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January 14, 2003
The Honorable George W. Bush
President of the United States
The White House
1600 Pennsylvania Ave., N.W.
Washington, DC 20500
Dear President Bush:
The United States is the world leader in biotechnology research and development. Maintaining that edge is important to the U.S. economy. As we face this new year, it is critical that we make certain the industry remains the world leader, bringing the benefits of biotechnology to those most in need. The Biotechnology Industry Organization (BIO) represents that industry here in Washington, with a membership roster of more than 1,100 biotechnology companies engaged in research and product development for health care, agriculture, pollution control and industrial applications. We are also actively engaged in the war against bioterrorism, working on countermeasures and defenses.
As president of BIO, I have prepared the following outline of our 2003 legislative priorities for the 108th Congress as well as administrative matters before your Administration.
Medicare Outpatient Prescription Drug Coverage - Current and future Medicare coverage for biologics is an extremely important matter for the overwhelming majority of BIO's membership. Nearly 90 percent of our members are engaged in research and development of health care products oriented toward the diseases and conditions of aging. Medicare coverage for outpatient prescription drugs is important to the future success of the biotech industry. More importantly, America's growing senior population will surely benefit from the nearly 371 biotech drugs in late stage clinical development, for diseases such as cancer, diabetes, and neurodegenerative disorders.
BIO believes any Medicare outpatient prescription drug coverage legislation should include the following: stop-loss protection and protection for those most in need first; delivery mechanisms that rely on the private marketplace and competition; efforts to expand beneficiary choices among private plans; measures that improve patient care through innovations in biotechnology, and do no harm to current drug coverage.
Medicare Current Coverage- Throughout 2002, BIO has fought to have equity restored to products that are covered by the Medicare Hospital Outpatient Prospective Payment System (HOPPS). The Centers for Medicare and Medicaid Services (CMS) made several substantial changes in the FY 2003 HOPPS payment rule that may negatively affect patient access to innovative biotech products. The end result of the agency's FY 2003 payment rule establishes a built-in bias against innovative biotech drugs by slashing reimbursement rates by an average of 35 percent. Historically, no other area of Medicare reimbursement has experienced such dramatic cuts in one single year. The reduction in HOPPS reimbursements - the amount paid to hospitals for their use of biotech drugs - will undoubtedly be a disincentive to hospitals for using the most innovative medical treatments for America's seniors. While Congress will surely focus attention on establishing Medicare coverage for outpatient prescription drugs, the threat to what coverage actually exists today via the HOPPS system must be addressed.
Medicaid- Medicaid patients are entitled, by law, to medically necessary health care, and BIO is concerned that some efforts may hamper such access. We believe that the first priority of state Medicaid programs should continue to provide access to the full range of medically necessary treatments. Physicians should be able to offer their patients the most appropriate therapy for an illness without Medicaid officials requiring them to treat the patient with a less costly, less
effective option. Programs that deny access to care are putting patients' lives at stake and are very likely violating federal law.
Additionally, Medicaid rebates should support drug coverage. The Medicaid rebate program gives manufacturers a role in sharing state and federal Medicaid costs of providing drug coverage to the most-needy citizens. Although we are fully support this goal, we cannot support efforts that would undermine the program by requiring additional rebates as a mandatory "tax" that the state can use to provide discounts to citizens not eligible for Medicaid.
Reimportation- BIO opposes any efforts to weaken the FDA's authority to police our borders against dangerous, counterfeit, and non-FDA-approved drugs. With this in mind, we oppose any legislation that would allow for the "reimportation" of prescription drugs into the United States from other countries. If the FDA is unable to properly police our borders, it will be "open season" on the flow of potentially dangerous and counterfeit drugs into the United States from unscrupulous mail order and internet-based companies abroad. BIO is always mindful of initiatives that attempt to undermine the life-saving scientific research that the biotech industry produces everyday, and any attempt to enact reimportation legislation would only serve to endanger the health of many Americans.
Capital Formation- The biotechnology industry is the most intensive research and development (R&D) industry in the world. Billions of dollars per year are spent on R&D in efforts to discover cures and therapies for some of the most devastating diseases afflicting humankind. Congress has recognized the need to support R&D-intensive companies by enacting several tax incentives to fuel advanced scientific research. However, the long lead times involved in developing new drugs, often 12-to-15 years, renders such tax incentives as the R&D credit or the use of NOL carry- forwards useless for "pre-profitable" venture-backed drug development companies that won't be able to use these incentives until their product is approved. This is happening at the same time in which most of the pharmaceutical companies are increasingly dependent on these companies to carry out the R&D on many of the new products aimed at diseases such as cancer, Parkinson's, Alzheimer's, and many metabolic disorders. Long-term research industries, specifically biotechnology, are placed on an unequal playing field as compared to other industries that can currently utilize the existing tax code's research tax incentives. BIO supports opportunities to reform the existing tax code and "level the playing field" for not-yet-profitable biotech companies.
Stock Options- Due to little or no revenue as they await their first product approvals, most biotechnology companies use stock options to leverage tight payroll budgets and attract talent. BIO opposes stock option expensing because it would force our companies to reduce the number of stock options issued to employees in order to maintain growth in reported earnings or control losses. Furthermore, many of the accounting options for expensing of options are inappropriate for valuing employee stock options issued by emerging growth companies with volatile stocks. These methods produce values that we believe are misleading to investors and shareholders. If stock option expensing is enacted, we believe investment in biotechnology R & D would decline significantly. It costs hundreds of millions of dollars over the course of a decade or more to bring a new medication to market, and over this time, biotech companies rely on a steady influx of capital from investors to fund R&D. Biotech companies forced to expense the estimated future value of stock options may find themselves at a disadvantage versus other types of ventures.
Homeland Security Act- Congress took swift and decisive action in 2002 by creating a new Department of Homeland Security and passing legislation to provide the necessary resources for the government to prepare for, and combat, acts of terrorism. One of the resources that will likely be sought is the innovation and technological insight of the biotechnology industry. A great number of BIO's member companies are at the forefront in developing products that could be called upon to head off a possible biological attack on America. In addition, our industry is uniquely poised to provide cutting-edge technologies that can be developed for detection and preventive diagnostics. As we move forward, BIO strongly urges Congress and your Administration to retain liability protections for companies that work to develop and produce vaccines, therapeutics, and diagnostics, to combat acts of terrorism. Without adequate liability protection, the fear of losing their economic viability will prevent most, if not all, biotechnology companies from developing and manufacturing these products.
Intellectual Property- Strong, predictable, and timely intellectual property protection is essential for the success of the biotechnology industry, particularly in light of the industry's need to generate investment capital over very long periods of time. Most biotech companies are engaged in research and development and have yet to launch a product. Their patent portfolios are their only assets with which to generate investment and advance R&D. In the 107th Congress, BIO opposed any efforts, such as legislation passed by the Senate in July of 2002, S. 812, (the Greater Access to Affordable Pharmaceuticals Act), that would narrow or weaken patent protections and jeopardize the pursuit of new treatments and therapies for debilitating diseases.
In addition, BIO urges you and the Congress to take steps to ensure that the U.S. Patent and Trademark Office (PTO) has the funding it needs to play its critical role in supporting America's research-based business sector. BIO supports your efforts to implement a strategic plan for the PTO, provided that: (1) your Administration takes steps to eliminate the diversion of patent applicants' user fees to other programs, and (2) the PTO discontinues the outdated practice of requiring separate applications for the same basic invention.
Finally, effective patent protection is as important in the global marketplace as it is in this country. Any attempts to undermine U.S. law or worldwide standards for intellectual property protection - such as requiring compulsory licensing, enacting unreasonable patent disclosure requirements, or allowing countries to bypass valid patents entirely - have the potential to cause great harm to the biotechnology industry. As discussions on international standards for obtaining and enforcing patents move forward, we urge continued vigilance to defend strong intellectual property protection as one of the cornerstones of an effective global trade policy.
Advanced Technology Program- BIO strongly supports the Advanced Technology Program (ATP). The ATP is an extremely important program for the biotechnology industry in the United States. The ATP fosters new and highly risky innovative technologies by investing in research that may have otherwise not have had the resources to move forward. By investing in this research, not only does the ATP benefit the company, but ultimately the consumer who can benefit from a new therapy or innovation because of this research. It is also worth noting that ATP- funded projects, even when channeled through individual companies, tend to have broader impacts by virtue of their key role in fostering the emergence of new technology platforms, something the competitive market place is conspicuously poor at doing. For example, Iomai Corporation, a BIO member company based in Maryland, has received ATP funding. This funding has allowed Iomai to develop a cancer immunotherapeutic vaccine that effectively triggers the immune system to overcome barriers currently preventing other approached from aggressively killing cancer cells.
Technology Transfer- Bringing research from the "bench to the bedside" is an important goal of BIO. Our industry's success is in no small part due to the efficient and timely transfer of technology from the public to the private sector. However, a great proportion of research technology continues to languish on the shelves at NIH. BIO will work with your Administration to identify ways to more effectively transfer the technology from the public to the private sector for further development. The research that comes out of NIH is of great benefit to public health because it yields lifesaving therapeutics and diagnostics. It also provides the basis for scientific training that leads to the best scientists in the world. Any attempts to turn this honorable institution into a for-profit entity will ultimately affect the institution's credibility as well as the willingness of the private sector to partner with NIH.
FDA Appropriations- It is critical that Congress swiftly authorize appropriations for the FDA. The significant increase in user fees authorized through the renewal of the Prescription Drug User Fee Act (PDUFA) was intended to bring FDA's drug approval process back to sound financial footing. Without the new appropriations, the FDA will be unable to advance many important initiatives agreed to as part of the PDUFA legislation and the accompanying "goals letter."
Even more importantly, FDA is dangerously close to freezing its recruiting and hiring process in many key divisions, including the Office of Drug Safety. Not only will a hiring freeze seriously jeopardize FDA's ability to meet its PDUFA goals, it puts patients at greater risk since FDA will be unable to advance many of the patient safety reforms included in the legislation.
Regenerative medicines- Scientists have demonstrated the enormous potential of stem cell research to develop cures and treatments for currently unmet medical needs. We will continue to work with the your Administration and the Congress to quickly and effectively implement your policy regarding federal funding of stem cell research, including analyzing whether changes to the policy are necessary. Moreover, BIO will continue to support legislation that prohibits the use of cloning for reproductive purposes. Reproductive cloning is unsafe and unethical. However, we strongly believe that use of nuclear transfer for research purposes (so-called "therapeutic cloning") must be allowed to continue.
Genetic Discrimination- Our nation is on the cusp of reaping the rewards from our significant investment in biomedical research. Using genetic information, biotech researchers will continue to learn about the causes and progression of disease and disability. Armed with this information, we can eventually conquer diseases and conditions that have plagued us for hundreds of years. However, public fear and anxiety are obstacles to achieving this goal. Specifically, if the public believes that genetic information will lead to denial of health insurance or other benefits, they will not seek these new diagnostics and treatments.
That is why BIO supports federal legislation that would prohibit health insurers from denying insurance to individuals based on genetic information. At the same time, genomic research must advance. We are pleased you have announced your support for anti-discrimination legislation. BIO stands ready to work with you and the Congress to develop a proposal that will protect patients' rights while allowing important medical research to go forward.
Global Health- The developing world is facing a dramatic public health crisis as diseases such as HIV/AIDS, malaria, and tuberculosis are devastating the populations of many countries. Recent studies have concluded that biotechnology could dramatically improve health in these nations. BIO will work with the Administration and the Congress to develop policies that would provide incentives and resulting markets for companies to develop and distribute products to help cure and treat neglected diseases in the developing world.
Agricultural Biotechnology- Agriculture is fundamental to the economies and environments of the entire world. Farmers in 2002 continued to adopt biotech varieties at record rates wherever governments have allowed them access. Unfortunately, one of our largest trading partners, the European Union (EU) continues to utilize a number of illegal, non-tariff trade barriers and otherwise disrupt agricultural markets with its policies. The illegal EU moratorium on regulatory approved crop varieties improved through biotechnology seriously threatens the viability of the global trading system, which is based on rules grounded in sound sciences. BIO urges the Administration and Congress to remain engaged with the representatives of the European Union and remind them that their actions are illegal and clearly violate international trade law.
In addition to the challenge of gaining regulatory acceptance in Europe and other parts of the world, the agriculture biotechnology industry is keenly focused on the regulatory environment here at home. Finalization of a number of proposed rules and draft guidance relating to agricultural biotechnology would bring tremendous clarity and will only increase confidence in the regulatory apparatus that oversees this important technology. BIO is committed to working with the Administration and Congress to ensure that the policies and actions taken by U.S. regulatory agencies remain the "gold standard" worldwide because of their commitment to making decisions that are supported by science.
Energy Legislation- The House and Senate authorized funding for bioenergy R&D in their respective comprehensive energy bills, and they will fund new DOE bioenergy activities at $300 million over four years. BIO strongly supports this legislation, which will spur the development of innovative bioenergy technologies to convert cellulosic biomass to energy and chemicals. This legislation will stimulate the creation of jobs in rural areas, where they are needed most, by stimulating the construction of biorefineries and creating demand for agricultural biomass.
Environmental Research Tax Credit- BIO proposes a 15 percent investment tax credit for plants and equipment constructed or manufactured for use in biotech biomass conversion or manufacturing to produce fuels, polymers or fine chemicals. This tax credit would be available only to companies using innovative enzyme-based manufacturing and production methods. This tax credit would help create jobs in rural areas, where they are needed most.
As your Administration and the new Congress join forces to confront a raft of economic, health, technology, security, energy and environmental challenges - many of them almost unimaginable when you took office two years ago - please consider the legislative and regulatory needs of a growing biotechnology industry that will be essential to meeting those challenges in the coming years.
We look forward to working with you, your Administration and the Congress in 2003 on these important issues. If your staff has any questions, please contact me or Sharon Cohen, Vice President, Government Relations at (202)-962-9200.
Sincerely,
Carl B. Feldbaum
President
Biotechnology Industry Organization
CBF:sc
cc: U.S. Congress
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