Why is the ODTC Important for Rare Diseases?
The ODTC allows drug manufacturers to claim a tax credit of 50 percent of the qualified costs of clinical research and drug testing of orphan drugs (drugs for diseases affecting 200,000 Americans or fewer). The ODTC is part of a package of provisions enacted in 1983 in the Orphan Drug Act (ODA) that provides incentives for drug companies to develop products for rare diseases. This legislation has been extremely successful.
Without the ODTC, one-third fewer orphan drugs would be developed going forward.
In the decade before the ODA, only 10 medicines were developed by industry for rare diseases. Since 1983, however, more than 3,500 potential treatments have been designated as an orphan drug, and more than 500 orphan therapies have been approved by FDA. This is a direct result of the incentives provided by the ODA, including the tax credit.