April 2010
    

A Polsinelli Shughart Life Sciences e-Alert:

Health Care Act of 2010 Includes $1 Billion in Tax Credits and Grants Available to Small Life Sciences Companies

The Health Care Act of 2010 primarily contains provisions to U.S. health care providers and insurers. However, hidden in the thousand pages are a number of provisions that are directly relevant to the life science industry, including entities that develop and bring to market pharmaceuticals and medical devices. These include:

• Adoption of a new pathway for FDA approval of biosimilar drugs in the Biologics Price Competition and Innovation Act

• Economic provisions affecting the Life Science industry
     
  • Expansion of 340B Medicare Coverage
  • Increase in Medicaid Rebate
  • Industry Fee to Fund Health Care Reform
  • Filling the Donut Hole in the Part D Drug Benefit
  • A New Medical Device Tax

• Establishment of New Entities Applicable to the Life Science Industry
      
  • Comparative Effectiveness Research Institute
  • Independent Payment Advisory Board
  • Cures Acceleration Network.

One very interesting provision of the Health Care Act of 2010 that has received very little (if any) press coverage is the new Qualifying Therapeutic Discovery Project Credit program. It allows taxpaying companies with 250 employees or less who incurred in 2009 or will incur in 2010 expenses for items such as salaries and wages or equipment and consumables (not rent, mortgage payments, interest, maintenance costs or the like) for a Qualifying Therapeutic Discovery Project to apply for a U.S. income tax credit OR a cash grant (for entities that are in a loss position) equal to 50% of the qualifying expenditure.

Qualifying Therapeutic Discovery Projects include those that:

• Treat or prevent diseases or conditions by conducting clinical trials, studies, or carrying out research protocols for the approval of a new product;
• Diagnose disease or conditions or to determine molecular factors by developing molecular diagnostics to guide therapeutic decisions; or
• Develop a product, process or technology to further the delivery or administration of therapeutics.

The Secretary of the Department of Health and Human Services will determine how to allocate the funds among competing applications that have the greatest potential to create and sustain high quality, high paying jobs in the U.S. and to enhance U.S. competitiveness in the life, biological and medical sciences, upon a finding that they have reasonable potential to result in new therapies for:

• Unmet medical needs;
• Prevention, detection or treatment of chronic or acute diseases;
• Reduction of long-term health care costs in US; or
• That significantly advance the goal of curing cancer in next 30 years.

The new Act leaves many questions about this new program unanswered and regulations must be promulgated in the next 60 days. Will the funds be distributed on a first-come, first-served basis, or will they be allocated among substantive areas, or equally between 2009 and 2010? How will some of the key factors to determine priority be defined? What information will the Secretary require and what forms will be approved for the application?

As answers to these questions develop, we will monitor the HHS pronouncements and draft regulations on these and other issues that will impact our clients’ ability to obtain their fair share of the $1 billion that is available under this one-time program. Despite these uncertainties, one thing is clear. The companies that have analyzed the potential applicability of this program to their research and development expenditures in 2009 (as well as their planning for the remainder of 2010), compiled the relevant data, and are prepared to move quickly as soon as the program begins to accept applications will likely be in a much better position to maximize the funding that they may receive under this program.

For More Information

Please contact Kevin Sweeney, Chair of the Polsinelli Shughart Life Sciences group, at KRSweeney@polsinelli.com or 816.572.4638 if you want further information or want us to monitor the program on your behalf and advise you on how to apply.

About Polsinelli Shughart PC

With more than 490 attorneys, Polsinelli Shughart PC is a national law firm that is a recognized leader in the areas of business litigation, financial services, bankruptcy, real estate, business law, labor and employment, construction, life sciences and health care. Serving corporate, institutional and individual clients regionally, nationally and worldwide, Polsinelli Shughart is known for successfully applying forward-thinking strategies for both straightforward and complex legal matters. The firm can be found online at www.polsinelli.com.