Washington Editor

WASHINGTON - While the more than $6 billion increase in President Obama's fiscal year 2010 budget proposal for cancer research is a positive step in finding new cures, that progress could be for naught if Congress fails to give biotech companies - which are involved in developing and advancing more than 250 investigational cancer products - tax breaks and other needed help to survive the economic downturn, said Jim Greenwood, CEO of the Biotechnology Industry Organization (BIO).

With the release Thursday of the president's $3.55 trillion 2010 budget - which includes $76.8 billion for the Department of Health and Human Services and a proposal for a $634 billion reserve fund to help finance health care reform over 10 years - Greenwood said he was compelled to remind the administration and Congress that, while critical, government-funded research "is but the first step" in finding the cures for cancer and other diseases.

Biotech companies, he told reporters during a briefing Thursday, ultimately are the entities that take much of the research from the National Institutes of Health (NIH) and other federal agencies and "turn it into real medicines that have real effects on the lives of patients."

Greenwood noted that biotech firms have played a major role in developing the medications that have led to the increase in the average life expectancy and survival rates of patients with cancer.

"By reducing the incidence of cancer and various other diseases we have the capacity to achieve $4 trillion in savings," he declared.

But, he said, if biotechs are going to succeed in developing those life-saving medications, the right policies about intellectual property, follow-on biologics (FOBs), comparative effectiveness research, preemption and reimbursement must be in place.

"We are faced by a variety of challenges, most immediately, the challenge of the economy," Greenwood said.

He noted that about half of public biotechs have less than one year of cash remaining and a third have less than six months.

"That gets worse every day and will until we get out of this economic rut," Greenwood said. "We need help from the Congress."

BIO sought to have included in the $787 billion stimulus package a provision that would have allowed small biotechs to receive a one-time acceleration of their accumulated net operating losses (NOLs) to sustain the firms during the current economic crisis.

Under the proposal, biotechs could elect to receive a refund of accrued NOLs at a discounted rate under the condition that the refunds be reinvested in R&D.

Companies permanently would forgo the opportunity to claim all NOLs involved in the computation of the refund.

The plan would apply only to small firms that experienced a loss during the 2008 tax year, with the refund capped at a per-company dollar amount, according to BIO.

But, Greenwood lamented, "We didn't get that." However, he added, "We are going to continue to pursue that using other vehicles and continue to talk to the administration and Congress."

Patent reform legislation, which is expected to be reintroduced soon by Sen. Patrick Leahy (D-Vt.) and Rep. John Conyers (D-Mich.), "continues to threaten our ability to attract capital investment" if it were to become law as proposed by the two lawmakers during the last Congress, Greenwood said.

When deliberating patent reform bills and determining the path forward, lawmakers should consider how innovative industries, particularly biotechs, are being affected by the current economic downturn.

FOBs legislation this year "is obviously critical" to the biotech industry, he said.

But, Greenwood said, biotechs must have the incentive of knowing they will have appropriate time to recoup their development expenses.

He noted that BIO has pushed for at least 14 years of data exclusivity protection.

The president's $634 billion health reform reserve includes funds to establish an FOBs pathway for the FDA.

Obama's proposal called for an exclusivity period that is "generally consistent with the principles in the Hatch-Waxman law for traditional products."

The proposal also said brand biologic manufacturers would be prohibited from reformulating existing products into new products to restart the exclusivity process, a process known as ever-greening.

The administration, the budget document stated, would "prevent drug companies from blocking generic drugs from consumers by prohibiting anticompetitive agreements and collusion between brand-name and generic drug manufacturers intended to keep generic drugs off the market."

The 1984 Hatch-Waxman Act provides for up to five years of data exclusivity for innovator firms.

However, Greenwood argued that because biologics are very different than small molecules, an appropriate balance must be struck to ensure biologic innovators have appropriate R&D incentives.

"The measure of a successful pathway will be that it is as balanced as the Hatch-Waxman approach is for small-molecule pharmaceuticals," Greenwood said.

"Any biosimilars legislation must expand access and lower costs while preserving the incentives necessary for the development of new therapies and treatments as well as research leading to significant second-generation improvements in safety and efficacy to innovative products," he contended.

Obama's budget also is proposing to bring down the costs of drugs in the Medicaid program by increasing the drug rebate for brand-name medications from 15.1 percent to 22.1 percent of the average manufacturer price, apply the additional rebate to new drug formulations and allow states to collect rebates on medicines provided through Medicaid managed care organizations.

All of those savings would be devoted to the health care reserve fund, according to the budget document.

Health care reform, Greenwood said, "has to focus not simply on trying to squeeze out the costs of doctors, hospitals and medicines, but squeeze out the costs of chronic diseases.

"We think the solution is to reduce the incidence of chronic disease, and we have the companies that can do that, provided the right policies are in place," he said.