[Congressional Record Volume 143, Number 38 (Friday, March 21, 1997)]
[Extensions of Remarks]
[Page E550]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                 THE IMPORTANCE OF ORPHAN DRUG RESEARCH

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                         HON. NANCY L. JOHNSON

                             of connecticut

                    in the house of representatives

                        Thursday, March 20, 1997

  Mrs. JOHNSON of Connecticut. Mr. Speaker, I am pleased to introduce 
today, along with my distinguished senior colleague from the Ways and 
Means Committee, Robert Matsui, the orphan drug tax credit of 1997, 
legislation to extend this credit permanently. Similar legislation was 
recently introduced in the Senate by Senators Orrin Hatch and Max 
Baucus.
  In 1983, the Congress enacted legislation that granted a 50-percent 
tax credit to biomedical research companies for the clinical testing of 
drugs used to treat rare diseases with limited commercial potential, 
commonly referred to as orphan drugs. Because the process of research, 
development, and approval for new pharmaceuticals is so costly, the 
small market for a drug discourages drug companies from undertaking it. 
Often, drugs designated as orphan drugs 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.
  This legislation, in conjunction with orphan drug market exclusivity, 
has been successful in encouraging the type of narrow research critical 
to finding answers to the many questions posed by rare diseases. 
Currently, there are approximately 600 drugs that have received orphan 
drug designation and more than 100 of those have been approved for 
marketing. Because of the orphan drug legislation, we now have drugs to 
treat such diseases as cystic fibrosis, hepatitis B, multiple 
sclerosis, renal cell carcinoma, and pituitary dwarfism.
  The bill we are introducing today would make the orphan drug tax 
credit, which is set to expire May 31, 1997, permanent. Uncertainty 
over the future of the tax credit has caused a significant decline in 
the investment of capital in the biotechnology industry. The bill would 
also maintain a change made to the credit in last year's legislation to 
allow companies to carry the tax credit back or forward pursuant to 
section 39 of the Internal Revenue Code. Most of the companies engaged 
in research or orphan drugs do not qualify for the tax credit. Under 
current law, a company can only claim a credit against their current 
year tax liability. Since most companies involved in orphan drug 
research are biotechnology firms that are still developing and have yet 
to market a product, they have no tax liability against which to claim 
the tax credit. This structural change would allow a developing 
company, such as a biotechnology firm, to use the tax credit at such 
time that it had a tax liability.
  I am pleased to note that this bill is endorsed by leading patient 
groups and national organizations including; the Biotechnology Industry 
Organization, the National Organization for Rare Disorders, Inc. 
[NORD], the National Multiple Sclerosis Society, and the Leukemia 
Society of America.
  I urge my colleagues to support this important legislation and I look 
forward to its prompt approval by the Congress.

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