Bill would give CROS bigger R&D tax credit

A new bill, the Domestic Research Enhancement Act of 2017, has been introduced with bipartisan support from Reps. Pat Meehan (R-PA), George Holding (R-NC) and G.K. Butterfield (D-NC).If enacted into law, it will let contract research organizations (CROs) take a larger research and development tax credit than they now can. This, in turn, would increase the number of domestic clinical trials held in this country.Companies now getting tax credits would be able to keep them.

Contract research now provides many of our new drugs and therapeutic devices. Companies engaged in research who do their R&D internally can already claim 100 percent of allowed expenses, but if a company contracts out the research, it can only claim 65 percent of the expenses. The rest is lost. Around the world, other companies can often claim up to 100 percent of allowed expenses.

The new bill “…makes contract research providers eligible to receive an R&D credit andallows them to claim the 35 percent of eligible expenses currently abandoned when research is contracted out. About 45 percent of clinical trials currently take place in the U.S. We believe this legislation will ensure that the U.S.remains the preeminent location for clinical trials, and innovation remains within U.S. borders,” according to John J. Lewis, senior vice president of the Association of Clinical Research Organizations (ACRO).

“Currently, the CROs have a perverse incentive to contract clinical trials outside the U.S. When the companies owned the lab, the research going on there qualified for the R&D credit. But the next day, when the owner is a CRO, now conducting research on behalf of many sponsors, the CRO gets none of the R&D credit. Same work, same facility, same employees,” Lewis concluded.

ACRO Chairman John Hubbard, Ph.D., added, “The life sciences industryis a very important economic driver in both Pennsylvania and North Carolina, and contract clinical research organizations are a major contributor…employing more than 20,000 research staff in these two states.” Hubbard is also the president of Bioclinica in Doylestown, Pennsylvania.

Also welcoming the legislation is ACRO board member Cynthia Verst, president of clinical operations atQuintiles/MS. “In many ways, North Carolina is the birthplace. of the CRO industry,” she said.

ACRO is a trade group that advocates for companies doing medical research and developing drugs and therapeutic devices. Its constituent companies have more than 130,000 researchers among them. The organizationis attempting to propose similar legislation in the Senate in the hope that Congress wants to modernize the R&D tax credit.

According to Lewis, when the R&D tax credit was introduced in the 1980s, the CRO industry barely existed. Because the industry has proliferated, proponents of the bill would like to see CROs get their fair share, he said.

Here is a podcast interview we did with an FDA and CRO focused attorney on the matter.