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California Healthcare Institute Warns State Biotech Industry at Risk

Written by on Monday, June 18th, 2007

The California Healthcare Institute ("CHI") is warning that the California’s biotech industry is at risk as a result of recent court decisions, according to the San Jose Mercury News.

The San Jose Mercury News reported:

[The organization was] critical of several recent Supreme Court rulings, including its decision in January in MedImmune vs. Genentech, which eliminated a longstanding requirement for businesses licensing another company’s patented technology.

The decision allows companies licensing such technology to challenge the patent without first having to breach their license agreement and risk being sued.  As a result, many biotech executives fear the ruling could trigger a flood of patent challenges.

In other cases, the report said, the Supreme Court has made it tougher for biotech companies to obtain court injunctions against companies that infringe upon their patents and to prove their technologies are novel enough to warrant patents in the first place.

According to the San Jose Mercury News, CHI also expressed concern about the patent reform debate in Congress and the potential effects of patent reform on the industry.  At the heart of its concern is the fact that biotech products take many years and significant expense to develop.  If biotech companies are forced to overcome additional obstacles, what will this do to the industry?

I agree with CHI that California’s biotech industry will be impacted by some of the recent decisions by the courts as well as by patent reform; however, I can’t help but think that CHI is focusing on the wrong issues.  In my view, the issues that pose the greatest risk for the biotech industry are not these recent patent decisions, nor patent reform, but rather the push for biogenerics and for adopting universal healthcare, both of which could have serious and even devastating consequences for the industry.  How will the industry survive and flourish in a world, where biotech companies are unable to profit from the next big blockbuster?  As an entrepreneur myself, it’s difficult to believe that biotech entrepreneurs will be out there launching new biotech start-ups to the same degree they are today without the promise of a big payoff at the end.  How many well-intentioned people would really do that to themselves?  As much as I enjoy what I’m doing in building my firm and practice, I’m not sure I would do it if you took away the profit potential.  It’s just too much work.

Don’t get me wrong–I am as concerned as the next person with the rising costs of healthcare and the challenges with obtaining affordable health insurance and medications.  When my former law firm closed its doors unexpectedly and decided to terminate my COBRA six months later, I was surprised to find myself uninsurable.  Then, I had the pleasure of paying full price for brand-name medications for a year as I struggled to get my firm off the ground in a bad economy.  I even became very ill at one point and found myself in the situation of not being able to go to the doctor due to the expense and the fear of being hospitalized.  Coming from a family of healthcare professionals, it was a shock to the system to experience first-hand the other side of the story and to realize how easy it was to find myself–when I was young and basically in almost perfect health–in the position of not being able to obtain the insurance I needed.

And, of course, now that I do have insurance, I just received a letter from my insurer that the prescription drug benefits are being slashed this summer as a cost-saving measure–a move that will likely hit me and a lot of other Californians in the pocketbook.

However, the flip side of argument is that the biotech industry is a for-profit industry, which is just not going to thrive if you take away the "profit" element.  You don’t have to be an entrepreneur to understand that reality. 

With all of the innovation coming out of the biotech world today, a profitable industry could be the difference between any one of us dying from a horrible illness and our being able to avoid getting sick altogether.

So, does CHI have the right focus?  I guess it is up to us to decide.  


Comment from Daniel Abramzon
Time June 25, 2007 at 9:13 pm

I am not sure that Biogenerics are really the threat that many in our industry make them out to be. First of all, biotech products are relatively difficult to manufacture and the FDA will require a high degree of probative evidence to show bio-comparability between the original product and the generic. So even after product patents on biotech drugs expire, there will be a manufacturing process barrier to keep generics at bay. The second point to consider is that the pressure added by generic competitors should tend to drive increased innovation. Innovators will always be in a race to find the next big product before the previous one goes off patent. I recently had the opportunity to attend a talk by the CEO of one of the biggest biotech companies in the world. When asked about biogenerics he responded “If we can’t out-innovate ourselves in 20 years, we don’t deserve to be in business”. This rings true to me.

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