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Insight & Intelligence : Mar 2, 2009
Obama Budget Greeted with Kudos Along with a Few Concerns
While basic research is getting a boost, industry advocates point out that small biotech are still struggling.!--h2>
February was a great month for scientific research. President Obama signed into law a stimulus package that provides over $25 billion for research—$10 billion of that for the NIH—and last week he pledged to double funding for cancer research and the NSF, starting with the 2010 budget.
That $3.5 trillion federal budget outline incorporates priorities such as healthcare reform including expanded insurance coverage and enhanced investment into research and science education.
For the NIH, the stimulus and budget proposal represent a return to growth after years of financial stagnation following the doubling of the agency’s budget from 1998 to 2003. The $10 billion stimulus alone amounts to one-third of the agency’s $30 billion budget in 2009.
Also, in the 2010 budget proposal—full details of which will be released in April—cancer research will be the biggest beneficiary among disease areas, with $6 billion in new funding.
The news elated the cancer research community. Typical was the comment from Ryan Hohman, director of communications and policy for Friends of Cancer Research: “It’s an incredible step toward finding a cure.”
Amid a symphony of plaudits, though, were notes of concern, particularly from advocates of the industries that turn scientific discoveries into marketed products. “Basic research is critical, but basic research is only the first step in curing cancer,” says Jim Greenwood, president and CEO of the Biotechnology Industry Organization (BIO).
“It’s the private biotech companies that ultimately build on basic research to develop products with real impact,” he says. And those companies are suffering: 50% of publicly traded biotechs are down to their last year of cash, and a third have six months’ cash or less. “And it gets worse every day,” Greenwood adds.
Both BIO and the Advanced Medical Technology Association (AdvaMed) are lobbying for legislation that would allow small R&D to receive a refundable tax credit for their net operating losses (NOLs). Under current law, NOLs provide a tax credit that can be cashed in once a company becomes profitable and has income to apply the credit against.
The organizations failed to get the NOL credit into the stimulus package, but they are continuing the fight. Upcoming tax legislation may offer another opportunity.
What Happens After 2010?
“How much can you accomplish in that period of time?” he asks. “Scientific research is not a water faucet; you can’t turn it on and off.”
He calls the NSF’s extra $3 billion in stimulus funding “a huge amount of money to absorb in a two-year period,” given its $7 billion budget. The agency is to fund proposals already received but which the agency couldn’t afford under its regular budget. But researchers who submitted those earlier grants may have already moved on, Teich notes, and scientific advances may have made some of these projects obsolete.
And the big question, he says, is “What happens after 2010, when the stimulus runs out?”
The plan also calls for allowing Americans to buy FDA-approved drugs from other countries—a cost-saving measure the biotech and pharmaceutical industries have opposed for years. It also plans to establish a pathway for follow-on biologics (FOBs).
The FOB issue has been one of the defining drug-policy controversies this decade. The government hopes FOBs can save money in the same way as generic versions of conventional small molecule drugs, a position supported by the Generic Pharmaceuticals Association. The biotech industry, however, has maintained that biologics cannot be readily copied.
Budget Assumes Major Health Reform
Both BIO and AdvaMed have reiterated their preference for “market-based” reforms and cite the success of the competitive private-insurance market that provides Medicare prescription drug coverage. They also say innovation can generate savings through, for example, more effective treatments that prevent costly complications or disease progression.
“We are concerned that some of the proposals intended to provide budgetary savings may impede the medical advancements and breakthroughs all of us wish to see,” says Greenwood in a statement, alluding to the possibility of price controls and restricted access to advanced technologies.
Achieving savings to support expanded health coverage will “not be easy and should not mean compromising quality or limiting medical progress,” says Stephen J. Ubl, president and CEO of AdvaMed. “That’s why the details of the many constructive proposals in the budget to change incentives in the healthcare system are critical.”
Though few 2010 budget details have been released, Ubl has already identified “one troublesome proposal,” which would require preauthorization of Medicare imaging studies by private utilization review firms.
“To turn this kind of control over physician decisions to private, for-profit entities would be an unprecedented step for Medicare,” he says.
Debbie Strickland is a GEN freelance writer.
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