Placeholder Banner

Orphan Drug Tax Credit is Crucial to Rare Disease R&D

February 25, 2016
The term “rare disease” may be misleading: to be “rare” a disease must effect fewer than 200,000 people in the U.S., but there are over 7,000 rare diseases that have been identified. Taken together, that means that nearly 30 million Americans suffer from a rare disease or condition.  While innovative therapies have been developed for a variety of these diseases—including Sickle Cell Anemia, Gaucher Disease, and Huntington Disease—too many patients still lack treatment options.

Developing an innovative medicine for a rare disease is fraught with challenges. Since each rare disease effects so few patients, it is often the case that not much is known about how the disease does its damage or whether the disease manifests differently in people with different risk factors or genetic profiles. On top of that, it can be difficult to find enough patients to participate in the clinical trials that are needed for the Food and Drug Administration (FDA) to approve a rare disease therapy. Even after those hurdles are cleared, biopharmaceutical developers can have serious trouble recouping the investments they made to discover, develop, and deliver the therapy because the patient population is so small.

Thankfully, Congress recognized these outsized hurdles for rare disease drug developers, and in 1983, the Orphan Drug Act was enacted. This law established incentives to spur innovation, one of which was the creation of the Orphan Drug Tax Credit (ODTC), which is designed to promote investment in research and development on orphan drug development. Specifically, the ODTC allows developers to receive a tax credit for the clinical trial costs associated with potential new orphan drugs.  By reducing some of the inherent risk in developing an orphan drug, this change in public policy sought to offer hope to millions of patients.

But did it work?

Partnering with the National Organization for Rare Disorders (NORD) and Ernst & Young, BIO developed and released a white paper, entitled the Impact of the Orphan Drug Tax Credit on Treatments for Rare Diseases, to specifically examine the role of the ODTC on rare disease drug development by highlighting both the quantitative and qualitative benefits of the tax credit.

Since the creation of the ODTC, more than 200 new orphan drugs have been approved by FDA, compared with only 34 approvals before the ODTC was enacted.  However, knowing that the ODTC was not the only incentive included in the Orphan Drug Act, the white paper sought to identify the benefits of this important component. In fact, we found that, over the past 30 years, one-third fewer orphan drugs would have been developed to treat rare diseases.  This amounts to 67 fewer therapies on the market today without the ODTC.

According to NORD, the “Orphan Drug Act is an issue of huge importance to the rare disease community, patients, and families.  Its impact on their lives is beyond measure.”  To further demonstrate the impact that innovation can have, a number of patients shared their personal experiences in writing, which we believe are as illustrative as the facts and figures of the White Paper when it comes to the benefits that the ODTC has helped to make possible. Read their stories here.

The last 30 years have seen great accomplishments in treating rare disease, but we know that there is so much work still ahead of us.  There are over 400 medicines for rare disease currently in development, focusing on conditions from rare cancers to multiple sclerosis, and muscular dystrophy to neurologic disorders. Additionally, major scientific advances in gene therapy likely hold great promise for patients with rare conditions, as many of these diseases are genetic in origin.

As the international community prepares for Rare Disease Day next Monday, February 29, we are reminded that public policy has a strong legacy in the battle against rare diseases. The ODTC, along with the other provisions of the Orphan Drug Act, will continue to play a vital role in treating, and someday curing, these diseases, which is why their preservation should remain a common advocacy priority for all those who are working diligently to secure a better tomorrow.