Good Day BIO: Why we need to protect Qualified Small Business Stock

With a shutdown averted (for now), budget and infrastructure negotiations continue. Wherever things land, there’s another thing we hope won’t stay in the final package: proposed changes to Qualified Small Business Stock.

Qualified Small Business Stock, or QSBS, are shares for founders, employees, and investors in a qualified small business subject to limited capital gains taxes. This encourages investment by enabling employee-owners to take the risk of joining an early-stage company and receive a return.

QSBS drives investment in small and emerging biotechs—helping them attract and retain talent by making up for the fact they can’t provide the salaries, benefits, or job security of large corporations.

But the budget reconciliation bill would curtail the effectiveness of QSBS in incentivizing investment. As approved by House Ways & Means, the Build Back Better Act would apply the tax change to sales of stock as opposed to new investments.

This would “punish taxpayers who invested in or earned QSBS shares years ago by changing the treatment for existing shares and imposing a tax on them,” explained a joint letter to House leadership signed by BIO.

It’s risky to join or invest in a small or startup biotech. “These companies fail at higher rates and even those that succeed do not provide employee-owners and investors substantive access to liquidity, meaning any investment of time, resources, or capital must be for the long-term,” we said. “The QSBS framework incentivizes that long-term investment and employee retention.”

“Employee-owners, founders, and investors made economic decisions in the past based on the QSBS construct supported on a bipartisan basis. This policy would change the rules on them after they followed the rules applicable at the time and held up their end of the bargain,” our letter explained.

BIO remains engaged on the budget reconciliation and infrastructure process—make sure you’re subscribed to Good Day BIO to get the latest updates.


Additional Health News:

CNN: Pill to treat Covid-19 cuts the risk of death by half, says Merck
A pill has cut the risk of hospitalization or death from Covid-19 by half in a study, Merck and Ridgeback Biotherapeutics said Friday. It would become the first oral medicine that fights viral infection for Covid-19 if approved by the US Food and Drug Administration for emergency use authorization.

Prescription Drug Affordability Boards are flawed—and would harm innovation and access to new treatments, says a new white paper from BioNJ.

Prescription Drug Affordability Boards, like the one proposed by the New Jersey Legislature, review the prices of drugs in states and set limits on the price of those drugs. 

But policymakers should avoid creating them, says BioNJ’s new white paper, Prescription Drug Affordability Boards: Myths vs. Facts on Drug Supply Chain.

Here are four myths vs. facts that explain why:

MYTH: “Government is the primary funder of research.”
FACT: “The private sector provides a significantly larger percentage—by orders of multitudes—of biopharma research and development funding than government sources such as the National Institutes of Health (NIH).”

MYTH: “Government price controls will not harm innovation.”
FACT: “Innovation ecosystems where artificial price constraints are in place inevitably see a decline in investment.”

Read: How many lifesaving drugs would you risk?

MYTH: “Manufacturers control when patients pay the ‘list’ price.”
FACT: “Patients almost never pay the list price for a prescription due to the complicated drug supply chain where entities such as Pharmacy Benefit Managers (PBMs) stand between the manufacturer and the patient.”

MYTH: “Prescription spending is rising in the U.S.”
FACT: “Drug prices and spending remain relatively flat. In fact, spending on U.S. medicines only increased 0.8 percent in 2020 and has only increased by a total of $56 per capita since 2010.”

Read: A ‘raid on future cures’

Instead, policymakers should adopt solutions that will improve patient access and deliver savings to the health care system—such as capping out-of-pocket costs and using negotiated rebates to provide to patients directly.

Read and share the white paper.

Listen: You don’t have to take our word for it on drug price controls. On this week’s episode of the I am BIO Podcast, small biotechs, investors, and patient advocates explain why proposals like H.R. 3 would harm innovation and future cures—listen via Apple, Google, or Spotify.

Thanks in large part to the revolutionary brain imaging work of Dr. Nora Volkow, addiction is now understood to be a disease of the brain. Beyond drug addiction, her groundbreaking work has led to a better understanding of ADHD, aging, and the neurobiology of obesity. She has been the Director of the National Institute on Drug Abuse (NIDA) at the National Institutes of Health since 2003.

Meet more Hispanic and Latinx scientists and innovators you should know.

President Biden’s Friday: The White House COVID-19 Response Team will hold a briefing at 11 AM ET.

What’s Happening on Capitol Hill: Congress passed a spending bill yesterday that funds the government through December 3—The New York Times explains what happened and what’s next. House Speaker Nancy Pelosi delayed the planned vote on the infrastructure bill after Democrats could not reach a deal, and the House will meet today to try again, reports NPR.