July 29, 2013 3:25 pm

Shire, Vertex, BioMarin among firms lobbying Congress to maintain orphan drug tax credit in proposed tax reform – exec

This article is provided to FT.com readers by BioPharm Insight—a news service focused on providing insight into the most price sensitive issues in the global pharmaceutical market. www.biopharminsight.com

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Shire (LON:SHP), Vertex Pharmaceuticals (NASDAQ:VRTX) and ViroPharma (NASDAQ:VPHM) are among the companies lobbying to prevent Congress from eliminating the Orphan Drug Tax Credit, said Carrie Burke, Shire’s director of alliance development. The tax credit could be under fire as per a proposed reform of the US tax code, lobbyists and healthcare consultants based in Washington, DC, told BioPharm Insight.

Tax reform will likely be discussed in the fall, they added.

The credit is intended as incentive for companies to create drugs for a small population where research and development would otherwise be too costly. The term orphan in the US refers to rare diseases that affect fewer than 200,000 people at any point in time.

The orphan provision is a federal tax credit of 50% on clinical drug testing costs for therapies being evaluated under section 505(i) of the Food, Drug and Cosmetic Act. Orphan drug laws passed in the 1980s established the credit.

The sentiment among companies, Burke noted, is that if the credit is discarded, companies like Shire and smaller drugmakers may shelve orphan drugs in development. Orphan drugmakers including the aforementioned companies as well as Amicus Therapeutics (NASDAQ:FOLD) and BioMarin Pharmaceutical (NASDAQ:BMRN) have decided on a “divide and conquer” strategy, Burke said. Company lobbyists have spread out on Capitol Hill to reach individual lawmakers, she explained.

ViroPharma declined to comment and the other companies did not return requests for comment by press time. Over the past few years, pharma companies have intensified efforts to develop orphan drugs considering they are well-reimbursed in the US healthcare system. There are treatments available for orphan diseases such Gaucher’s and Fabry’s and many others are in various stages of clinical progress.

The orphan drug credit may be under fire, said a healthcare lobbyist and consultant. Both Senate Finance Chairman Max Baucus and Ranking Member Orrin Hatch have proposed a “blank-slate” approach as a legislative starting point for tax reform, he noted. Thus, orphan drug developers have to justify why they should receive the tax credit, he added.

The Biotechnology Industry Organization (BIO) and the Pharmaceutical Research and Manufacturers of America will likely send letters and lobby on behalf of their member companies, added a second healthcare lobbyist.

BIO has asked the patient community to weigh in by 24 July, according to a 10 July notice on the Rare Disease Legislative Advocates website. “Congress must hear from the patient community that the Orphan Drug Tax Credit is important to them,” the site states.

The clean slate proposal should make orphan drugmakers wary, noted a second consultant, adding that any company gaining tax credits should be prepared to justify itself.

The sentiment among House Ways and Means and Senate Finance Committee staffers and tax lobbyists is that the whole tax reform issue will most likely be addressed October or November, noted the first healthcare lobbyist and consultant. The second lobbyist added the consensus among Republicans and Democrats is that tax reform will be discussed in the fall, with nothing likely passing this year. Alex Brill, research fellow, American Enterprise Institute for Public Policy Research, Washington, DC, agreed that fall will be the time for Congress to start thinking about tax reform, not concluding the process. The process will likely start in the House, Brill noted.

Yet, Brill said he has not seen nor heard much focus on the orphan tax provision and that it is a smaller item in terms of budget considerations. But Burke said that staffers on the Finance Committee have confirmed “everything is on the table” and if orphan drugmakers do not protest the gutting of the tax credit, it could disappear. Company representatives have informally talked and agreed that patient advocates should be wrapped into lobbying efforts, Burke added; the National Organization for Rare Diseases is now supporting the cause.

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