Healthcare Reform Requires Room for Innovation

Published on: 
Pharmaceutical Technology, Pharmaceutical Technology-01-02-2010, Volume 34, Issue 1

To move from R&D to breakthrough drugs, biotech companies need policies that support innovation.

Today, there are more than 200 biotechnology therapies and vaccines approved by the US Food and Drug Administration, and more than 600 new biotechnology medicines are currently either in human clinical trials or under review by FDA for diseases including cancer, Parkinson's disease, diabetes, Multiple Sclerosis (MS), and rare diseases. Many other potential treatments, vaccines, and diagnostics are in earlier phases of development. Cutting-edge research in areas such as regenerative medicine, gene therapy, and synthetic biology may lead to even more effective ways to not only treat, but predict, preempt, and prevent disease.

Jim Greenwood

To continue this innovation and move from the promise of research to the reality of breakthrough medicines and tools, biotech companies need innovative scientists, patient investors, and a policy environment that supports innovation.

The research and development (R&D) of new therapies is a long, expensive, and risky process. On average, the development of a new drug costs $1.2 billion over the course of 10 to 15 years from the time research begins until it receives FDA approval to go on the market. There are many dead ends and failed drug candidates along the away—only five out of every 5000 potential medicines tested ever reach the stage of clinical trials.


The ongoing financial crisis has left many biotech companies unable to access the investment capital they need to continue work on promising therapies. This has led dozens of companies to shelve or delay promising projects, lay off workers, and, in some cases, close their doors for good. As of September 2009, at least 40 US public biotech companies had either placed drug development programs on hold or cut programs all together. These programs include therapies for HIV, cervical cancer, MS, and diabetes.


The vast majority of biotech companies are start-up or emerging companies still developing their first product. These companies depend on investor capital and other financing sources to fund their R&D efforts. The current economic environment has hit such early stage companies particularly hard. As of July 2009, thirty-nine percent of publicly-traded US biotech companies had only enough cash on hand to fund one year of operations. Twenty-seven percent had only six months of cash left.

Many companies in desperate need of immediate funds are finding that capital markets are closed to them. For many investors, funding early-stage scientific research is now seen as too high-risk relative to other investment opportunities.

If biotech companies must halt or delay promising projects for lack of funding, we risk losing the benefits of significant medical advancements that could save and improve lives, help create high-wage jobs, and sustain our country's position as the global leader in biotech innovation.

Despite the current economic challenges, the long-term prospects for biotech remain strong. Companies continue to innovate at a breathtaking pace, developing medicines that are providing hope where there once was none and creating new tools to allow for more personalized and effective care.

Biotech innovation has always been a high-risk enterprise but we can improve the odds. Even with the best scientist practicing the most cutting-edge science in the best run business, it is more important than ever for us to make sure that policymakers around the world make policy that values and incentivizes innovation.

Congress can increase investor confidence by completing its work on healthcare reform and adopting an approach that lowers costs and increases access to quality healthcare while preserving incentives for innovation. The debate over healthcare reform has been lengthy and vigorous. While careful deliberation is certainly appropriate, uncertainty about the outcome has kept cautious investors on the sidelines until the final shape of healthcare reform is clear.

The Biotechnology Industry Organization (BIO) and its members support the goal of universal healthcare coverage. We deeply believe that every man, woman, and child in America—and, for that matter, the world—should have access to the best healthcare possible, including our most innovative products. We also believe that encouraging biomedical innovation must be at the heart of healthcare reform if it is to succeed. Health reform simply focused on ratcheting down reimbursement for medicines would jeopardize the incentives for innovation. Biotech companies offer some of the most compelling opportunities to improve treatments, save costs, and address unmet health needs.

Enacting a sound regulatory pathway for biosimilars is another important step that Congress can take to bring greater stability to the biotech sector. By expanding market competition, biosimilars can broaden access to and reduce the cost of cutting-edge drugs, helping to achieve the primary goals of healthcare reform.

As of early December 2009, both the US House of Representatives and the Senate have included provisions in their healthcare reform bills to create a balanced pathway for the approval of biosimilars. The current provisions strike an appropriate balance among the competing goals of ensuring patient safety, expanding competition, reducing costs, and providing necessary and fair incentives for continued biomedical innovation.

Both bills employ a common sense approach similar to the process and timeline currently in place for generic versions of chemical-based medicines. They would provide 12 years of data exclusivity during which a competitor could not rely on the safety and efficacy data of the innovator biologic for FDA approval. A shorter exclusivity period would prematurely deprive biotech innovators of their intellectual property and deprive biotech investors of adequate time to gain a return on their investments.

Settling healthcare reform with a focus on promoting innovation and establishing a balanced biosimilars pathway will improve the policy environment and strengthen the overall investment climate for the biotech sector.

These policy prescriptions can help provide the certainty biotech researchers, and their investors, need to continue to develop and improve breakthrough biologic medicines and treatments and, one day, cures.

Jim Greenwood is president and CEO of the Biotechnology Industry Organization, tel. 202.962.9200,