Policy and Legal

An idea becomes a prototype, then a treatment, then a lifesaver. That’s how R&D is supposed to work, but as Tolmar, Inc., can tell you, tax policy is a crucial element as well.

Tolmar spent years developing a therapy to improve the treatment of advanced prostate cancer. The resulting long-acting injectable, called ELIGARD®, works by stopping testosterone production to slow the growth of cancer cells. It’s a remarkable technology, now used by patients nationwide and around the world who are fighting advanced prostate cancer.

This innovation was facilitated by a U.S. tax policy that supported R&D investments by pharmaceutical companies. However, a recent change means that Tolmar and other pharmaceutical R&D units will find it more difficult to produce innovations that make human lives better, safer, healthier and longer.

The problem: Until about a year ago, businesses were able to deduct 100% of their R&D expenses in the year in which they incurred the expenses. Starting in 2022, however, a change in tax policy requires businesses to spread their R&D deductions out over a period of five years, making it more expensive to invest in innovation.

The cost for companies: “We have a finite amount of capital to put into the development of new products. The changes in tax policy will lead to difficult decisions,” said, Tolmar Chief Financial Officer Jeff Lederman.

• “We typically put the vast majority of our cash back into the company—whether that means investing in R&D, capital purchases or our workforce—and if we have less funding, we have to cut back in some or all of those areas. So, this policy change could have a significant impact on our organization.”

The cost to patients: This tax change could also have a negative impact on patients in the United States and around the world by delaying the development and availability of innovative new therapeutic products.

• Tolmar is one of a small number of U.S. manufacturers of long-acting injectable prostate cancer treatments, and the company has a number of other innovative medicines and therapeutics in its pipeline.

• “This is not so much about saving dollars; it’s about patient impact,” said Tolmar President and Chief Operating Officer Shawn Silvestri. “The results we’re chasing are meaningful to patients’ lives. If you’re looking for something that’s purpose-driven, that’s the kind of work we do—and that makes the choices for me that much more difficult.”

A competitive disadvantage: While the impact on patients is the most worrisome effect, the R&D tax change also has negative implications for American economic competitiveness.

• Making research more expensive puts companies that operate in the U.S., as Tolmar does, at a distinct disadvantage, especially when other countries are aggressively supporting domestic research.

Our move: At the NAM, we’re pushing Congress to reverse this change and allow manufacturers to keep investing in innovation, jobs and workers. Learn more and take action at www.nam.org/protect-innovation.