By Lisa Seachrist

Washington Editor

WASHINGTON -- U.S. Rep. Bill Archer (R-Texas), chairman of the House Ways and Means Committee, said the orphan drug tax credit will become permanent under a provision of the tax bill that will be reported out of his committee this week.

The tax credit, which expired May 31, gives companies that develop orphan drugs a dollar for dollar reduction in their tax liability for 50 percent of the cost of human clinical trials.

"I first put this proposal into the tax bill in 1995, and it was vetoed by the President," Archer said. "It is time to let the millions of Americans with rare diseases rest easy by making the orphan drug tax credit a permanent part of the nation's tax law."

The Orphan Drug Act became law in 1983 in an attempt to stimulate research into rare diseases by the private sector. The act uses a research tax credit and seven years' market exclusivity to entice biotechnology and pharmaceutical companies to develop drugs for diseases that afflict less than 200,000 Americans.

In the decade prior to the act only ten orphan drugs had been approved for marketing in the U.S. Since the act became law, more than 140 new orphan drugs have been approved and 800 orphan products are in development.

Rod Ferrell, a spokesman for the Multiple Sclerosis (MS) Society, highlighted the impact of the act. "Before we had orphan drugs we had no future," he said. "Because of the Orphan Drug Act, we now have three drugs for MS."

Michael Langan, a spokesman for the National Organization of Rare Disorders, noted that while there are new drugs for MS and cystic fibrosis, among others, "there is still much work to be done. Without this tax credit, 20 million Americans will be left without the hope that there will be a treatment for their condition."

"This credit is particularly necessary because it is often economically unfeasible for many companies to develop cures or treatments for disease that afflict less than 200,000 people," Archer said. "Fortunately, the number of people impacted by each rare disease is small. Unfortunately, the number of rare diseases is so large that it adds up to millions of Americans who need our help."

However, the tax credit is a temporary tax incentive that must be continually renewed. Between, 1983 and 1995, the tax incentive was extended, but for an 18-month period between March 1995 and August 1996, it lapsed. Now, with its May 31 expiration, the tax credit must once again be reauthorized.

"This tax credit only applies to the costs of clinical trials, not the preclinical development," said Chuck Ludlam, vice president of government relations for the Biotechnology Industry Organization. "The tax credit helps the research director of our companies to justify the expense of developing these drugs."

By making the tax credit a permanent part of the tax code, Ludlam noted, Archer is allowing companies to count on the credit as part of their financial plan. "The tax credit is part of the economics of a very fragile industry," Ludlam said.

Calling the tax credit "life and death" for the 20 million Americans who suffer from any one of 5,000 rare disorders, Archer challenged his Democratic colleagues to label the provision "corporate welfare."

"It's important to remember that this is more than a garden variety Washington issue," Archer said. "My plan will touch people's lives."

Ludlam pointed out that in addition to the orphan drug tax credit, which is expected to give companies $356 million in tax savings over ten years, Archer also provided capital gains incentives that encourage investment in innovative biotechnology companies.

"You have solved this problem at both ends," Ludlam told Archer. "Your priorities make sense; you are a man of compassion." *