Orphan Drug Credit

AAA

DEFINITION of 'Orphan Drug Credit'

A federal tax credit that provides an incentive for pharmaceutical companies to seek treatments and cures for rare diseases affecting Americans. Normally, companies may not be motivated to make a drug for a small population because sales may be insufficient to justify the research and development costs of creating the drug. The Orphan Drug Credit provides a credit of 50% of clinical drug testing costs for drugs being tested under section 505(i) of the Federal Food, Drug and Cosmetic Act.

INVESTOPEDIA EXPLAINS 'Orphan Drug Credit'

The credit can be applied whether the clinical tests are performed directly by the pharmaceutical company or are contracted out to a third party. In general, the testing must be conducted within the United States. Orphan drug credits allow pharmaceutical companies to create orphan drugs that target rare conditions.

RELATED TERMS
  1. Research Activities Credit

    A nonrefundable federal tax credit implemented in 1981 as an ...
  2. Unified Tax Credit

    A tax credit that is afforded to every man, woman and child in ...
  3. Work Opportunity Tax Credit

    A separate, nonrefundable credit that is part of the general ...
  4. Tax Deduction

    A deduction from gross income that arises due to various types ...
  5. Section 1341 Credit

    A tax credit available for taxpayers who are repaid in a later ...
  6. Tax Credit

    An amount of money that a taxpayer is able to subtract from the ...
RELATED FAQS
  1. What is the difference between MAGI (modified adjusted gross income) and adjusted ...

    Calculating personal income tax correctly involves understanding two important tax terms: adjusted gross income (AGI) and ... Read Full Answer >>
  2. What is the difference between a regressive tax versus a progressive tax?

    A progressive tax is one that increases along with an individual's ability to pay the tax, while a regressive tax doesn't ... Read Full Answer >>
  3. What are some ways to minimize tax liability?

    Minimizing tax liability is one of the most important financial planning aspects for business owners and individuals each ... Read Full Answer >>
  4. What deductions, credits and exemptions depend on gross income calculations?

    The greatest challenge in determining your total tax liability stems from an incomplete understanding of what income figure ... Read Full Answer >>
  5. What is the difference between gross income and earned income?

    Prior to preparing and filing a tax return, do yourself a favor by gaining an understanding of commonly used tax terms including ... Read Full Answer >>
  6. Are Roth IRAs tax deductible?

    Contributions made to a Roth IRA are not tax deductible, although you may be able to take a tax credit, depending on your ... Read Full Answer >>
Related Articles
  1. Investing

    Using DCF In Biotech Valuation

    Valuing firms in this sector can seem like a black art, but there is a systematic way to pin a price on potential.
  2. Fundamental Analysis

    Evaluating Pharmaceutical Companies

    Learn how to find a healthy pharmaceutical investment in a market full of weak drugs.
  3. Markets

    A Primer On The Biotech Sector

    Investing in the biotech sector can involve both huge losses and major gains.
  4. Fundamental Analysis

    Pharma Patent Trolls: Cheap Drugs At A Steep Price

    Though patent trolls can help patients achieve cheaper medication in the short-term, everyone pays for it in the long term.
  5. Insurance

    Pharmaceutical Phenoms: America's Best-Selling Medicines

    These three drugs were the winners of their day. Find out what winning pharmaceuticals have in common.
  6. Mutual Funds & ETFs

    Investing In The Healthcare Sector

    Perform a thorough checkup to uncover a medical stock with a clean bill of health.
  7. Taxes

    What is Adjusted Gross Income?

    Adjusted gross income (AGI) is a term from the Internal Revenue Code. AGI is used to determine a person’s income taxes due.
  8. Taxes

    The First Thing You Should Do With Your Tax Refund

    Nobody likes to pay taxes, but everyone loves to get a tax refund. When the check arrives in the mail, it's hard to resist spending it on some indulgence.
  9. Taxes

    Which Is Better? Tax Preparer Or Tax Software

    Every taxpayer – and every year – is different, so here are four factors to help you decide whether a tax pro or software is best for you.
  10. Taxes

    Before You Visit Your Tax Preparer: Do This

    The earlier you start preparing your tax records and documents, the more likely you are to have a smooth tax return experience – and all the tax benefits you're due.

You May Also Like

Hot Definitions
  1. Mixed Economic System

    An economic system that features characteristics of both capitalism and socialism.
  2. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  3. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  4. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  5. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center