The U.S. Pharmaceutical Industry’s Race to End COVID-19

The U.S. Pharmaceutical Industry’s Race to End COVID-19

Posted by William Mehi on 07.13.20

As COVID-19 spreads worldwide, people need vaccines and new drugs to treat this pandemic and it’s complications as soon as possible. Pharmaceutical companies have found themselves center stage, now supplying (and rapidly scaling up) vitally important medical products to support patients in their time of need. Breakthroughs like these don’t occur overnight due to the difficult and labor intensive work involved and it takes time. The entire Pharmaceutical industry is racing to compress into months the search for a drug or vaccine and subsequent clinical testing that typically takes decades.

There are many challenges when it comes to narrowing down what’s working and what’s not, and where to focus R&D efforts, especially when racing against the clock to prevent further loss of life. The pharmaceutical industry is working to provide the medicines to turn back the Coronavirus pandemic. The companies that are undertaking research and development of new drugs, procedures, equipment, and software are not only helping to diminish an immediate problem, but they are applying never before seen processes and technologies to do so. Any company producing new antibiotics or infection fighting equipment, utilized to combat COVID-19 are certainly at the forefront of all medical research being conducted in the U.S. currently. These lifesaving efforts can be supported by the R&D tax credits.

R&D Tax Credit

Research and development (R&D) tax credits target companies that are developing new or improved products or processes. First enacted into law in 1981 as a way to keep companies in the United States competitive in the global market, the R&D tax credit is one of the most lucrative tax credits available to taxpaying employers and shareholders. 

To remain competitive in the global medicine market, it has become imperative that pharmaceutical businesses claim the R&D tax credits they have earned. Many factors have to be taken into effect for what is considered qualified activities.

Some activities that can qualify:

  • Drug research
  • Clinical Trials
  • Quality assurance
  • Supply expenses linked directly to qualified activities
  • IT software programs to maintain and organize results
  • Employee wages for in house research expenses
  • Third party contract research expenses
  • Pre-clinical and discovery research to develop new compounds
  • Improving automation process
  • Prototypes
  • Improving packaging methods
  • Further development to improve shelf life
  • Drug delivery systems
  • Devices used for testing purposes

The above examples are just a few of the activities that should not be disregarded without first considering the tax credit potential. With continued regulations and changes in the industry, innovation is always happening and continues to help grow the US economy.  It is important to be able to analyze and document all expenditures within these activities to confirm the qualifications. The activities and associated expenditures of a company can qualify for the R&D tax credit if the activities meet the four-part test established by the IRS. 

The Four-Part Test

Qualified research must meet the following four criteria:

  • New or improved business component
  • Technological in nature
  • Elimination of uncertainty
  • Process of experimentation

Watch this video: How to Qualify for R&D Tax Credits: The Four-Part Test


Find Out if Your Activities Qualify

It is understandable that you may not be certain about whether a particular activity qualifies your pharmaceutical company. You may also need the help of a professional to document all of your R&D activities.  Your accountant or qualified R&D tax credit expert can help you determine whether your business meets the criteria of the test by conducting a tax credit study. To learn more about whether your industry and company activities meet the R&D four-part test, request our free assessment today.

Tax Point Advisors currently partners with some of the most forward-thinking companies in the United States, and we’re eagerly looking to help additional companies take full advantage of the available credits in the most effective way. 

Tax Point Advisors provides R&D tax credit study services and other specialty tax services to CPA firms and their clients throughout the U.S. To learn more about R&D tax credits from the experts at Tax Point Advisors, please call us at (800) 260-4138 or please leave us a message below.

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