rare Disorders (NORD) notes that only a few hundred of the some 7,000 rare diseases have approved treatments. Also, for every Genzyme there might be dozens of biotech groups that have never turned a profit, and those smaller companies angle for every financial incentive available during the long journey of advancing treatments to market.

"Repeal of the tax credit would cause irreparable harm to the goal of promoting development of therapies for patients with rare diseases," said Lori Gorski, a spokeswoman for Genzyme, as quoted by the Boston Herald.

Congress has sought cuts to government programs and few have escaped its budgetary cleaver, causing many agencies to feel the pain since sequestration took effect in March. So it's going to take some effort to keep the tax credits for orphan drug research intact.

- check out the Herald's article

Special Report: Top 20 orphan drugs by 2018

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