R&D Tax Credits: A Tool to Advance Global Health Technologies?

Governments around the world have used fiscal tools both to support broad R&D to foster economic competitiveness and as a public policy instrument to support high-priority research areas such as agriculture, alternative energy, and medicine. Within the health sector, there is some experience with using credits to make certain kinds of pharmaceutical R&D more profitable for companies, like drugs for orphan diseases and vaccines. There is much existing literature that examines the impact of tax credits in spurring broad R&D for products with recognized markets, but there is little information available about whether a tax credit is a useful measure to encourage more R&D for the set of neglected diseases, which includes a mix of diseases with small to no markets.

This report uses the tax credit proposal HR 3156 in order to assess the value of a neglected disease R&D tax credit more broadly. After describing the design and estimated costs of the credit, its strengths and weaknesses are examined, drawing lessons from ongoing R&D tax credits. Based on this analysis, the report goes on to discuss whether a tax credit could result in more neglected-disease R&D expenditure from existing or new players and whether such expanded spending could enhance the chances of developing a product with significant public health impact in low-income countries.

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