WASHINGTON, D.C. — U.S. Representatives Josh Gottheimer (NJ-5), Chrissy Houlahan (PA-6), Stephanie Murphy (FL-7), and Eric Swalwell (CA-15) have come together to advocate for the Orphan Drug Tax Credit (ODTC) within negotiations of the reconciliation package. 

The Orphan Drug Tax Credit provides a tax credit equal to 25 percent of the cost of qualified clinical testing expenses associated with developing orphan drugs — that is, a drug used to treat, prevent, or diagnose a rare (or “orphan”) disease. By definition, rare diseases are those impacting 200,000 or fewer people in the United States.

Nearly 30 million people are battling rare diseases today, and more than 90 percent of identified rare diseases do not have FDA-approved treatments available. The need for continued incentives to spur the ongoing development of these drugs has never been greater.

The Members wrote in a letter to Speaker Nancy Pelosi and Chairman of the House Ways and Means Committee Richard Neal today, saying, “We urge you to preserve the [Orphan Drug Tax Credit] in its current form as the Build Back Better reconciliation package is negotiated and finalized in the coming days. By maintaining the ODTC, we can continue to incentivize life-saving research and find treatments and cures for millions suffering from some of society’s most vexing diseases.”

The full letter can be found here and also is below.

Dear Speaker Pelosi and Chairman Neal:

We strongly oppose proposed changes to the Orphan Drug Tax Credit in the House Ways and Means Committee-reported reconciliation bill. The Ways and Means proposal would limit the Orphan Drug Tax Credit’s (ODTC) applicability to only the first approved orphan use of a drug, thus diminishing research into rare disease uses. As Congress negotiates the final reconciliation package in the coming days, we urge you not to reduce the Credit’s value. Instead, we encourage you to rely on other revenue-raising mechanisms to offset the cost of the package that will not hurt critical research and development into life-saving cures for rare diseases.

By definition, rare diseases are those impacting 200,000 or fewer people in the United States. Critically, the number of rare diseases identified in the United States runs in the thousands. The sheer quantity of these illnesses, combined with the various challenges associated with developing drugs for small patient populations, resulted in little action from the pharmaceutical industry toward developing rare disease cures before the enactment of the ODTC in 1983. Today, despite the enactment of the ODTC and the life-saving innovations achieved over the last 38 years because of the Credit, the fact remains that millions of Americans with rare diseases still do not have access to FDA-approved treatments for their ailments. Indeed, for the nearly 30 million people battling rare diseases today, more than 90 percent of identified rare diseases do not have FDA-approved treatments available. Thus, the need for continued incentives to spur the ongoing development of these drugs has never been greater.

The ODTC was enacted in 1983 as part of the Orphan Drug Act (ODA), which contained various reforms to encourage pharmaceutical manufacturers to pursue research and development into treatments for rare diseases. As initially enacted, the ODTC provided a tax Credit equal to 50 percent of the cost of qualified clinical testing expenses associated with developing orphan drugs. Since enactment, the ODTC and the broader ODA have played critical roles in developing treatments for rare disease, with over 1,000 FDA approvals for rare disease treatments granted since 1983, with many of those approvals having occurred in recent years.

Unfortunately, 2017’s Tax Cuts and Jobs Act took aim at the ODTC, halving its applicability to 25 percent to generate revenue to pay for the legislation. Critical bipartisan legislation now introduced in Congress, Cameron’s Law — named after 6-year-old Cameron Hyman from Wyckoff, NJ, who is diagnosed with the rare disease Sanfilippo Syndrome — would fully restore the ODTC. Still, in the current reconciliation process, we should not repeat the same mistake Congress made in 2017 and further diminish the value of this life-saving Credit. The Ways and Means Committee’s proposal, in its current form, would restrict the applicability of ODTC to only the first approved orphan use of a new drug and not for any subsequent use. This change would diminish research into rare disease uses and make treatments for rare diseases even rarer. In the face of these devastating impacts for millions suffering from rare diseases, the Ways and Means Committee’s proposal would generate just $2.7 billion in revenue over ten years, less than one-tenth of one percent of the entire amount of revenue needed to offset the proposed legislation.

For these reasons, we urge you to preserve the ODTC in its current form as the Build Back Better reconciliation package is negotiated and finalized in the coming days. By maintaining the ODTC, we can continue to incentivize life-saving research and find treatments and cures for millions suffering from some of society’s most vexing diseases. Please be in touch for further information about the ODTC or its benefit to millions suffering from rare diseases.

Sincerely,

Members of Congress

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