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The World Health Organization (WHO) defines a rare disease as a devastating and lifelong condition that affects fewer than 1 in every 1000 people. Nevertheless, different nations have their definitions for these diseases, accommodating their population, healthcare structure, and resources. There is no precise definition of a rare genetic disorder, however, worldwide health organizations concur that such diseases are identified by three elements: the total number of people affected, the rate of occurrence, and the lack of a cure. In India, there are over 8,000 people with rare genetic maladies, including ZMA, Hunter syndrome, Gaucher disease, and Fabry’s disease.

Tax exemptions play an important role in making life-saving drugs available and affordable for people who suffer from rare diseases else, it would be difficult for patients to access the drugs they need to survive, and the cost of these drugs could be prohibitive. Understanding how tax exemptions work is critical to ensuring that those who need these treatments can access them. This article will explain the different types of tax exemptions available for drugs used to treat rare diseases, the criteria for qualifying for the exemptions, and the benefits of taking advantage of them. We will also discuss the potential drawbacks of tax exemptions, such as the decrease in revenue that can occur for governments and businesses. Finally, we will explore the potential for expanding tax exemptions to make treatments for rare diseases more accessible and affordable.


Tax exemptions are government-issued reductions in taxes for certain products or services, such as sales tax, tariffs, import duties, or property taxes. These exemptions are meant to encourage certain types of business activities by decreasing the government’s revenue. Tax exemptions can be granted to specific businesses or products that are deemed essential by the government. They differ from tax deductions. Tax deductions are reductions which are granted under certain conditions or as rewards for specific actions, such as medical deductions for people with certain diseases or disabilities.


There are three main types of tax exemptions that can be used to make drugs more affordable for people who suffer from rare diseases: – Relief from Value Added Tax (VAT): The VAT is a type of sales tax commonly used in Europe and other parts of the world. It is often used to make drugs more affordable for people who cannot afford to pay full price for them. This type of tax exemption can be granted to both businesses and individuals. – Exemption from import duties: Import duties are taxes applied to imported goods and materials. These taxes can substantially increase the cost of drugs, especially if a country doesn’t have a VAT to offset the cost of the drugs. Most countries grant import duties on a case-by-case basis, usually when a particular drug is not available in the country, to begin with. – Exemption from patents: Patents are government-issued protections that prevent other companies from copying or producing a given product. Pharmaceutical companies use patents to protect new drugs and keep their prices high so that they can make a profit from the research and development involved in creating each drug. In rare cases, governments will exempt drug companies from their patents so that drugs can be made more affordable for people with rare diseases.


Tax exemptions should be used in rare cases when no other options are available. Exemptions can be granted to drugs that are patented or imported and that would normally be unaffordable for people suffering from rare diseases. Exemptions can also be granted to drugs that are not usually available in a certain country or regions within a country because of a lack of infrastructure or distribution systems in the area. Creating a set of criteria that all people must meet before receiving a tax exemption can help to prevent abuse of the program and ensure that only people who truly need the drugs have access to them. The exact criteria for qualifying for tax exemption vary depending on the country and the type of exemption being used. At a minimum, people who use tax exemptions should have a valid prescription for the drugs they need to treat their rare diseases. In some cases, patients may also be required to provide medical records or other proof of their condition. These rules help to prevent people from falsely claiming that they need the drugs and receiving a tax exemption as an undeserved benefit.


Tax exemptions can bring several benefits to governments, businesses, and patients. First, they can make new drugs or treatments that would otherwise be out of reach financially available and affordable to people who need them. Second, they can encourage businesses to invest in the research and development of new drugs and treatments. Many businesses prefer to focus on drugs and treatments that will bring them the biggest profits, but they are less likely to take on the enormous risk of researching and developing new drugs for rare diseases. Tax exemptions can make the drugs they make more profitable by increasing the number of people who can afford them. Tax exemptions also bring benefits to patients by helping them to pay for their medications. When patients cannot afford their treatments, they may have to either go without them or spend so much money on the drugs that they risk going into debt. This can be especially dangerous for people with rare diseases, who may have to take multiple drugs or have regular treatments to keep their conditions under control.


As with any government-run program, there are potential drawbacks to tax exemptions for rare diseases. First, the revenues that the government is bringing in from other businesses and industries may decrease as a result of businesses receiving tax exemptions for their products. This can put pressure on other businesses to find ways to make up for the loss of revenue that they would normally collect from taxation. Second, fraudulent claims that people do not qualify for tax exemption may make the program less effective overall. In other words, attempting to take advantage of tax exemptions that were not earned may lead the government to stop issuing them to everyone. Third, some patients may receive the drugs they need but at the expense of other patients who may not qualify for the same tax exemptions. This can lead to a system in which people who need the drugs the most do not receive them because they are either unable or unwilling to pay the higher prices that come with tax exemptions.


India Department of Revenue, Ministry of Finance gives full waiver of Basic Customs Duty (BCD) and Integrated Goods and Services Tax (IGST) to drugs imported (personal use only) for treatment of Spinal Muscular Atrophy (SMA) rare disease, thereby making the medicines for SMA rare disease more affordable.

– Germany – Germany exempts all drugs that are considered necessary from the country’s VAT. This applies to many of the treatments used to treat rare diseases.

– United Kingdom – The United Kingdom has granted several different tax exemptions to drugs used to treat rare diseases.

– United States – The United States has a program called the Federal Government Drug Discount Program, which provides tax exemptions for people who qualify for certain types of drugs.


Tax exemptions play an important role in making life-saving drugs available and affordable for people who suffer from rare diseases. Without tax exemptions, it would be difficult for patients to access the drugs they need to survive, and the cost of these drugs could be prohibitive. Understanding how tax exemptions work is critical to ensuring that those who need these treatments can access them.

Author(s) Name: Sandesh S Bhasri (Karnataka State Law University)