Q&A: The bill's boon to biotech

The historic healthcare reform legislation that was signed by U.S. President Barack Obama yesterday (23rd March) will be an obvious boon to big pharmaceutical companies and hospitals, which will eventually have access to more than 30 million new customers covered under the bill. But how will the bill affect smaller companies and academics? __The Scientist__ asked linkurl:Kenneth Kaitin,;http://csdd.tufts.edu/about/from_the_director professor of medicine and director of the Tufts Center for the Study of Drug Development.

Kenneth Kaitin
Image courtesy of the Tufts Center
for the Study of Drug Development

__The Scientist__: What do you think the effect of the passage of the healthcare reform legislation will be on the biotech industry? __Kenneth Kaitin__: There was the provision in the bill that affords 12 years of market exclusivity for branded biopharmaceutical products, which is a substantial and very critical guarantee that companies that develop biopharmaceutical products would have adequate amount of time on the market to recoup R&D expenses. Many of these products are produced by small and midsized Pharma companies and biotechnology companies. I would say that, more than anything else, provides a huge benefit for the biotech industry. The other aspect of the bill that I think really benefits the small industry is the requirement that goes into effect almost immediately that no children with preexisting conditions can be denied coverage. Since many of the diseases of children tend to be orphan indications, they tend to be treated with targeted medicines, and these are often the domain of biotech and small Pharma. All told, I think that small industry stands to gain substantially from the healthcare reform bill. In many respects, I think they benefit equal to or more, in relative terms, than Big Pharma benefits from the bill. __TS__: How do you think the bill might affect academics who are doing translational work or drug development? __KK__: I don't see where that's going to have a big effect on academic institutions directly. What I think may be the bigger effect is the opportunity for new markets and an increased amount of potential R&D investment in the Pharma sector, which suggests that there'll be increasing need to tap into those assets within the academic institutions. __TS__: Is it a foregone conclusion that the opening up of this new market will directly translate into an increase in spending on R&D that would foster these kinds of collaborations? __KK__: I don't think we'll see it right away, because the industry is still struggling with the challenges that have occurred over the last ten years. Patent expirations for a lot of top-selling drugs at a lot of the larger companies are leading to large mergers and acquisitions, which tend to thwart R&D investment as the companies end up spending resources on integration of new companies and new cultures. I think it's going to be a while before the industry suddenly bounces back. But what this provides is potentially more earnings, because the stockholders will be more confident that this is an industry that can expand its market, generate profits moving forward, and all of that suggests that there'll be more money available. But that's not going to happen immediately. __TS__: Nancy Pelosi, speaker of the House of Representatives, mentioned the legislation potentially unlocking some entrepreneurial spirit in this country. Might the bill affect the start-up landscape, specifically with academics taking the ideas they've hatched in the lab and moving into the private sector? __KK__: It's not an easy task to bring a new product to market. The failure rate, as my group shows through its studies, is actually getting worse than it has been in the past. Only 16 percent of products that begin testing in human subjects eventually reach the marketplace. Let's face it, a lot of investors don't have the stomach for that type of risk, and the investment community is very key to this whole process. And I know for a fact that they look at academic institutions, they look at opportunities that are there. All of this really hastens this process. __TS__: Pelosi also mentioned that having a more secure source of healthcare might embolden people (such as academics) to strike out on their own. __KK__: I don't think there's any question about that. I'm sure there are lots of people out there who were unwilling to take the risk of starting a company for fear of failure and loss of health coverage -- especially if they have conditions that they're concerned about or have family members with health concerns -- but this [bill] frees up a lot of people to take their ideas and move forward with those ideas on their own, and not have to worry about the onerous cost of health coverage.
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[December 2006]