Cutting the Orphan Drug Tax Credit is not drug pricing reform
Congress’s proposed limits to the Orphan Drug Tax Credit (ODTC) in the Build Back Better Act (H.R. 5376) could severely hurt development of potential treatments for rare diseases that impact 30 million people in the United States, half of whom are children. It is difficult to understand how Congress could agree to the drastic reduction of this proven resource that supports the development of new treatments for 90 percent of the approximately 7,000 known rare diseases that currently do not have an FDA-approved treatment, many of which are life-limiting or fatal.
To understand the significance of the ODTC, it is important to understand the unique challenges — and promises — in taking rare disease drugs from research through development, approval, manufacturing and delivery to patients. Rare diseases have small patient populations, which makes developing drugs to treat them inherently more difficult, costly, and risky than those for common medical conditions. The ODTC incentivizes biotechnology and pharmaceutical companies to invest in the development of treatments that are not otherwise economically viable.
In 1983, recognizing rare diseases historically have attracted minimal attention, Congress established the Orphan Drug Act (ODA), creating the tax credit for advancement of rare disease treatments. At the time, only 38 drugs had been approved by the U.S. Food and Drug Administration (FDA) for rare diseases. Now, thanks to this effective and long-standing public health policy, there are more than 650 drugs approved to treat rare diseases. Most importantly, this has led to a significant and consistent decline in the number of annual deaths from rare diseases.
Congress should not be focused on snatching hope from those living with rare diseases; our representatives should instead support and enhance existing rare disease policy because it is working. Of note, the FDA affirmed the value of the ODA and this incentive in an Office of Inspector General (OIG) report issued in September. Rep. Anna Eshoo (D-Calif.) also recently called for the complete restoration of the ODTC after it was reduced from 50 to 25 percent in 2017.
While we recognize the importance of addressing use of the tax credit when not appropriate or necessary, Section 138141 of the Build Back Better Act would only serve to limit the development incentives provided by the ODTC, which would in turn lead to less drug development. This section proposes to restrict the availability of the ODTC to only include qualified clinical testing expenses for the first approved orphan use or indication of a new drug. This means, for example, that the tax credit would not be available for clinical testing expenses to evaluate whether existing therapies can treat children in addition to adults, or whether existing therapies can treat additional rare conditions. The $2.7 billion in projected savings pale in comparison to the cost of drug development for rare disease patients awaiting life-altering treatments and cures.
The innovative biotech companies that are part of the Rare Disease Company Coalition, of which I am chairwoman, understand the significant hurdles for developing treatments for rare diseases, and take on outsized risk by dedicating significant resources and teams to continued research and development for these diseases where often little is currently known. It is a relentless pursuit to develop new treatments for people living with rare diseases.
When a drug is approved for one rare disease, it is both prudent and typical to determine if the drug is applicable to other disease states, given that it has been established as a safe and effective treatment option. Approximately 25 percent of rare disease therapies have been approved to treat two or more orphan indications.
Given the heterogeneous nature of many rare diseases, the first approved orphan use may be for a segment of the patient population first studied in clinical trials (e.g., patients within a given age range). In some cases, clinical trials in adults precede clinical trials in children and, in other clinical trials, pediatric trials may be conducted in several age groups. To not permit use of the ODTC for these additional trials may mean that these additional trials will not be conducted at all, resulting in inequities across patients who suffer from the same rare disease.
We simply cannot lose the gains that have been made since passage of the ODA. It took decades after passage of the ODA to see meaningful results for people living with rare diseases. On the cusp of significant medical innovation and scientific advancement, we must preserve this innovation.
Undermining this development process by targeting the ODTC — an incentive that helps offset the high costs associated with clinical testing in rare disease patients — is not drug pricing reform, especially when more than 90 percent of rare diseases still do not have an approved treatment. In the absence of the ODTC, the net cost to a company of developing an orphan drug would increase by over 30 percent, risking the financial support necessary to pursue additional rare disease indications.
As representatives of biotech companies that know investing in rare diseases is a societal responsibility, we implore Congress to strike Section 138141 from the Build Back Better Act. Social infrastructure must include this underserved community.
Betsy Ricketts is the chair of the Rare Disease Company Coalition, an education and advocacy-focused coalition of diverse life science companies committed to discovering, developing and delivering rare disease treatments. She is also the vice president of policy, government and public affairs at Ultragenyx.