
Potential elimination of the Orphan Drug Tax Credit - Joel White & Jill
Schmalz, Horizon Government Affairs

Community efforts to encourage CMS to revise its proposed rule on Medicaid “line
extension” rebates – Jennifer Bernstein, Horizon Government Affairs

Preserving Access to Orphan Drugs Act of 2013 - Theo Merkel, Office of
Senator Pat Toomey

American Cures Act (America Helping Encourage Advancements in Lifesaving
Science) - Dr. Binta Beard, Office of Senator Richard Durbin

The Patients Choice Act - Karen Jaffe, Fight to Live

Newborn Screening Saves Lives Act Re-authorization - Emil Wigode, March of
Dimes

Patients' Access to Treatment Act - Emily Shetty, The Leukemia & Lymphoma
Society

CAL Undiagnosed Diseases Research and Collaboration Network Act - Taylor
Gilliam, Office of Representative John Carter
Tax Reform Discussion Draft:
What Does it Mean for Rare
Diseases and Orphan Drugs?
Joel White, Jen Bernstein and Jill Schmalz
Horizon Government Affairs
March 20, 2014
S
Tax Reform: Background
S Representative Dave Camp (R-MI), Chairman of the Committee
on Ways and Means, released a tax reform discussion draft for
comment on February 26, 2014
S Goals:
S economic growth:
S job creation:
GDP by $3.4 trillion
1.8 million new private sector jobs
S simpler and fairer tax code: 95% of filers in lowest rate
Tax Reform: Basics
S
New Individual and Corporate Rate Structure:
S
S
S
S
S
Larger Standard Deduction:
S
S
Reduces rates and collapses brackets into two: 10 and 25 percent for virtually all taxable
income
No Alternative Minimum Tax
Reduces the corporate rate to 25 percent
More than 99 percent of all taxpayers face maximum rates of 25 percent or less
Increases and inflation adjusts the standard deduction of $11,000 for individuals and
$22,000 for married couples
Charitable donations:
S
S
S
Expands deductible contributions past the end of the tax year
Simplifies exempt organization taxes and sets a floor instead of a cap to the amount of
donations that can be deducted
Committee estimates an addition $2.2 billion in charitable contributions annually
Tax Reform: Process
S Goal is to simplify the tax code by eliminating most credits and
deductions to get rates as low as possible
S Blank slate assumed no credits or deductions
S The Committee then reviewed every credit and deduction and
made decision about which to keep and which to repeal
S Repeals the Orphan Drug Tax Credit
S Reforms and Makes Permanent the R&D Tax Credit
Orphan Drug Credit
S
Current law provides a 50 percent business tax credit for qualified clinical testing
expenses for rare diseases or conditions
S
S
Qualified clinical testing expenses are costs incurred to test an orphan drug after it is
approved by the FDA for human clinical trials, but before the drug has been approved for
sale
A rare disease or condition is defined as one that (1) affects less than 200,000 persons in
the United States, or (2) affects more than 200,000 persons, but for which there is no
reasonable expectation that businesses could recoup the costs of developing a drug for
such disease or condition from sales in the United States of the drug
S
The discussion draft repeals the credit for amounts paid or incurred in taxable years
beginning after 12/31/2014
S
Under current law, expenses incurred for clinical testing expenses for orphan drugs or
rare diseases or conditions are ineligible for the general research credit
S
Under the discussion draft, research on orphan drugs or rare diseases can claim this credit
Research and Development Tax
Credit
S
Credit expired on 12/31/13.
S
R&D credit is 20 percent of amount of expenses that exceed a base year OR an
alternative credit of 14 percent calculated on a different base
S
The proposal makes the alternative method for calculating the R&D credit
permanent as of 12/31/13, increases the rate to 15 percent, and repeals the 20
percent calculation method
S
The permanent general research credit is equal to:
S
S
15 percent of the qualified research expenses for the tax year that exceed 50
percent of the average qualified research expenses for the three preceding tax
years
Committee staff indicated that while the credit rate is less than the Orphan
Credit, the base used in calculating the credit is larger, so the tax benefit may be
more. Staff is soliciting analysis from impacted entities
Committee’s Next Steps
S Committee leadership is meeting with Members of Congress to
discuss the draft and receive feedback
S Committee members and staff are soliciting feedback from groups
on all aspects of the discussion draft
S The Committee intends to hold hearings on the discussion draft
and then will decide how to proceed
S Committee staff has asked for our input on the Orphan, R&D and
TPTC
Our Next Steps
S Financial impact analysis on how repeal of the credit but increase
in R&D credit washes out:
S Positive: more incentive to conduct research into rare diseases
S Neutral: same incentives
S Negative: less incentive to conduct research into rare diseases
S Develop advocacy materials, including letter to Chairman Camp
S Meet with Committee Staff
S Hill Briefing on May 7
Questions and Discussion
Thank You
Joel White
President
jwhite@horizondc.com
(202) 559-0192
Jen Bernstein
Executive Vice President
jbernstein@horizondc.com
(202) 559-0197
Jill Schmalz
Senior Vice President
jschmalz@horizondc.com
(202) 803-6031

BACKGROUND:
◦ The Patient Protection and Affordable Care Act
subjects some orphan drugs to a new fee on
branded prescription drugs.
◦ Drafters conditioned exemption from the new fee to
a manufacturers’ utilization of the Orphan Drug Tax
Credit, leaving some orphan drugs still subject to
the fee.

LEGISLATION:
Would exclude ALL pharmaceuticals indicated
by the Food and Drug Administration solely for
the treatment of a rare disease from the
branded prescription drug fee imposed under
the Patient Protection and Affordable Care Act.

STATUS:

Senate – S. 1128
◦ Introduced by Senator Pat Toomey (R-PA) with 5
bipartisan cosponsors.

House – H.R. 2315
◦ Introduced by Representative Jim Gerlach (R-PA-6)
with 39 bipartisan cosponsors.



Federal investment in biomedical research has
generated medical discoveries and scientific
innovations that have led to longer lives, created new
industries, and established the U.S. as a leader in
research and development.
But years of stagnant federal investment in
biomedical research jeopardize future life-saving
discoveries and our standing as a global leader in
research.
The American Cures Act proposes to augment federal
appropriations for biomedical research with a
mandatory trust fund dedicated to steady growth in
federally funded biomedical research.

Stagnant Investment in Biomedical Research
◦ This graph illustrates the decline in biomedical research in
constant dollars from 2004-2014.
35
Federal Funding for NIH, CDC, VA Research, and DHP in Constant
Dollars
34
33
32
31
30
29
28
27
26
25
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

The bill creates a trust fund to support a mandatory
funding stream. That funding will be available to the
Appropriations Committee to supplement discretionary
appropriations for the following agencies and
programs, which represent the core drivers of federally
funded biomedical research in the U.S.:
◦
◦
◦
◦

National Institutes of Health (NIH)
Centers for Disease Control and Prevention (CDC)
Department of Defense Health Program (DHP)
Veterans Medical & Prosthetics Research Program
The mandatory funding is dependent on
appropriation levels at or above FY14 levels, ensuring
that the American Cures Act does not supplant
discretionary spending for the eligible programs
Estimated Cost
 Each year, the bill would increase funding for
each agency and program at a rate of
GDPindexed inflation plus 5%. This steady,
long-term investment allows the agencies to
plan and manage strategic growth while
maximizing efficiencies. Based on
projections from the Congressional Budget
Office, investment at this pace will require an
additional $150 billion over 10 years.
Patient Choice Act
….for those you love
Basic Elements
• FDA provisional approval of fast track drug
after establishment of Safety
• Full approval continues to be sought
• Distribution under informed consent
• Enables provisional approval of drugs on the
market in approved countries for > 4 yrs
• Solves the Compassionate Use Problem!!
Benefits
• Provides patient rights to early access to investigational
therapies under informed consent – giving patients the right
to choose their therapies.
• Can save thousands of patients’ lives every year who die
waiting for FDA approved access to therapies, when all the
standard approved therapies run out.
• Preserves the existing regulatory system while making it
financially viable for the companies.
• Promotes innovation and ensures medical advances can
reach the marketplace more quickly.
• Stops the loss of companies investing in the development of
therapies for deadly & rare diseases, and creates jobs,
growth and drives American leadership in medical
innovation.
Calls for Provisional Approval
•
•
•
•
•
•
Manhattan Institute
Milken Institute
Kauffman Foundation
PCAST
NEWDIGS
And many more!
• “Such a reform would allow drugs that have been found safe and
promising (in Phase I and Phase II clinical trials) to win approval for
limited marketing to patients. This would give patients early access
to innovative new therapies, while the FDA would retain the ability
to collect information confirming the drugs’ safety and effectiveness
and to revoke a drug’s marketing authorization later, when
appropriate.” Manhattan Institute
Legislative Status
• Introduced in 113th congress on May
22nd
• Many support letters – ALWAYS NEED
MORE!!
• Lead by Cong. Morgan Griffith (R-VA),
Cong. Peters (D-CA), Cong. McCaul (RTX),T. Yoho (R-FLA)



Under many private insurance plans, patients with
cancer continue to pay extremely high out-of-pocket
costs because their prescribed medication is often
placed on a “specialty tier.”
Specialty tiers allow plans to impose high coinsurance,
in lieu of a co-payment, for expensive drugs, resulting
in higher out-of-pocket spending for patients.
Not only does this place a financial burden on patients,
but it has also been shown to discourage adherence to
treatment which can increase overall costs to the
healthcare system.

HR 460, the Patients Access to Treatments
Act, a bill which would require plans to limit
cost-sharing requirements for specialty
drug tiers to the level of cost sharing
required for non-preferred brand drug
tiers.


An independent study revealed that H.R. 460
would have a negligible impact on insurance
premiums, increasing premium costs by $3 per
year, absent any other changes to the average
benefit design.
This change would only impact 14 percent of
commercial health plans, leading to less than
0.01 percent increase in the average commercial
insurance health plan, for better coverage of
treatments used to treat chronic and lifethreatening conditions
Brief Background on Cal:
In 2006, a young boy by the name of Cal passed away when he was five
years due to an undiagnosed disease. During his short life, Cal
developed many unexplained medical problems such as neurological
difficulties, cerebral atrophy, migraines, and seizures. Doctors handling
Cal’s case could only tell his parents what diseases he did not have,
and tragically Cal’s parents never received a confirmed diagnosis.
If there had been a medical database, where symptoms of rare
diseases could be shared; doctors could have collaborated on Cal’s
case and confirmed a diagnosis.
Currently, there is no database like this that is available, and the only
way to compare cases is by word of mouth.
Facts about Undiagnosed Diseases:
According to the Department of Health and Human, undiagnosed
diseases are considered to be disorders with long-standing
symptoms or signs that have not been diagnosed; despite
extensive clinical investigation.
Undiagnosed diseases include rare diseases that less than
200,000 individuals in the US have, yet-to-be-described
disorders, or rare variants of more common diseases.
According to the European Organization for Rare Disease, 25% of
diagnoses are delayed between 5-30 years. This delay in an
accurate diagnosis can be costly by involving numerous tests,
medications, therapies, travel, and special diets. These expenses
can leave the patients and loved ones emotionally and physically
drained.
The CAL Network:
Ever since Cal’s untimely passing, Heather, Cal’s mother, has
made it her mission in life to help create a rare disease
database. This database would allow doctors to share patient
symptoms and effectively collaborate with one another.
Congressman John “Judge” Carter was inspired by Cal’s story
and Sponsored H.R. 1591 the CAL Undiagnosed Diseases Act
of 2013. H.R. 5191 outlines the CAL Network, in order for it
to be successful. The CAL Network would provide physicians
with a way to search for similar cases of undiagnosed
diseases.
The CAL Network:
This network would help determine factors that contribute to
undiagnosed diseases (i.e. age, race, gender, family history).
This network would also help identify reason for
misdiagnoses, and allow the Secretary of Health determine if
additional undiagnosed disease programs are needed.
The CAL Network would additionally be beneficial for
veterans returning home. Currently, there is a long list of
veterans with undiagnosed diseases. Since, more and more
veterans are returning home, this already long list could
increase in number and ultimately be detrimental to our
brave men and women.
Implementation of CAL Network:
The CAL Network implementation would require two critical
phases. The first phase would be a study period.
The study period would last up to one year after the date of
enactment in order for any necessary study and research
necessary to implement the CAL Network.
The implementation phase would require the CAL Network to
be up and running on September 30, 2015. The CAL Network
Bill would authorize 5 million from the FY2014 to FY2019
appropriations to fund the CAL Network.
 April
23 - RDLA Luncheon,
750 9th Street, NW, Suite 750, Washington,
DC • 20001
 May
7th - Caucus Briefing,
Rayburn House Office Building,
Washington D.C.