President Barack Obama hit upon some familiar themes in his fourth State of the Union (SOTU) address last night. Perhaps the theme most relevant to biopharma was his call for more basic research spending, which he linked not only to past science and tech triumphs but to the promise of a cure for a deadly disease as well as another science victory over other nations, a half-century after the U.S. reached the moon first, ahead of the old Soviet Union.
“Innovation also demands basic research. Today, the discoveries taking place in our federally financed labs and universities could lead to new treatments that kill cancer cells but leave healthy ones untouched,” President Obama told a joint session of Congress. “Don’t gut these investments in our budget. Don’t let other countries win the race for the future. Support the same kind of research and innovation that led to the computer chip and the Internet, to new American jobs and new American industries."
Obama also used basic research spending to buttress the us-versus-the-rich theme he wove throughout this year’s SOTU address: “Do we want to keep these tax cuts for the wealthiest Americans? Or do we want to keep our investments in everything else—like education and medical research?”
Notwithstanding his injections of urgency into his annual pitch, even the President knows that boosting basic research spending will be much easier said than done. In addition to the usual campaign posturing by both sides that will likely push most budget decisions past Election Day, President Obama and Congress have another hurdle to surmount—namely the August budget deal, under which both sides agreed to cut at least $1.2 trillion from the budget over 10 years starting on January 2, 2013, conveniently after the nation casts its votes. The alternative will be a set of across the board spending cuts that include 7.8% for NIH and other nondefense programs.
For proof that SOTU speeches don’t usually yield bigger NIH budgets, just turn the clock back a year ago. Addressing Congress on January 25, 2011, Obama tried to make the case for more basic research spending by evoking memories of the 1960s Space Race, declaring that the nation was facing “our generation’s Sputnik moment” and that the U.S. needed to reach a level of R&D it hadn’t seen since those moon-shot days. He also promised: “We’ll invest in biomedical research, information technology, and especially clean energy technology.”
The outcome: A FY 2012 budget that kept spending for NIH fairly flat, with just a 1% increase, to $30.6 billion. The previous fiscal year, NIH saw its budget shrink by 1%, under an April 2011 agreement with Congressional leaders that came after his 2010 and 2009 SOTU addresses, in which Obama boasted about delivering “the largest investment in basic research funding in history,”—the $10 billion boost to NIH included within his $814 billion “stimulus” measure, the American Recovery and Reinvestment Act.
Last night Obama also touched on three other themes of note. One was a plea for a tax reform bill in part to repatriate the earnings of biopharma and other multinational companies now parked in overseas tax havens: “No American company should be able to avoid paying its fair share of taxes by moving jobs and profits overseas.” The president also declared: “Every multinational company should have to pay a basic minimum tax. And every penny should go towards lowering taxes for companies that choose to stay here and hire here in America.”
A biopharma coalition of companies, academic institutions, and industry groups in four states has sought to squeeze out some additional tax incentives for the industry, through The Life Sciences Jobs and Investment Act of 2011 (S. 1410 and HR 2632). The bill lets businesses choose from a pair of tax breaks: a 40% credit toward the first $150 million of R&D, double the current 20% or repatriation to the U.S. of up to $150 million a year of profits from overseas operations at a 5.25% tax rate compared with the current 35% repatriation tax rate, tied to promises of hiring more research personnel.
Supporters say the measure will bring back $750 million to the U.S. over five years, but lawmakers will likely want to expand any repatriation measure to cover a whole lot of other campaign contribution-giving industries besides biotech and pharma, further complicating efforts to pass something this year.
Also, Obama touched on the need to train displaced workers for the field’s higher-skill jobs and the need to retain high-skill immigrant college students, now forced to leave when their H1-B visas expire: “As soon as they get their degree, we send them home to invent new products and create new jobs somewhere else.
“If election-year politics keeps Congress from acting on a comprehensive plan, let’s at least agree to stop expelling responsible young people who want to staff our labs, start new businesses, defend this country. Send me a law that gives them the chance to earn their citizenship. I will sign it right away,” Obama promised.
But with no announced programs to address these issues beyond the transformation of community colleges long under way and a citizenship plan that’s likely a nonstarter given the contentiousness of immigration reform, it is unlikely these issues will fare better this year than the quest to increase basic research spending.