Pharma and Life Sciences Tax News: Vol. 10, No.7:

In addition to the continued weak economic environment, the pharmaceutical industry faces an emerging "innovation deficit" that has prompted many major companies to reassess current strategies and core competencies — a process which could involve exiting from some parts of research and development. Helping to alleviate these concerns, the R&D tax credit under Section 41 of the Internal Revenue Code remains a critical incentive for US pharmaceutical companies to invest significantly in activities in the pursuit of new life-saving and life-enhancing medicines.

A recent report by the staff of the Congressional Joint Committee on Taxation recognizes recent favorable court decisions in the research credit area, as well as the opportunity to resolve policy issues associated with the credit by crafting legislation to make it permanent. This analysis represents a key step toward eliminating uncertainty with respect to research spending in the pharmaceutical and other industries.