The exponential growth of 3D printing technology and its application across various industries has been tremendous. In the medical field specifically, 3D printing has contributed to both clinical and innovative advancements. Additive manufacturing technologies have been applied to medical equipment, prosthetics, dental products, bioprinting, and pharmaceuticals. However, before these technological advancements can be utilized for clinical applications, the FDA must first approve them. On December 4, 2017, the FDA issued a guidance to help speed up the approval process for companies making advancements such as these. Additionally, these companies may be entitled to research and development tax credits to offset the cost associated with testing, process improvement, and production.
The Research & Development Tax Credit
Enacted in 1981, the now permanent Federal Research and Development (R&D) Tax Credit allows a credit that typically ranges from 4%-7% of eligible spending for new and improved products and processes. Qualified research must meet the following four criteria:
- Must be technological in nature
- Must be a component of the taxpayer’s business
- Must represent R&D in the experimental sense and generally includes all such costs related to the development or improvement of a product or process
- Must eliminate uncertainty through a process of experimentation that considers one or more alternatives
Eligible costs include U.S. employee wages, cost of supplies consumed in the R&D process, cost of pre-production testing, US contract research expenses, and certain costs associated with developing a patent.
On December 18, 2015, President Obama signed the PATH Act, making the R&D Tax Credit permanent. Beginning in 2016, the R&D credit can be used to offset Alternative Minimum tax for companies with revenue below $50MM and for the first time, pre-profitable and pre-revenue startup businesses can utilize the credit against $250,000 per year in payroll taxes.
The FDA has referred to the Technical Considerations for Additive Manufactured Medical Devices as “leapfrog guidance” because it sets up the parameters that manufacturers and innovators should have prepared when submitting their innovations for FDA approval. By doing so, submissions for 3D printed products can be expedited in the FDA approval process. 3D printing of medical devices and tools has become one of the largest areas of 3D manufacturing along with having the greatest positive impact on the world. Many of the products that have already been submitted or that are going through the approval process are life-changing, primarily for the fact that 3D printing allows for customization. When a tool or device can be easily, quickly, and cost-effectively customized to a patient’s needs or body, a large portion of the time that is spent in either a clinical or surgical setting is reduced, which improves the outcome of medical treatments as well as quality of life.
Scott Gottlieb, a physician and commissioner of the FDA, has stated that in addition to the transparent process, regulations for future submissions will allow manufacturers to bring their innovations to market more efficiently. With so many transformative medical technologies in the midst of a breakthrough on the market, manufacturers needed this guidance to help them progress through the time consuming process of FDA approval faster and more easily. The guidance includes device design, software workflow, material controls, post-processing, process validation and acceptance, quality data, and device testing considerations. All expenses related to a new product or process, including testing, are R&D tax credit eligible.
The new guidance outlined for the consideration of new 3D printed medical devices sets up parameters and regulations for manufacturers who want to get their 3D printed products FDA approved. The faster these approvals happen, the more the medical field can advance. The guidance requires a complete product, process, and testing framework that is ideal for optimizing R&D tax credits.
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Charles Goulding and Rafaella July of R&D Tax Savers discuss the FDA’s issued guidance on 3D printed medical devices.
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