BIOCOM Federal Report
Last week BIOCOM traveled to Washington DC and visited members of the House to voice the life science industry’s concerns over an amendment by Rep. Paul Kanjorski, D-PA, that would have stripped the Garrett-Adler language (which BIOCOM supported) from the Wall Street Reform and Consumer Protection Act of 2009 (H.R. 4173), which had been passed by the House Financial Services Committee hearing in November.
The Garrett-Adler language is a permanent exemption for small companies with market capitalization of $75 million or below from complying with the regulatory burdens of the Sarbanes-Oxley Act (“SOX”). The amendment is of great significance to the industry because 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). There are at least 48 BIOCOM member companies in the San Diego region that fall under $75M in annual revenue. According to Foley & Lardner, 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). 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 strained capital and resources that could otherwise go to developing new life-saving therapies and devices.
BIOCOM is happy to report the Kanjorski Amendment, which would have removed the Garrett-Adler language, was defeated by a vote of 271 to 153. BIOCOM would like to thank the following representatives and staff who took the time to meet with us and supported BIOCOM in opposing the Kanjorski Amendment: Bilbray, Issa, Hunter and McCarthy. Congresswoman Davis voted in favor of the Kanjorski amendment and Congressmember Bob Filner did not vote. Click here to see BIOCOM’s letter of opposition to Kanjorski (http://biocom.org/public_policy/legislative_monitoring/)
Importation an Issue Again, FOB’s Still on the Table
During its Washington visit earlier this month, BIOCOM met with Senator Dianne Feinstein’s staff to discuss the industry’s opposition to drug importation. Joining us was Todd Gillenwater of the California Healthcare Institute, Jeremy Allen of Vertex and Anna Weinstein of BIO. Together the group voiced their concerns over an importation amendment proposed by Sen. Byron Dorgan (D-ND) as part of the greater issue of health care reform. While BIOCOM supports public policies that promote improved access to the most medically appropriate and current therapies, devices, and diagnostics, Senator Byron Dorgan’s Importation Amendment is not a safe solution and could open the U.S. market up to sub-optimal care, serious patient safety risks, and could result in poor outcomes and higher health costs.
BIOCOM believes that all U.S. quality and safety standards should be met before risking patient safety for importation from other countries and is happy to report that two drug importation amendments – one introduced by Sen. Byron Dorgan, D- ND and the other by Sen. Frank Lautenberg, D-NJ - were defeated in the Senate on December 15th. The Dorgan drug importation amendment (that BIOCOM opposed), which would allow for drug importation without any required safety certification by the Secretary of HHS, was defeated by a vote of 51-48. A second drug importation amendment, known as the Lautenberg amendment, was introduced and would only allow for drug importation after the Secretary of HHS certified it could be done at no risk to patient safety. Lautenberg’s amendment failed by a vote of 56-43. BIOCOM will continue to follow this issue and advocate for improved access to medicines for the people who need them via safe and effective policies. Jeopardizing consumer safety via importation is not the answer.
As has been reported here frequently, legislation in both the House and Senate health reform bills propose to create an approval pathway for follow-on biologics, 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. We expect unfriendly members to continue to try to change this period. Please send a copy of the letter on our public policy website supporting the Biosimilars Amendment Rep. Eshoo has proposed. (http:www.biocom.org/public_policy/legislative_monitoring/)
Medical Device Tax Still in Play
One area of great concern is the medical device tax contained in both the House and Senate Health Care Reform 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 $40 billion in the original Finance Committee measure). The fee would be based on market share determined by domestic sales. If enacted, 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. (http://www.biocom.org/public_policy/legislative_monitoring/)
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.