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Tuesday, January 14, 2020

Tax breaks for college tuition, medical expenses just came back from the dead

On December 20, President Donald Trump signed into law the Taxpayer Certainty and Disaster Tax Relief Act of 2019 (the Act). The new legislation retroactively resurrects and/or extends a bunch of individual and business federal income tax breaks, which we will call the extenders. The extensions generally go through 2020. This column covers what you need to know about the extenders that are most likely to help individual taxpayers.
As its name indicates, the Act also includes a bevy of federal tax relief provisions for disaster victims. See below for more information on that.
More-favorable itemized medical expense deduction threshold extended through 2020
The Tax Cuts and Jobs Act (TCJA) set the threshold for itemized medical expense deductions at 7.5% of adjusted gross income (AGI) for 2017 and 2018. The threshold was scheduled to increase to a daunting 10% of AGI for 2019 and beyond. The Act extends the more-taxpayer-friendly 7.5%-of-AGI threshold through 2020.
College tuition write-off resurrected for 2018 and extended through 2020
This deduction can be up to $4,000 annually at lower income levels or up to $2,000 at middle income levels. It expired at the end of 2017. The Act retroactively resurrects the deduction to cover qualified college expenses incurred in 2018 and extends the write-off to cover costs incurred in 2019 and 2020. If you qualify for the deduction based on your income, you can claim it whether you itemize or not.
* Taxpayers with modified adjusted gross income (MAGI) up to $65,000, or up to $130,000 if you’re a married joint-filer, can deduct qualified expenses up to $4,000.
* Taxpayers with MAGI between $65,001 and $80,000, or between $130,001 and $160,000 if you’re a married joint-filer, can deduct up to $2,000.
* The allowable deduction goes to zero if your MAGI is more than $80,000, or $160,000 if you’re a married joint-filer.
Break for forgiven principal residence mortgage debt resurrected for 2018 and extended through 2020
For federal income tax purposes, a forgiven debt generally counts as taxable cancellation of debt (COD) income. However, a temporary exception applied to COD income from cancelled mortgage debt that was used to acquire a principal residence. Under the temporary rule, up to $2 million of COD income from principal residence acquisition debt that was cancelled in 2007-2017 was treated as a tax-free item ($1 million for married individuals who file separately). The Act retroactively resurrects this break to cover eligible debt cancellations that occurred in 2018 and extends the break to cover eligible debt cancellations that occur in 2019 and 2020.
Key Point: The Act allows the exclusion for eligible debt cancellations that occur after 2020 under a binding written agreement that was entered into before 1/1/21.
Mortgage insurance premium write-off resurrected for 2018 and extended through 2020
Premiums for qualified mortgage insurance on debt to acquire, construct, or improve a first or second residence can potentially be treated as deductible qualified residence interest. Before the Act, the deduction was only available for premiums paid through 2017. The Act retroactively resurrects this break to cover eligible premiums paid in 2018 and extends it to cover premiums paid in 2019 and 2020. However, the deduction is only available for premiums for qualifying policies issued after 12/31/06 and premium amounts allocable to periods before 2021. Note that the deduction is phased out for higher-income individuals.
$500 credit for energy-efficient home improvements resurrected for 2018 and extended through 2020
Through 2017, you could claim a federal income tax credit of up to $500 for the installation of certain energy-saving improvements to a principal residence. This break expired at the end of 2017, but the Act retroactively resurrects it for 2018 and extends it for 2019 and 2010.
Key Point: The $500 maximum allowance must be reduced by any credits claimed in earlier years. In other words, the $500 amount is a lifetime limitation. So, if you claimed the credit before 2018, you may be ineligible for any further credit.
Credit for fuel cell vehicles resurrected for 2018 and extended through 2020
You can claim a federal income tax credit for vehicles propelled by chemically combining oxygen with hydrogen to create electricity. The base credit is $4,000 for vehicles weighing 8,500 pounds or less. Heavier vehicles can qualify for credits of up to $40,000. An additional $1,000 to $4,000 credit is available to cars and light trucks to the extent their fuel economy meets federal standards. This credit expired at the end of 2017, but the Act retroactively resurrects it to cover qualified vehicles purchased in 2018 and extends the break to cover qualified vehicles purchased in 2019 and 2020.
Credit for plug-in electric motorcycles resurrected for 2018 and extended through 2020
The 10% federal income tax credit for the purchase of qualifying electric-powered 2-wheeled vehicles manufactured primarily for use on public thoroughfares and capable of at least 45 miles per hour (i.e., electric-powered motorcycles) can be worth up to $2,500. The credit expired at the end of 2017, but the Act retroactively resurrects it for 2018 and extends it for 2019 and 2020. Don’t forget to wear your helmet.
Credit for alternative fuel vehicle refueling equipment resurrected for 2018 and extended through 2020
The Act retroactively resurrects the personal and business federal income tax credit for up to 30% of the cost of installing non-hydrogen alternative fuel vehicle refueling equipment placed in service in 2018 and extends the credit for 2019 and 2020. You can claim the credit for a personal recharging station in your garage — that means you, Tesla TSLA, +9.77%   owners.
Credit for health insurance costs extended through 2020 for the few who qualify
The health coverage tax credit (HCTC) equals 72.5% of the premiums paid by certain very-narrowly-defined individuals for qualified health insurance coverage. The HCTC was scheduled to expire at the end of 2019, but the Act extends it through 2020 for those few folks who qualify. You know who you are.
You may want to file an amended 2018 return
Unless you’ve not yet filed your 2018 return, you’ll need to file an amended return for that year to take advantage of the breaks that were retroactively resurrected for 2018. Ask your tax adviser if it’s worth the trouble.
The bottom line
The extenders legislation is important good news for the individuals who can benefit from it. If you are in that category, you may also want to file an amended 2018 return to take advantage of breaks that were retroactively resurrected for 2018.
One more thing: Best wishes for a happy and prosperous 2020.
More info: Disaster relief provisions
In addition to all the extenders provisions, the Act also includes a bevy of federal tax relief measures for individuals and businesses in areas affected by federally-declared disasters occurring between 1/1/18 and 30 days after the 12/20/19 date of enactment of the new law. Relief measures include the following:
* Exceptions to the 10% early withdrawal penalty for pre-age-59½ withdrawals from retirement plans and IRAs are provided for qualified disaster relief distributions, as defined.
* IRA withdrawals for home purchases that were cancelled due to eligible disasters can be recontributed to the IRAs they came from.
* Flexible rules are provided for retirement plan loans in qualified hurricane relief situations.
* An employee retention tax credit is available to employers affected by qualified disasters. The credit equals 40% of qualified wages, up to $6,000 of wages per eligible employee.
* Limitations on charitable contribution deductions are temporarily suspended for charitable donations related to qualified disaster relief efforts.
* Liberalized rules apply to deductions for qualified disaster-related personal casualty losses.
* And more. Consult your tax adviser for full details.
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Pharmacovigilance and Regulatory Trends: IQVIA’s Joe Rymsza

Pharmacovigilance (PV) is basically drug safety. It is, at its core, the collection, detection, evaluation, monitoring and prevention of adverse effects of pharmaceutical products. And it’s an increasingly important—and increasingly complex and expensive—component of biopharmaceutical drug discovery, development, manufacturing and commercialization.
Joe Rymsza, vice president of Pharmacovigilance and Regulatory Technology Solutions for IQVIA, took time out to discuss trends in PV and regulation in the biopharma industry in the coming year as well as to talk about the company’s software-as-a-service (SaaS)-based safety platform.
Rymsza notes that volumes of adverse events have been increasing by more than 20% year-over-year across the biopharmaceutical industry. “It’s the number one challenge the industry is facing and there’s no end in sight. It’s being driven by obvious and non-obvious things, like the introduction of new productions, expansion and marketing of products into new geographies, and requirements to start to mine third-party social media sources for adverse events.”
In fact, biopharma companies spend around 70% to 80% of their operational budget on meeting regulatory requirements, what Rymsza called an “inverted pyramid.”
“They probably spend about 80% of their financial resources on getting data into the system and doing rote reporting to the health authorities and various agencies,” Rymsza said, “and various obligations in countries in which they market, and less than 20% on things that give discernible value to patient safety or that feeds insight back into the drug discovery processes.”
And this is something that most biopharma executives would like to flip.
Although PV is separate from regulation, it is both overlapping and synergistic. Rymsza says that on the regulatory side, “you see the parallel regulatory burden in the companies, particularly companies that market products at scale in 150-plus geographies. They’re dealing with a massive number of country regulations. Once a product is approved, which is in and of itself an amazing and time-consuming process, you have to maintain the labels and do goofy things like paying an application fee in all the countries it’s marketed. If there’s a change, like a change in the supply chain in the ingredients, that also creates a cascading regulatory modification.”
In terms of trends for PV and to a similar extent, regulation, Rymsza believes that automation, with a fair amount of nuance, will be the biggest umbrella trend. He stratifies the market into three layers, essentially large, middle and small/emerging biotechs. Although the trends will undoubtedly affect all three types, in this context Rymsza is primarily focusing on the large biopharma companies with international markets.
“You’re going to see 90% of the top 100 to 200 pharma companies engage in automation-driven projects and pilots and proof-of-concept programs,” he said. “There is absolutely no question it’s started to occur. It began with a trickle in 2017 and now you see it across the board. The industry is just recognizing that their current aged and inflexible technology isn’t able to meet the growing needs of the business.”
This is automation in terms of PV, in particular. Companies, Rymsza said, “are looking to reimagine the end-to-end solutions that need to be on a SaaS platform that’s being built from the ground up with the tenets of automation in mind.”
Part of this need for automation comes from the growing number of resources companies need to keep up with PV activities. “Ultimately,” Rymsza said, “there are not enough people around the world to hire to process this information with the increased number of adverse events and increasing burden of regulations. It’s becoming a really important inflection point from the standpoint of how the industry has to look at their end-to-end processes and systems through the lens of automation.”
Rymsza also cautions about focusing just on the clichés of machine learning and artificial intelligence (AI). “The technology itself is less important than the basic question of how do we make the most value-added processes for the organization without compromising quality and compliance.”
In a related theme, companies are implementing a regulatory information management system to have a single source of information about their product portfolio. Rymsza says, “If you go into a top 40 company and ask for a list of products marketed in which country and which doses, it’s a mess. And it’s an unsustainable way to operate.”
To assist in dealing with this trend, IQVIA has developed Vigilance, a SaaS-based PV system that the company and Rymsza hope will help biopharma companies “flip the pyramid.”
“It’s essentially the cornerstone of our strategy to reimagine PV. We built it from the ground up on Salesforce.com. If you look at the trend, our industry is so far behind the rest of the industry in terms of running their businesses on classic SaaS structure, shackled with expensive upgrade projects, unlike the SaaS arena.”
Vigilance is about looking at the full end-to-end process from the viewpoint of adverse event identification through assessment, signal management and reporting, and, Rymsza said, “how we can intelligently use automation, natural language processing and bits of pieces of machine language and AI where appropriate, to automate every aspect of that process. And to do things with real-world data beneath it so when you get adverse events, you can conduct inline comparison automatically against massive multi-million-dollar assets to determine the probability that an adverse event may be important.”
The company also provides E2B(R3) operational PV services, biostatistics, management on top of the Vigilance, if companies want to purchase them. “We think there’s a lot of advantages to combining the technology and services, but we are also offering the technology as a standalone technology SaaS platform,” Rymsza said.
E2B(R3) doesn’t have a direct translation, but it relates to the efficient transfer of PV safety data electronically. The U.S. Food and Drug Administration (FDA), European Medicines Agency (EMA), and Japan’s Ministry of Health, Labour and Welfare (MHLW) have all adopted E2B(Re) as their standard submission formation. All companies that report safety data to these agencies using E2B will be required to adopt E2B(R3) format.
Digital transformation, Rymsza noted, is a buzzword across life science companies, but usually, that has revolved around commercial and clinical activities. “But now they are turning their attention to safety and regulations, and asking, Why aren’t we using commonly accepted processes like natural language processes and automatic ingestion of documents from regulatory affairs, move them in, prep them to learn basic ingestion into the system and begin to automate some of the analysis?”
Only three years ago there wasn’t much interest, but now everyone in the life sciences is interested and wants to find algorithms that can actually perform causality analysis on significant parts of their product portfolios.
“There isn’t an organization in the top 50 that isn’t interested, and in certain cases, have already started running pilot projects with the intention of going live in the latter part of 2020 or in 2021,” Rymsza said.
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M&A for 2019 was Big; Will 2020 Be Even Bigger?

Consulting firm EY released its annual report on mergers and acquisitions (M&A) to coincide with the JP Morgan Healthcare conference this week. For 2019, EY indicates there were $357 billion in life science deals, an “all-time record,” surpassing the previous high in 2014.
“2019 has been a ‘mega’ year driven by pharma buyers,” said EY consultant Peter Behner. “In 2020, firepower remains plentiful and we expect to see more activity in medtech and big biotech, with megamergers coming from companies with acute growth gaps.”
2019 started off in January when Bristol-Myers Squibb announced plans to acquire Celgene for about $75 billion. In June, AbbVie announced plans to acquire Allergan for $63 billion. AbbVie noted that a deal of this size was planned to deliver immediate scale to its growth platform and meet its strategic goal of decreasing reliance on Humira. The company noted at the time, “Smaller bolt-on acquisitions provide opportunities for future growth, but also require significant R&D investment amid scientific and clinical uncertainty. This transaction offers immediate compelling financial and strategic value to our shareholders with a much lower risk profile.”
Other notable deals included Roche’s acquisition of Spark Therapeutics for $4.8 billion. In 2017, the FDA approved Spark’s gene therapy, Luxturna (voretigene neparvovec), a gene therapy for a rare, genetic type of blindness. After 10 months, the deal was finally completed on December 17. Roche saw Spark’s gene therapies for hemophilia as complementary to its own hemophilia treatment, Hemlibra. In November, Roche also acquired Promedior for up to $1.4 billion.
In late November, Novartis bought The Medicines Company for $9.7 billion. Under the terms of the deal, Novartis paid $85 per share in cash, which is about a 41% premium of The Medicines Company’s 30-day volume weighted average of $60.33 on November 22 and about 24% of its closing share price of $68.55 on the same day. The boards of both companies unanimously approved the acquisition.
Roivant Sciences, Vivek Ramaswamy’s umbrella companies, sold ownership of five Vant companies to Japan’s Sumitomo Dainippon Pharma for $3 billion. Sumitomo Dainippon also was buying an equity stake of more than 10% of Roivant shares. The five Vant companies are Myovant Sciences, Urovant Sciences, Enzyvant Sciences, Altavant Sciences, and Spirovant Sciences. Spirovant is a new Vant that focuses on developing gene therapies for cystic fibrosis.
And Eli Lilly and Company announced it was buying Loxo Oncology for $235 per share in cash, which comes to about $8 billion. Under the terms of the deal, Lilly acquired all outstanding Loxo shares for $235 in cash.
EY does not think 2020 will be as big a year for M&A as 2019, calling it “highly unlikely.” The consultancy firm believes there will be plenty of dealmaking, though, noting the industry has about $1.4 trillion—yes, trillion!— in financial capacity for acquisitions. But EY believes the big biotech companies and medical devices firms that weren’t particularly active in 2019 will step up to the front and start spending this year.
Bolt-on acquisitions will be common, but the EY report suggests about a third of the industry leaders could go after megamergers, which are more than $40 billion each. Some of the companies that have the capacity, however, seem uninterested. That includes Roche, Novartis and Merck & Co.
Big pharma that might be looking at big deals includes Johnson & Johnson, Novo Nordisk, Pfizer, AstraZeneca and Eli Lilly. Other big companies that closed big deals in the last few years are unlikely to go big again so soon, including Takeda, AbbVie and Bayer.
Last year, the report notes, big pharma companies tended to focus more on share buybacks and paying out dividends rather than buying up acquisitions. The report found that leading biotech companies spent 39% of their capital on research and development, 39% on stock buybacks, 13% on dividends and only 9% on M&A.
“Such behavior may please shareholders in the short term,” the report noted, “but it has long-term downsides, suggesting companies are uncertain about how best to invest for future growth.”
Some of that may be related to political and economic uncertainty. Although the Trump administration proclaims a strong economy despite a current $22 trillion in national debt, there have been persistent fears of a recession. And the Trump administration’s tenure has been, to say the least, volatile. It’s also likely that Brexit concerns in Europe have made European biopharma companies more cautious about making big deals.
Time will tell as to whether big pharma will start wheeling-and-dealing, but analysts at SVB Leerink think Gilead, Amgen and Biogen are likely to be considering bigger deals this year. There was also some surprise on the part of the EY report on a lack of deals around digital technologies, with most drug companies instead choosing partnerships instead of acquisitions to bolster their data analysis and artificial intelligence capabilities. Of note were partnerships between Novartis and Microsoft and Gilead and Glympse Bio.
The EY report suggests that the deal drivers of 2019 will be the deal drivers of 2020—buying innovation and diversifying from an over-reliance on drugs that will be losing patent protection, for example, AbbVie’s dependence on Humira.
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Bigfoot Biomedical Gets $45 Million of Financing Led by Abbott Labs

Abbott Laboratories (ABT) led $45 million of financing for Bigfoot Biomedical, the initial tranche of a Series C round.
The funding also included Quadrant Capital Advisors, Senvest Capital, Janus Henderson and Cormorant Asset Management.
Bigfoot is developing the Bigfoot Unity Diabetes Management Program, an insulin dosing platform that integrates Abbott’s FreeStyle Libre glucose sensing technology.
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Oklahoma sues three drug distributors for ‘major oversupply of opioids’

The Oklahoma Attorney General’s office filed a lawsuit today against Cardinal Health (NYSE:CAH), McKesson (NYSE:MCK) and AmerisourceBergen (NYSE:ABC) for their alleged role in fueling the opioid epidemic in the state, adding to the several lawsuits the companies already face across the country.
The AG office says the companies distributed opioids primarily to hospitals and pharmacies and were obligated to have a systems of checks and balances to alert them if there was a sharp, unexplained increase in opioid orders.
The defendants “distributed what can only be called a major oversupply of opioids into Oklahoma,” the lawsuit said.
The lawsuit comes after the state AG won a lawsuit last year against Johnson & Johnson, which was ordered to pay $465M; the state reached settlements last year with Purdue Pharma and Teva Pharmaceuticals.
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Monday, January 13, 2020

Welltower to form JV with Thomas Jefferson University

Welltower  (WELL +1.4%) signs a memorandum of understanding to form a joint venture with Philadelphia-based Thomas Jefferson University and Jefferson Health.
Under the MOU, Welltower would acquire a stake in certain real estate assets of Jefferson, allowing Jefferson to reduce some of its fixed asset investments and redeploy the capital to other clinical and academic strategic areas.
In addition to the joint venture, Welltower would help Jefferson accelerate its ambulatory care growth strategy through capital support and its predictive analytics to guide future real estate investments based on where Jefferson clinical services would best serve the public.
Also, Jefferson’s clinicians would provide care at the Welltower senior housing, assisted living, and memory-care communities in the Philadelphia region.
The two companies expect to sign a definitive agreement within 90 days.
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Vanda Pharma prevails in Fanapt patent challenge

The U.S. Supreme Court has denied the petition for a writ of certiorari (orders a lower court to deliver its record in a case so the higher court may review it) from a subsidiary of Hikma Pharmaceuticals related to U.S. Patent No. 8,586,610 covering Vanda Pharmaceuticals’ (VNDA -5.2%) Fanapt (iloperidone) tablets.
The denial means that the patent will remain in effect through November 2, 2027 (unless successfully challenged beforehand).
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