[Congressional Record Volume 143, Number 16 (Monday, February 10, 1997)]
[Senate]
[Pages S1191-S1192]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. HATCH (for himself and Mr. Baucus):
  S. 293. A bill to amend the Internal Revenue Code of 1986 to make 
permanent the credit for clinical testing expenses for certain drugs 
for rare diseases or conditions; to the Committee on Finance.


                      THE ORPHAN DRUG ACT OF 1997

  Mr. HATCH. Mr. President, today I am introducing the Orphan Drug Act 
of 1997, legislation to extend permanently the orphan drug tax credit. 
I am pleased that my good friend and colleague from Montana, Senator 
Baucus, is joining me. Similar legislation was introduced in the House 
last year by Representatives Nancy Johnson and Robert Matsui. I am 
confident that they will once again introduce legislation this year to 
make the credit permanent.
  Mr. President, this credit encourages private firms to develop 
treatments for rare diseases. As many of my colleagues know, we 
extended this medical research tax credit last year, but, it will 
expire on May 31 of this year.
  Since the 1983 enactment of the orphan drug tax credit we have seen 
very encouraging progress in developing new drugs to alleviate 
suffering from a number of so-called orphan diseases, those diseases 
that afflict a relatively small number of people. Because the process 
of research, development, and approval for new pharmaceuticals is so 
costly--running into hundreds of millions of dollars--the small market 
for a drug discourages drug companies from undertaking it.
  Mr. President, the incentive provided by this credit gives hope to 
individuals who suffer from such rare but devastating conditions as 
Tourette's syndrome. Huntington's disease, and neuro- fibromatosis, to 
name a few. Many

[[Page S1192]]

drugs designated as orphan drugs have a much small potential market 
than even the 200,000 patients referred to in the definition in this 
credit--sometimes they are for conditions that affect as few as 1,000 
persons in the United States. This means that without some incentive 
there is simply no possibility for a firm to profit from its decisions 
to develop drugs that treat these diseases.
  Fortunately, the orphan perception has been changing over the years 
that this research credit has been in effect. In fact, Mr. President, 
pharmaceutical companies have made great strides in discovering 
treatments for these orphan diseases. While only seven orphan drugs 
were approved by the FDA in the decade before the credit's initial 
passage, over 100 have been approved since and approximately 600 are 
now in development.
  Last year, I mentioned the first-ever treatment for Gaucher disease, 
a debilitating and sometimes fatal genetic disorder. This disease 
afflicts fewer than 5,000 people worldwide, yet the company who 
discovered the treatment expended its time and money to search for a 
treatment precisely because of the orphan drug credit's incentives. 
There are other examples as well.

  Mr. President, this credit's effectiveness has been tested for the 
past 14 years, and it has passed with flying colors. Few provisions of 
the tax code can claim to have clearly reduced human suffering and to 
have expanded our store of medical knowledge. This credit has done 
both.
  By helping small, entrepreneurial firms to take advantage of the 
orphan drug credit, we can make it even more effective. Before last 
year, the tax credit only served as an incentive for companies that 
earn a current-year-profit. If the credit could not be used 
immediately, it was lost forever. For large, profitable drug companies, 
this was rarely a problem.
  However, for many small, start-up pharmaceutical companies, this 
current-year restriction made the credit of little or no use. These 
firms typically lose money in the early years since they put all 
available funding into research. They only expect to see profits many 
years into the future.
  In order to improve the credit's usefulness, we modified the credit 
in legislation last year to allow firms to carry the credit back 3 
years and carry it forward 15 years. This will give small, growing 
companies an incentive to find ways to treat these rare diseases that 
cause so many to suffer. I have been impressed by the strides being 
made in the biomedical field, including growing firms in my home State 
of Utah.
  In the course of research, scientists often stumble upon treatments 
that could, if developed, improve the lives of victims of rare 
diseases. However, because of the high cost of drug experiments and the 
enormous expense involved in gaining FDA approval, many researchers 
reluctantly set these promising drug innovations aside. Mr. President, 
this should not happen, not when so many are suffering from these rare 
diseases, and we have an effective credit available that has proven its 
benefits.
  The following national groups officially endorse the Orphan Drug Act 
of 1997: National Organization for Rare Disorders [NORD], National 
Multiple Sclerosis Society, Tourette Syndrome Association, United 
Parkinson Foundation, American Autoimmune Related Disease Association, 
Leukemia Society of American, Cystinosis Foundation, New England 
Biomedical Research Coalition, Biotechnology Industry Organization, and 
the Epilepsy Foundation.
  I urge my Senate colleagues to join us in sponsoring this bipartisan 
legislation. Mr. President, I ask unanimous consent that the text of 
this bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 293

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. CREDIT FOR CERTAIN CLINICAL TESTING EXPENSES MADE 
                   PERMANENT.

       (a) In General.--Section 45C of the Internal Revenue Code 
     of 1986 (relating to clinical testing expenses for certain 
     drugs for rare diseases or conditions) is amended by striking 
     subsection (e).
       (b) Effective Date.--The amendment made by this section 
     shall apply to amounts paid or incurred after May 31, 1997.
                                 ______