Upcoming Hearing on Science Education Programs
The California Assembly and Senate Select Committees on Biotechnology will be holding an informational hearing entitled, “Investing in the Future—Science Education Programs Creating the Globally Competitive Workforce of the Future,” on December 7, 2009, from 11am-1pm. The hearing will be held at Life Technologies,
5791 Van Allen Way, CarlsbadThe Committees will convene to hear how the public education system and the life sciences industry are working in partnership to address the industry’s future workforce needs, and to hear from those working in these partnerships what the state can do to facilitate and encourage these relationships.
The public will also have the opportunity to provide comment at the hearing, and lunch will be provided to attendees courtesy of Life Technologies. If you will be attending or have questions about the hearing, please contact Jimmy Jackson, BIOCOM Vice President of Public Policy and Communications, at jjackson@biocom.org.
Health Care Reform Update
On Saturday, November 21st, the Senate voted along party lines, 60 to 39, to begin a floor debate on health reform legislation.
The floor debate is expected to begin in early December, with a goal of passing a bill before Christmas. Sixty votes are required for passage in the Senate. It is significant to note that at least three Senators have strongly indicated that their vote to begin debate was not a guarantee they would support the measure as presently constituted. If the measure passes the Senate, a conference committee will be convened to resolve differences in the two measures and to develop a final bill.
As this debate continues, some areas of concern will continue to merit close monitoring and constant vigilance. The two bills will likely have different versions of a medical device tax, treatment of follow-on biologics, and comparative effectiveness and will have to be reconciled in the conference committee.
MED TECH TAX: One area of great concern is the medical device tax contained in both the House and Senate Finance Committee bills. Current law does not impose an annual sector fee on companies that manufacture or import medical devices for sale in the United States; however the approved House proposal imposes a $20 billion tax on the medical device industry over the next six years. The Senate proposal would also impose a $20 billion non deductible fee (down from $4 billion in original Finance Committee measure). The fee would be based on market share determined by domestic sales. This tax would take effect in 2010.
California is the birthplace of the life science industry, and home to one of our nation’s largest medical device cluster, which employs over 112,000 medical technology workers. BIOCOM will continue working with partners at MDMA, CHI, AdvaMed, SoCalBio and BayBio to push for further negotiation on the medical device tax language currently being considered as part of broader health reform legislation. The California delegation has displayed remarkable unity in supporting our efforts, but the battle isn't over. Please send a copy of the letter on our public policy website opposing the Medical Device Tax to your legislators.
Follow-on Biologics and Data Exclusivity: Legislation in both the House and Senate bill propose to create an approval pathway, and provide 12 years of non-patent data exclusivity to ensure continued medical innovation, with an additional 6 months of exclusivity for the use of products for the pediatric population. One area of concern related to follow-on biologics is the issue of interchangeability that has been included in the House bill. The approved language states that a follow-on biologic or a biosimilar shall be determined as interchangeable with an innovator product if the product produces the same clinical result as the referenced product, and the risk of alternating or switching, between the use of the biological product and the reference product, is not greater than the risk of using the innovator product. This is concerning because the bill doesn’t outline specific standards that must be met to establish an interchangeable biosimilar, but instead directs the Food and Drug Administration to set such standards. Also troubling is the language located in Section 1188 of the House bill, which mandates a "waiver” of copayment amounts for individuals who switch to biosimilar products. The language in Section 3139 of the Senate bill sets Medicare Part B, biosimilar products reimbursement, payment rates at 6% of the average sales price of the brand name innovator. Drug discounts through the 340B program are extended to inpatient drugs and also to certain children’s hospitals, cancer hospitals, critical access and sole community hospitals, and rural referral centers. The FOBs language on the Senate side also states if the FDA approves a product on the grounds that it is interchangeable to a reference product, HHS cannot make a determination that a second or subsequent biosimilar product is interchangeable to that same reference product until one year after the first commercial marketing of the first interchangeable product.
Comparative Effectiveness: Legislation in both the House and Senate propose to establish guidelines for comparative effectiveness research. The House establishes a Center for Comparative effectiveness research government entity that would be administered by 16 members and 3 agency directors. No more than 3 members may be representatives of the life sciences manufacturing industry. The Senate bill defines Comparative Effectiveness Research as not to include cost effectiveness and proposes to establish a non-profit Patient-Centered Outcomes Research Institute, independent from the government, overseen by 15 appointed stakeholder board members who would be responsible for identifying research priorities and conducting research that compares the clinical effectiveness of medical treatments. No more than 3 members may be representatives of the life sciences manufacturing industry. BIOCOM created a side-by-side chart to help you navigate through the components of the different health care reform bills.
Small Companies May Get SOx relief
BIO has brought to our attention HR 3817, which may be brought to the House floor for a vote in early December. This bill is named the Investor Protection Act, and is in a package of comprehensive reforms for financial markets. Amendment 44, which was adopted by the House Financial Services Committee on November 4, provides for an exemption from 404(b) SOx reporting requirements for companies with a market capitalization of less than $75million. In addition, the SEC and Comptroller General are to report back to Congress within 180 days on ways to lessen the regulatory burden of SOx for companies with market capitalizations between $75-250 million. BIOCOM is enthusiastically supporting this amendment.
The amendment which contains the exemption (http://www.house.gov/apps/list/speech/financialsvcs_dem/ipa_garrett_adler.pdf) is amendment 44 to the original HR 3817 (http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h3817ih.txt.pdf)
The Investor Protection Act at present includes an amendment offered by Reps. John Adler (D-NJ) and Scott Garrett (R-NJ) that would permanently exempt small companies with market capitalizations of $75 million or below from complying with the regulatory burdens of the Sarbanes-Oxley Act (“SOX”).
Signed into law on July 30, 2002, the SOx Act’s passed in response to the corporate accounting scandals of Enron, Tyco and others in 2001 and 2002. The law’s purpose was to rebuild public trust in America’s publicly traded companies by requiring public companies to adhere to significant new governance standards, including improved reporting of financial transactions and requirements for external audits. The average cost of compliance for public companies with under $1 billion in annual revenue is approximately $2.8 million since the enactment of SOx (source: Foley & Lardner 2007).
With 41% of active publicly traded biotech companies fall under $75 million in market cap, and 43% of these companies have less than 1 year of cash (source: BIO 2009), a $2.8 million SOx fee has caused a great majority of publicly traded biotech companies to struggle with outsized compliance costs, limiting their already limited capital and resources that could otherwise go to developing new life-saving therapies.
Presently, 41% of active publicly traded biotech companies fall under $75 million in market cap (source: BIO). The Garrett/Adler Amendment would exempt companies with market capitalizations of $75 million or below from complying with the regulatory burdens of SOx, and would direct the Securities Exchange Commission (“SEC”) and the Government Accountability Office (“GAO”) to conduct a study within 180 days to determine how to reduce the compliance burdens for companies with market capitalizations between $75 million and $250 million.
The Garrett/Adler Amendment would provide approximately 41% of active publicly traded biotech companies an exemption from the more onerous regulatory burdens of SOx, and help preserve funding for researching and developing new life-saving therapies. BIOCOM is pleased to support it.
BIOCOM Supports Water Conservation and Ensures R&D Companies Receive Exemption
Last week, the State Legislature passed and the Governor signed a comprehensive water bill package that includes mandatory conservation targets and an $11 billion bond package. BIOCOM was pleased to play a unique role in the negotiations, and came away with a significant victory for the industry. The water bond supports the building of water infrastructure, as well as the repair of the Bay Delta, where approximately 2/3 of Southern California’s water flows through. It also fuds repairs of other environmentally sensitive areas.
Another aspect of the package is a water conservation, which is where BIOCOM played a role. The bill requires each California water agency to get to a 20 percent average water use reduction by 2020. While business is expected to reduce discretionary water use significantly, it is generally agreed that water allocations should take into account and exempt water used for core business functions, such as that used directly in manufacturing, so as not to constrict the California economy. This water is known as “process water.” In our industry, it is the water used in experiments, and the water used to clean equipment.
While ultimately all who voted for the water package deserve praise, Senators Christine Kehoe, Denise Ducheny and Assemblyman Nathan Fletcher all deserve special mention. They went to their party leadership and made BIOCOM’s concerns a priority to be addressed before a final package was brought to the Legislature. Their support enabled BIOCOM to negotiate the amendments protecting the industry.
BIOCOM’s biggest concerns centered on the fact that companies in the research and development stage without an identifiable product were not covered in the exemption definitions, nor were non-profit research institutions. Fortunately, BIOCOM has been extensively involved in this issue on the local level, so we had a definition which a variety of stakeholders had agreed to at the City of San Diego. We were able to use this as the basis for state language, and with the help and support of the San Diego County Water Authority, exemption language was created that covers process water for companies whose primary business is research and development, as well as non-profit research institutions. Neither of these categories would have been covered by the bill as originally drafted, but BIOCOM was successful in revising the bill so that these vital parts of the California economy are protected.
State Legislative Update 2009
The 2009 California Legislative Regular Session has drawn to a close, and in other years that would mean the Legislature’s business would be done until January. But this is far from a typical year. The Legislature has convened twice in the past nine months to address budget deficits that were larger than some states’ total budgets.
Despite these challenges, and to some degree because of the lack of funding to implement new state programs, BIOCOM had a very successful year in the legislative arena. BIOCOM’s Legislative and Public Policy Committees identified four bills as priorities; of these, three were opposition bills: one was defeated in committee and may be revisited next year, one was not taken up when it was clear the author did not have the votes for passage, and one was amended and BIOCOM therefore removed its opposition. Furthermore, no bills BIOCOM opposed in this legislative session made it to the Governor’s desk this year.
BIOCOM was also a party to a wide coalition which scored one of BIOCOM’s most significant legislative victories ever, the signing of ABx3 15, a bill which allows companies to choose to have their corporate income tax based on a single sales apportionment factor. This is an issue BIOCOM has been actively engaged in for several years, and will eliminate the tax penalty companies who choose to have large workforces in California have had to pay.
This all said, the Legislature is likely to reconvene, possibly as early as the second week in October, for special legislative sessions on water, education, possibly taxation, and a variety of other subjects. Keep an eye out in the BIOCOMMUNIQUE for updates on what is happening in these areas.
You can find a summary of the bills BIOCOM took a position on in the 2009 state legislative session by clicking here.