[Pharm-policy] PhRMA press release on TACD statement on R&D

[James Love]

For reasons best known to PhRMA, they put out a January 26, 2000 press
release attacking the draft TACD statement on transparency on R&D
expenditures. 

The PhRMA press release seems to be based upon some misunderstanding of
the IRS data.  I don't think they understand that the IRS has the actual
claims reqarding qualified R&D expenditures, off the returns, and it was
not necessary to make any assumptions regarding the so called "base
rate" of expenditures.  I was going to do this, but didn't have to when
we found out the level of data collection by the IRS was more complete
and detailed than we had thought.  

Indeed, PhRMA has a whole paragraph on this on page two of the press
release (which isn't on the PhRMA web page yet).

Also, PhRMA makes another mistake and assumes that we derive the numbers
for qualifying expenditures from the amount of the credit, which is
wrong.  The IRS has the actual amount of qualifying expenditure directly
from the company tax returns.

PhRMA mentions Public Citizen in a way that makes it sound as if this
was their work product.   Public Citizen did not prepare the draft, CPT
did, and it will not be released as a product unless it is approved by
the TACD, probably in its Feb 10-12 meeting, after further review and
comment by the TACD, an organization representing more than 65 consumer
groups in the US and Europe.  

CPT had actually contacted PhRMA a few days ago and asked Susan Finston
if PhRMA could review the data, and explain the disparity between the
IRS numbers and the PhRMA survey.  I told Susan we would like to include
the PhRMA response in anything CPT published on the R&D question.  CPT
is working on an R&D report that is more extensive than the TACD
statement (the TACD statement largely goes to the issue of the need for
greater transparency).  

I'll ask Susan Finston for an electronic copy of the PhRMA press release
so you can see what they say.

PhRMA does point out that the IRS defines R&D more narrowly than does
PhRMA, a point not really in dispute, but it appears to make some
further mistakes in describing IRS rules for qualifying expenditures,
and adds some confusing items too.  For example PhRMA says that the IRS
data doesn't include foreign R&D, which is true, but the IRS data were
compared to PhRMA's report of US R&D, so it was an apples and apples
comparison, at least on this issue.  

Interestingly, PhRMA doesn't even mention the Orphan Drug Tax credit
data, which is pretty hard to explain, I would think.

Reading the release, it is fair to say that PhRMA is sensitive about the
R&D question, and they rushed a press release out the door that will
simply confuse matters even more, given a number of errors and
mistatements.   And, the PhRMA release is even more evidence of the
widespread confusion over these R&D numbers.

  Jamie


-- 
-- 
James Love, Consumer Project on Technology
P.O. Box 19367        | http://www.cptech.org
Washington, DC 20036  | mailto:love@cptech.org
Voice 1.202.387.8030  | fax 1.202.387.8030