Sander Flaum

Will Congress really kneecap the Orphan Drug Act?

By Sander Flaum

At first it sounded like a bad joke. Were House Republicans actually contemplating eliminating the Orphan Drug Act tax credit?

Insane! Cut out the heart of a program that has benefited millions of lives? Passed in 1983, the Orphan Drug Act has been driving pharmaceutical innovation for nearly 40 years. All told, the ODA has helped spur the development and approval of more than 550 treatments for orphan diseases.  

And these aren’t me-too drugs, but breakthroughs like Gleevec, which launched a revolution in cancer treatment and Lamictal, which helps children with a devastating form of epilepsy. And the advances keep coming. Just recently, the FDA approved Hemlibra, which will improve the lives of patients with hemophilia, and Mepsevii, the first treatment for Sly syndrome, an extremely rare and devastating metabolic disorder.

You might think the outrage of patient-focused groups like the National Organization for Rare Diseases (NORD) and the Biotechnology Industry Organization would have derailed this shortsighted and even cruel idea. Guess not.

On November 16, the House of Representatives steamrolled through its tax reform bill by a margin of 227 – 205 and, with that vote, eliminated the ODA tax credit. Why?  

One argument was that the ODA tax credit costs the U.S. treasury billions of dollars in revenue. Yes, and it’s arguably saved millions of lives by encouraging companies to develop drugs that otherwise would be too expensive or risky to tackle. We also heard that some companies “game” the ODA by seeking indications for orphan diseases and then expanding use into common diseases. Okay. So, even if that’s true, adjust the law. Just don’t cripple it. That’s like shutting down FEMA because a few contractors are overbilling.  

If anything, it’s time to strengthen the ODA. Even though our fight against killer diseases is paying off, progress remains painfully slow. The 21st Century Cures Act (2016) was a great idea, but our critics are more obsessed about our profits than the patients we’re helping. According to a 2015 analysis, without the tax credit, the dollars invested in orphan disease research and drug development would drop by 33 percent, as would the number of new treatments. In the last two years, nearly 45 percent of all new drugs approved were for orphan diseases. 

Our one-note critics don’t get it. Pharma’s support for the ODA has nothing to do with money. We’d actually do better financially if we just rolled over and took the House’s lower corporate tax rate and forget about tax credits. But that’s not the point! The ODA was created to enable our industry to develop treatments for underserved patients – those who are unfortunate enough to have rare diseases for which no treatments exist. Who isn’t proud that children with cystic fibrosis can now hope to live close to normal lives? Who isn’t excited about the progress we’ve made in muscular dystrophy? Who isn’t hopeful that, as with AIDS, cancer will soon be a manageable disease?

The fight isn’t over. Despite the disappointing House vote, the tax cut bill still has to go through reconciliation. Senator Hatch, who co-sponsored the original 1983 legislation, still hopes to protect the ODA. As I write, he’s proposing measures in the Senate’s version that would at least keep the ODA alive. 

Let’s tell our representatives not to balance the budget on the backs of patients with life-threatening diseases. Eliminating the ODA tax credit is not good economics. It’s just dumb.  

Sander Flaum

Sander A. Flaum is principal, Flaum Navigators, and executive-in-residence, Fisher College of Business, The Ohio State University.