This editorial is in today's Richmond Times Dispatch.
Virginia Economy: Let’s Be Sure Biotech Has a Bright Future
GEERT KERSTEN GUEST COLUMNIST
Published: September 2, 2009
They are the 21st-century's white-coat warriors: biotech researchers determined to create cutting-edge drugs from living organisms. The resulting medicines, called "biologics," typically take over 20 years and $1.2 billion to develop.
Successful drugs can work wonders. There are biologics currently on the market treating cancer, multiple sclerosis, and a host of other illnesses. And with about 600 biologics in the pipeline around the country, more medical miracles might lie just over the horizon.
It's not an exaggeration to say that we safeguard our own health by safeguarding the health of biotechnology research.
But because biologics tend to carry a hefty price tag, they've become a tempting target for cost-cutting among some in Washington. What the politicos fail to appreciate, though, is just how much investment is required to create a biologic in the first place.
While biotech revenues have risen over the three decades since the sector emerged in the mid-1970s, profits have continued to hover near zero.
"Consumers see market prices for drugs far in excess of production costs and it looks like large profits," noted Yale economics professor Fiona Scott Morton in congressional testimony. "Government payors then face the temptation of using their power to force prices below market levels."
Morton warned that if policymakers restrict the financial return on these drugs, the venture capital so critical to funding biologic research will dry up, with investors putting their money where a higher rate of return is more likely.
THE CRUX of the controversy is over intellectual property rights: How long should the government allow biotech companies to sell a new drug competition-free, before allowing outside firms to co-opt the research data on that drug and use it to concoct cheap generic approximations?
Because atom-for-atom replicas of biologics are virtually impossible, these copycat drugs are called "biosimilars" or "follow-on biologics."
Research from Duke University suggests it takes 13 to 16 years of sales for a firm to break even on a biologic drug. Therefore, it's reasonable to grant brand-name producers a 12-year period to keep their research data private, effectively blocking the creation of competing biosimilar products for that time period. A bill recently approved in House and Senate committees does just that.
This robust protection would put U.S. biotech firms on a level playing field with biotech companies in the European Union, which currently grants at least 10 years of data privacy. Unfortunately, some lawmakers have proposed shortening data protection to as low as five years.
If that were the case, firms could churn out biosimilars well before the original manufacturer has had a chance to recoup its investment costs. Developing these medicines would become a money-losing enterprise. At that point, what investors would continue pouring money into this research?
In short, whittling away the data privacy period for biologics will result in fewer investment dollars going into biotech research, which in turn will result in fewer and fewer life-saving biologics.
That would be bad not only for patients in Virginia. The decline of the biotech industry would exact a toll on the state economy, too.
THE BIOSCIENCE sector accounts for more than $2.5 billion in annual economic activity in Virginia. This state is home to 160 biotech-related companies, including 82 biotechnology firms, 29 medical device companies, 28 contract research and support organizations, and 31 businesses that produce sophisticated equipment supporting the bioscience industry.
If data protections aren't strong, investment into these firms will dry up.
Let's use our own company as an example. We have been working with complete dedication for more than 20 years on a cancer immunotherapy that is designed to make the first cancer treatment more successful, and thereby increase the survival of the patients. The treatment has shown excellent results in human studies around the world and is not toxic.
Yet, even with this excellent data, our company has had to survive many "near death" experiences. If there is even the perception among investors that they will not be able to have acceptable returns on such a risky investment, companies such as ours will no longer receive funding and our society will be left with only those advancements that come from the big pharmaceutical companies -- and that's not much. Almost all breakthrough drugs have come from small biotechnology companies and they need the longer protection to recoup the investment costs. If they do not get it, there goes the funding for novel research and with it our hope for new breakthrough drugs.
Geert Kersten is the CEO of CEL-SCI Corp., a biotechnology company headquartered in Vienna. Contact him at (703) 506-9460 or find out more at http://www.cel-sci.com.
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