Industry Backs R&D Tax Credit

The Pharmaceutical Research and Manufacturers of America has endorsedbipartisan legislation introduced by Senators Orrin Hatch and Max Baucus, as well as Representatives Nancy Johnson and Robert Matsui, which would extend permanently the Research & Development Tax Credit. This legislation is being strongly supported by a coalition of associations representing high-technology, research-intensive industries.

The bill would encourage companies to increase US-based R&D by offering a tax credit for R&D spending over a calculated base amount. The credit was first signed into law in 1981, and has been extended seven times, usually for one-year periods. In the decade following the enactment of the R&D tax credit, the ratio of R&D spending to output rose more than 40%, according to a 1992 study quoted by the PhRMA.

The permanent extension of the credit will make the USA more competitive, according to PhRMA president Alan Holmer, and will also speed up cures for diseases such as cancer, AIDS and Alzheimer's. the pharmaceutical industry pours back 21% of revenues into research to develop new medicines, he said, resulting last year alone in 53 new drugs. Uncertainty over the credit creates an uncertain climate for long-range innovation, he said, but by making this credit permanent, Congress will give companies the confidence needed to commit to research.