As President Trump talked tax overhaul on Capitol Hill Tuesday, Arkansas patient advocate Andrea Taylor was also meeting with lawmakers and asking them to save a corporate tax credit for companies that develop drugs for rare diseases.

Taking the credit away, Taylor said, “eliminates the possibility for my child to have a bright and happy future.”

Taylor, whose 9-year-old son, Aiden, has a rare connective tissue disorder, spoke as part of a small rally organized this week by the National Organization for Rare Disorders — the nation’s largest advocacy group for patients with rare diseases.

Earlier this month, House Republicans proposed eliminating the orphan drug tax credits, which Congress passed as part of a basket of financial incentives for drugmakers in the 1983 Orphan Drug Act. The law, intended to spur development of medicines for rare diseases, also gives seven years of market exclusivity for drugs that treat a specific condition that affects fewer than 200,000 people.

The Senate Finance Committee, led by Sen. Orrin Hatch, R-Utah, put the tax credit back into the tax legislation. After some negotiations, the committee settled on reducing the credit to 27.5 percent of the costs of preapproved clinical research, compared with the current 50 percent. The committee also restored a provision that would have eliminated any credits for drugmakers who repurpose a mass-market drug as an orphan.

Today, many orphan medicines treat more than one condition and often come with astronomical prices. Many of the medicines aren’t entirely new, either. A Kaiser Health News investigation, which was also aired and published by NPR, found that more than 70 of the roughly 450 individual drugs given orphan status were first approved for mass-market use, including cholesterol blockbuster Crestor, Abilify for psychiatric conditions, cancer drug Herceptin and rheumatoid arthritis drug Humira, which for years was the best-selling medicine in the world.

More than 80 other orphans won Food and Drug Administration approval for more than one rare disease and, in some cases, multiple rare diseases, the KHN investigation showed.

“As with any major reform, tough choices have to be made,” a Hatch spokesperson wrote in an emailed statement, adding that the senator will continue to work “to make the appropriate policy decisions” to deliver a comprehensive tax overhaul.

Hatch, who is a member of a rare-disease congressional caucus, received $102,600 in campaign contributions from pharmaceutical and related trade group political action committees in the first half of 2017, making him the top recipient of pharmaceutical cash in the Senate.

If the Senate provision remains untouched, reducing the tax credit would save the federal government nearly $30 billion over a decade, according to a markup of the bill released late last week.

Orphan drug development has become big business in recent years and advocates as well as critics of the industry say tax credits have been an important motivation for companies. Orphan drugs accounted for 7.9 percent of total U.S. drug sales in 2016, according to a report released by QuintilesIMS and NORD.

Because patient populations for rare-disease drugs are relatively small, companies often charge premium pricing for the medicines. EvaluatePharma, a company that analyzes the drug industry, estimates that among the top 100 drugs in the U.S. the average annual cost per patient for an orphan drug was $140,443 in 2016. Giant pharmaceutical companies such as Celgene, Roche, Novartis, AbbVie and Johnson & Johnson have led worldwide sales in the orphan market, according to EvaluatePharma’s 2017 Orphan Drug Report.

Jonathan Gardner, U.S. news editor for EvaluatePharma, said the orphan drug tax credit is “probably the most important incentive for developing an orphan drug.” Cutting the credit will force even the large companies to question development of drugs for rare diseasess, Gardner said.

Dr. Aaron Kesselheim, an associate professor of medicine at Harvard Medical School, has been critical of the Orphan Drug Act’s incentives and of companies taking advantage of the law’s financial incentives for profit. But he warned against rushing to eliminate the tax credit.

“We need to think about ways we can improve the Orphan Drug Act and stop people from gaming the system and exploiting it,” Kesselheim said. But there “are a lot of rare diseases that don’t have treatments. So, we need to be careful in making changes.”

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Advocates for the National Organization of Rare Disorders rallied on Capitol Hill and then visited a couple of dozen lawmakers to argue for the orphan drug tax credit.

Sarah Jane Tribble/KHN

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Sarah Jane Tribble/KHN

The battle over the tax credit is the latest controversy for the FDA’s orphan drug program. FDA Commissioner Scott Gottlieb announced a “modernization” plan for the agency this summer, closing a pediatric testing loophole and eliminating a backlog of corporate applications for orphan drug status. And, this week, the agency confirmed that Dr. Gayatri Rao, director for the Office of Orphan Products Development, is leaving.

Meanwhile, the Government Accountability Office confirmed this month that it recently launched an investigation of the orphan drug program. The GAO’s review was sparked by a letter from top Republican Sens. Hatch, Chuck Grassley, R-Iowa, and Tom Cotton, R-Ark., asking the agency to investigate whether drugmakers “might be taking advantage” of the drug approval process.

The pharmaceutical industry has had a muted response to the tax bill, which includes a corporate tax cut. The powerful industry lobbying group PhRMA said it is pleased Congress is looking at overhauling the tax code but “encourages policymakers to maintain incentives” for rare diseases. BIO, the Biotechnology Innovation Organization that represents biomedical companies, said it was “gratified” the Senate committee chose to partially retain the credit but would prefer to keep the existing incentive.

The group that rallied Tuesday — wearing bright-orange shirts that read “Save the Orphan Drug Tax Credit” — planned to meet with a couple of dozen lawmakers, including Grassley, who is a member of the Senate Finance Committee. NORD, like many patient advocacy groups, receives funding from pharmaceutical companies but the organization’s leaders say the industry does not have members on the board and does not dictate how general donations are spent.

On Tuesday, NORD leaders said they are open to discussions about the tax credit, and whether the overall law is working as intended. “We’re here to have that conversation; we’re ready to have that conversation,” said Paul Melmeyer, director of federal policy for NORD. “Sadly, that’s not the conversation we are having today.”

Abbey Meyers, a founder of NORD and the leading advocate behind passing the initial 1983 law, said she fears the high cost of the drugs will make it impossible to sustain the orphan drug program. Now retired, Meyers said she has followed the law’s success over the years and believes the tax credit should not be changed.

“There are other things that have happened since the law was passed where there wasn’t any logic to what they did,” Meyers said, adding “because somebody went to a senator and they put into the law.”

Kaiser Health Newsis a nonprofit news service covering health issues. It is an editorially independent program of the Kaiser Family Foundationthat is not affiliated with Kaiser Permanente.

KHN’s coverage of prescription drug development, costs and pricing is supported by the Laura and John Arnold Foundation. Dr. Aaron Kesselheim’s work is also supported by the foundation.

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An investigation by New York’s attorney general found that the Brooklyn Hospital Center improperly billed dozens of patients for the cost of forensic rape exams.

The exams, known as rape kits, are required by state law to be free of cost to patients. Attorney General Eric Schneiderman’s office said Tuesday that between January 2015 and February 2017, the hospital conducted 86 forensic rape exams. It billed the patient or her insurance plan in 85 of those cases, without revealing that the exam could be free.

Schneiderman said he launched the investigation after one victim complained that she had been billed seven times for a forensic rape exam performed at the hospital’s emergency room. After receiving the initial bill, the patient contacted a victim’s assistance organization, which reached out to the state’s Office of Victim Services, which told the hospital that the state should be billed. A month later, the patient got a bill from a collection agency.

“These kits are used on what is undoubtedly one of the worst days of a survivor’s life,” Schneiderman told The Associated Press. “The absolute last thing they should have to worry about is how they’ll pay for their care at the hospital. But we have found contrary to law that way too often they do have to worry.”

Schneiderman said the state had reached a settlement with the Brooklyn hospital, which dictates that the hospital maintain a Sexual Assault Victim Policy that prevents improper billing and provide full restitution to those who should not have been billed. He said he had also sent letters to 10 other hospitals in the state, seeking information on their policies.

The Violence Against Women Act, reauthorized by Congress in 2005, requires that the full out-of-pocket costs of sexual assault medical forensic exams be covered by a state or other entity, as a condition of receiving federal grants through a program called STOP. That program provides funding for law enforcement and prosecutions in combating violence against women as well as for victim services. Victims cannot be required to file law enforcement reports to receive free exams.

New York is not the only place where victims have been improperly billed. CBS News reported in 2014 that victims in 13 states said they had been billed for medical services related to a sexual assault. A victims’ advocate organization in Chicago told CBS it got as many as six calls a month from rape victims who had been wrongly billed.

In 2014, the Urban Institute published a study on how the funding for sexual assault exams is handled by states. “In practice, each state (or local jurisdiction, in the case of non state-level paying systems) decides what it will cover as part of the free exam,” the report found. “Some states cover only what is required by federal mandate, and other states provide more free services to victims.”

The report’s authors explain that VAWA 2005 dictates that such exams should, at minimum, include:

• Examining physical trauma
• Determining penetration or force
• Interviewing the patient
• Collecting and evaluating evidence

But the victim may require medical services for treatment relating to an injury, pregnancy or sexually transmitted infections. Whether and how those expenses are covered varies by state, and some victims are billed for the additional services.

The Urban Institute study found that crime victim compensation funds were the primary funding sources for the exams in most states, rather than federal STOP grants.

And, the report said, there are issues with using victim compensation funds to pay for rape kits:

“Victim compensation is intended to pay for services that directly benefit victims. … The most common types of expenses compensated are medical and dental services, mental health counseling, lost wages, and funeral or burial expenses. It is clear that the medical services provided in an exam directly benefit victims and are in keeping with the mission of compensation.

“However, some have questioned—through this study and otherwise—whether funds intended to benefit victims should be used to pay for forensic evidence collection intended to build a criminal case. Is forensic evidence collection a benefit to victims, or is it a benefit to the justice system? Victims who have had negative experiences with the justice system might say that it is no benefit to victims at all. No other evidence collection activities (such as autopsies, crime scene processing, and ballistics analysis) are paid for with funds meant for services to victims.”

New York’s Office of Victim Services covers the cost of emergency care for survivors of sexual assault. The attorney general’s office said it did not have details on how the victim services office funded its programs.

Ariel Zwang, CEO of victim assistance organization Safe Horizon, welcomed Schneiderman’s announcement.

“Rape survivors deserve expert and immediate medical care after an assault, including access to a rape kit,” she said in a statement Tuesday. “For so long, survivors and victim advocates fought to change the law so that survivors would not incur the cost of these important exams. We applaud the Attorney General’s office for ensuring enforcement of this law, holding hospitals accountable who have unnecessarily charged for this exam, and standing up for survivors.”

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