Biotech’s Second Big Win in Healthcare Reform: A Tax Credit Bonanza
The biotech industry won a major victory last month when President Obama signed healthcare reform into law. Biologic drugs, those developed through genetic engineering techniques and incubated in living cells, will now be granted a 12-year period of data exclusivity on the market, to protect them from cheaper copycat competitors. That will allow the innovative companies to recoup their long investment in R&D.
But that’s not the only significant benefit for biotech tucked into this piece of legislation.
In a recent Xconomy op-ed piece I mentioned the Therapeutic Tax Credit, details of which have now been spilling out. This portion of the legislation, now officially called the Qualifying Therapeutic Discovery Project Credit, looks like another big win for the biotechnology industry in general and its research efforts in particular. Indeed, this legislation was backed by the Biotechnology Industry Organization and is especially favorable to startups and small companies. Dean Zerbe provided a detailed description of this program in a recent posting on Forbes.com. People running the tax and finance departments of biotech companies employing less than 250 workers (i.e. the vast majority of them) should evaluate this program to see if they qualify for this tax credit. Here are the highlights of the program, according to the Forbes article:
If your biotech company has a tax liability, you can get a 50 percent tax credit; if you have no tax liability, you can get a grant in the same amount that is tax-free. The credit covers qualified investments in “therapeutic discovery projects.” What defines this? In order to receive the tax credit, the research program must fulfill at least one of the following three criteria:
1) It is designed to treat diseases via preclinical research or clinical studies for the purpose of getting FDA approval of the treatment.
2) It is designed to diagnose diseases or find molecular factors (e.g. biomarkers) related to diseases by developing diagnostics that can be used to make therapeutic decisions.
3) It is designed to develop some methodology that would advance the delivery or administration of therapeutics (e.g. technologies that are being developed to deliver siRNA).
By my reckoning, a very large percentage of biotechnology companies would qualify to apply for these tax credits. However, there are some additional criteria that will also be used to judge the research applications:
The research should have direct or indirect medical benefits. The emphasis here will be to finance programs that “will treat areas of unmet medical needs or prevent, detect or treat chronic or acute diseases or conditions.” Programs that will cut long-term health care costs are also favored, as are … Next Page »