“There are 10,000 baby boomers entering Medicare every day… If you could delay the onset of Alzheimer’s by five years, you’d save Medicare $50 billion a year. That’s what biotechnology companies do.”  ~Jim Greenwood

James Greenwood, President & CEO of the Biotechnology Industry Organization (BIO) gave the keynote speech at the BioOhio conference yesterday outlining his conviction that biotechnology is not the enemy in the global economic crisis but may be a great tool to help curb it.

First, it’s important to know that new drug approvals are not keeping pace with R&D spending.  While global biotech R&D spending more than doubled to $127 million in the last ten years, the number NME + BLA FDA approvals went from 29 in 2000 to just 24 in 2010.

At the same time, drug development times are steadily increasing. During the period 1982-89, the average time for the clinical phase was 2.5 years and the average approval time was 1.6 years.  Contrast that with the period 2005-09 where the average time for the clinical phase was 7.1 years and the average approval time was 1.1 years.  The time for approval has actually gotten shorter but the time required to satisfy the approval requirements has lengthened considerably.

Simultaneously, 39% of VC firms reported decreases in their healthcare investments in the last 3 years versus just 17% that saw an increase.  And it’s very easy to see where that money is going.  Venture capitalists reported that, in the next three years, they expect to shift investments away from technologies having high FDA regulation (biopharma, medical devices, diagnostics) to technologies having low FDA regulation (healthcare services, consumer health, healthcare IT).

Of all the factors cited as having the highest impact on VC investment, FDA regulatory challenges were cited as the greatest impact on VC investment decisions over reimbursement concerns, availability of capital and capital requirements.

With $14 trillion in debt, Greenwood expressed concerns that the recent deficit troubles and the actions of the Joint Select Committee on Deficit Reductions, the so-called “super committee” that is charged with finding $1.5 trillion in savings over the next ten years, means there could be an across-the-board cut of some $1.2 trillion — putting drug reimbursement and medical innovation in the crosshairs.

On Jan. 1, 2011, the first 6,000 of eligible Baby Boomers will turn 65 and begin receiving Medicare. The number of beneficiaries is expected to increase by 3% annually. The government estimates 76 million baby boomers in all will enroll in Medicare, causing the program to grow from 47 million beneficiaries to 80 million beneficiaries in 2030.

The total cost of Medicare is expected to expand to $929 billion in 2020 — an 80% increase over 10 years. The program is slated to become insolvent in 2017, but the federal health law could extend funding until 2029 if payments to physicians and other providers are cut back.  What’s really scary is the cost of treating chronic disease:  75 cents of each health care dollar goes to treating patients with chronic disease.

How do we help fight this monster?

Greenwood is advocating that we act quickly to promote investment in innovation.  Greenwood is proposing the following incentives:

  • Angel investor tax credit
  • R&D partnership structures
  • Improved capital gains treatment
  • Matching grants for start-up investments
  • Net operating loss reform
  • Tax holiday for repatriated investments
  • Faster cost recovery for intangible assets

How do you get involved?  Contact your congressperson.  All federal officials have offices in their home districts as well as an office in Washington, DC.   A face-to-face meeting has the potential to have more impact than a letter; a letter, more than a phone call; a phone call, more than an e-mail.

For details about your U.S. Representative — including mailing address for the district and capitol offices — use the House of Representatives, Find Your Representative page.

The Senate website contains an alphabetical list of all Senators, with their capitol addresses and a link to their Senate website, which will have information about state offices and telephone numbers.

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