Orphan Drug Credit

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.


Filed Under:

comments powered by Disqus
Hot Definitions
  1. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will respond similarly to a marketing action. Market segmentation enables companies to target different categories of consumers who perceive the full value of certain products and services differently from one another.
  2. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following:
  3. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option is purchased and the lower premium option is sold - both at the same time. The higher the debit spread, the greater the initial cash outflow the investor will incur on the transaction.
  4. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious debt when government leaders use borrowed funds in ways that don't benefit or even oppress citizens. Some legal scholars argue that successor governments should not be held accountable for odious debt incurred by earlier regimes, but there is no consensus on how odious debt should actually be treated.
  5. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the acquiring company will make an offer for the outstanding shares.
  6. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by additional investment would not warrant the expense. A harvest strategy is employed when a line of business is considered to be a cash cow, meaning that the brand is mature and is unlikely to grow if more investment is added.
Trading Center