BIO, Genzyme Working With Sen. Hatch On Orphan Drug Tax Credit Refinement

Legislation that would allow drug companies to begin receiving orphan drug tax credits earlier is being developed by Sen. Hatch (R-Utah) with input from the Biotechnology Industry Organization and Genzyme.

Hatch, who sponsored the original Orphan Drug Act in 1983 as well as the permanent law passed in 1997, intends to introduce "The Orphan Drug Tax Credit Clarification Act" before Congress breaks for its spring recess April 7.

The legislation "provides a small refinement to the existing interpretation of the credit to cover costs for qualified clinical expenses of a designated orphan drug, regardless of whether such expenses were incurred before or after such designation was granted," a "Dear Colleague" letter from Hatch states.

The bill would allow pharmaceutical companies to use the orphan drug tax credit from the day they apply for orphan designation, rather from the day FDA awards designation, as under current law.

Orphan drug designation is conferred on drugs developed to treat diseases that affect fewer than 200,000 Americans. FDA has approved approximately 220 orphan drugs for marketing, with another 800 in the research pipeline, according to the National Organization for Rare Disorders.

Hatch's letter notes that the Senate has passed the same provision twice before, in 1999 and 2000, as parts of larger bills, although it failed to be enacted both times. The Hatch bill is likely to be offered as an amendment to President Bush's tax cut package being considered in the Senate.

The Hatch bill is supported by BIO and the National Hemophilia Foundation. NORD, however, wrote Hatch on March 27 to state its opposition to the bill.

Hatch's "Dear Colleague" letter incorporates ideas circulated by BIO and Genzyme in their proposal to amend the orphan drug tax credit.

"As a result of the current structure of the credit," the letter states, "qualified clinical expenses incurred during the time it takes the FDA to officially designate the drug as an 'orphan' are being denied eligibility."

Companies wait "anywhere from two months to over a year for the FDA to confer orphan drug status." As a result, the letter adds, "a company is left with the decision to delay the start of clinical trials or initiate trials, without the benefit of the credit."

Genzyme said Congress' Joint Taxation Committee has scored the cost of the proposal at $100 mil. over 10 years, and that the tax savings would be put back into research.

NORD maintained in its March 27 letter that the amendment "would encourage a company to delay getting an orphan drug designation as long as possible in order to keep their orphan drug secret," since information about orphan drugs is published in the Federal Register.

Under the proposed bill, companies "could file a sham application for a designation, delay answering the FDA's questions, and delay obtaining the actual designation for months or years," NORD said.

As a result, "information about the drug would not be in the public domain, and desperate patients with hopeless diseases would not have an opportunity to participate in the clinical trial," NORD added.

Hatch's office said it believes NORD's opposition is based on a misunderstanding of the bill.

Genzyme said one of the reasons it is taking the lead on the issue is because it took FDA 14 months to grant orphan drug status to its biologic product NeuroCell for treatment of late-stage Parkinson's disease, which is now in Phase II/III trials.

NeuroCell received orphan designation in December 1996, after the company had completed enrollment for Phase I trials of the product in October 1996. In Genzyme's previous efforts to have the orphan drug tax credit changed, the company proposed that the correction should be retroactive to 1995.

Genzyme has been active on other issues on Capitol Hill as well. The company is understood to be working with Amgen and Sen. Kennedy (D-Mass.) on developing a prescription drug benefit proposal for Medicare (¹ (Also see "Amgen Working With Sen. Kennedy On Medicare Rx Benefit Bill" - Pink Sheet, 19 Feb, 2001.)).