How the Orphan Drug Credit Can Boost Your Innovation

Developing new pharmaceuticals and bringing them to market is an expensive endeavor. Uncommon diseases and conditions, often called "orphan diseases," affect small populations in the United States. Given the high costs of research and development (R&D), this limited patient base can make treatment development less economically attractive for pharmaceutical companies.

Congress passed the Orphan Drug Credit (IRC Section 45C) to address this challenge and encourage the development of treatments for less profitable drug therapies. The tax credit is worth up to 25% of qualified clinical testing expenses, and it is possible for companies to claim both R&D and orphan drug credits in the same tax year, maximizing support for a broad range of medical research.