Debating the Future of the SBIR Program
Given the impending expiration of the SBIR Program this October, 2008, the future of the SBIR Program is once again being re-visited.
As The California Biotech Law Blog reported last October, the biotech industry has been actively lobbying for the Small Business Administration ("SBA") to reverse its decision of January, 2001 to make venture-backed companies ineligible for SBIR grants. This issue, by far, has received the most press in recent years, and of course, is the issue receiving the most attention as the expiration date nears. The rule excludes many if not most biotech companies from being able to take advantage of SBIR funding, which of course is a serious concern to the industry as a whole.
Interestingly enough, even the more established pharmaceutical industry has been very vocal on this issue. While at first glance, this concern seems a bit misplaced, on further consideration, it makes perfect sense that pharma would support biotech’s efforts to change the SBA’s policy. It is a well-known fact that pharma is looking to biotech companies to supply new products to fill its drug pipeline, which is increasingly becoming depleted. The more money these companies can access at the early stages, the more likely it will be that enough biotech companies will survive to fill that pharma need.
So, while the issue of excluding venture-backed companies from SBIR grants is taking center stage to the renewal debate, I would argue that Congress should look beyond that stage at some more fundamental problems with the program as it debates SBIR’s future.
What are those problems?
First and foremost, there has never been a good clarification of the SBIR Program’s priorities.
The SBIR Program falls under the umbrella of the SBA, which according to its website, has a mission based on the following principles:
Based on the principles listed on the SBA’s website, it is clear that its chief mission is to support entrepreneurism and thereby help the economy. A second mission is to help promote. women, minorities, and socio-disadvantaged businesses. In contrast, the SBIR’s mission is a little less clear. The SBIR’s website describes the mission of the SBIR and its companion program, the STTR ("Small Business Technology Transfer"), as follows:
Contrary to the mission of the SBA, the stated mission of the SBIR seems to focus on supporting research and development rather than entrepreneurism. Yet, the SBIR falls under the umbrella of the SBA. This dual and somewhat conflicting dichotomy of SBA and SBIR missions is played out in practical ways through the program as well. For example, Phase I awards are made at the complete discretion of the participating government agencies on research and development grounds and Phase II awards are made on the basis of the scientific and technical merit of an idea. In contrast, Phase III awards are made on commercial viability grounds and require the use of private funds. Additionally, there is evidence to suggest that university spin-offs may be one of the primary recipients of SBIR grants rather than other types of businesses, which may have more of a commercial and less of an academic or research and development emphasis. In fact, even the debate as to whether accepting venture funds should exclude companies from being able to accept SBIR awards reflects this issue, since if the focus of the program was on successfully commercializing small businesses, then presumably the notion of supplementing private funds with public funds would be preferred rather than prohibited. A second problem with the program is that there is inadequate data to measure the SBIR Program’s success. The Government Accountability Office ("GAO") published a report in October, 2006 outlining the SBIR Program’s failures in collecting data from each of the agencies participating in the Program. One of the conclusions of the GAO was that the "SBA is Five Years Behind Schedule in Meeting its Obligation to Implement a Government-Use SBIR Database." How do you judge the success of anything without adequate data to draw any significant conclusions? A third problem with the SBIR Program is that there is evidence to suggest that certain organizations are repeatedly winning many of the awards and that those organizations may have succeeded in achieving the status of becoming SBIR award mills by learning how to successfully work the system. Is this really what was intended by Congress and the SBA? All in all, it is safe to say that SBIR is riddled with some fundamental problems that Congress would be wise to address as it evaluates the Program’s future. While there is no doubt that the SBIR Program plays a valuable role in early -stage biotech start-ups, the industry should perhaps consider redirecting its efforts toward clarifying the goals of the Program and generating useful data over focusing on the more narrow issue of overturning the prohibition on making awards to venture-backed companies.
|
