If your biotech company is like most U.S. businesses, it has been severely impacted by the ongoing coronavirus crisis and the stay-at-home orders that have been mandated across the country. Legislation was recently passed by Congress and signed into law that may make available disaster relief to your biotech company: the Coronavirus Aid, Relief, and Economic Security Act (the “CARES” Act).

The CARES Act established a new business loan program, the Paycheck Protection Loan Program (“PPP”), which will enable a U.S. biotech company qualifying as a small business to receive a loan in the amount of 2.5 times the company’s monthly payroll costs. As part of the PPP, biotech companies (and other small businesses) may be eligible for loan forgiveness on any loan proceeds applied during the eight week period immediately following receipt of the loan towards payroll, rent, utilities, and interest on mortgage and debt obligations incurred prior to February 15, 2020, provided that all employees are kept on the payroll for the eight week period and the documentation verifying the use is submitted to the lender. Any loan proceeds that are not forgiven will have a maturity of 2 years and an interest rate of 1%. The program is described in more detail on this weblink The interim regulations describing how the program will work are linked here and the FAQ addressing questions and answers is linked here.

To participate in this loan program, your company should submit an application through your primary bank. Alternatively, many online and non-bank business lenders are also participating in the loan program, so working through such a lender may be an available option.

In addition, your biotech company may be eligible for an economic injury disaster loan advance of up to $10,000. Originally these advances were supposed to be available within 3 days of submitting an application; however, this now been revised to remove the previously defined deadline. Advances should be requested directly through the SBA website at this link: https://covid19relief.sba.gov/#/. The loan advance will not have to be repaid but the amount may be deducted from a subsequently obtained PPP loan.

It is anticipated that the funds allocated to this program are going to run out before all the applications are processed, so companies are being encouraged to submit applications as soon as possible. It is unfortunately not clear how long businesses will have to wait to receive the aid. To date, the California Biotech Law Blog is only aware of one approved business via a third party report, and has heard of no business actually receiving any aid through these programs.

Now that President Obama signed the patent reform bill into law on Sept. 16, 2011, it is only fitting to ask whether the passage of this bill was a win for the biotech industry?

According to Roy Zwahlen, manager of intellectual property and technology transfer policy at BIO, the answer is a clear “yes.” He posted a blog posting on the BIO website, in which he articulated a number of reasons why he thought the bill was good for biotech:

1) Greater resources and operational flexibility for the PTO;
2) New and improved proceedings for patent quality review;
3) Will end the abuse of a loophole in false patent marking litigation;
4) Change America’s first to invent system to a first to file system;
5) Make it easier for inventors to file a patent; and
6) Eliminate the “best mode” requirement in patent litigation.

I thought Mr. Zwahlen’s apparent support for the patent reform bill was interesting in light of the industry he represents. Like many of my Bay Area counterparts, I have a completely different take on the issue.

While I am all in favor of making government agencies work better, as someone who regularly works with start-ups, I simply fail to see how changing our prior first to invent system in the U.S. to a first to file system could possibly have been good for the biotech industry. There is no question that the rest of the world has been using a first to file system and that our system was out of sync with the system adopted by the rest of the world. Yet, I would argue that our first to invent system was beneficial to cash-strapped start-ups and small businesses, which often do not have the budget when they first launch their businesses to immediately file patents to protect their inventions. As a lawyer working with start-ups, I frequently get the question “how much time do I have to file?” Particularly in the current times, when start-ups and small businesses are arguably more cash-strapped than they have ever been and investment money is so difficult to come by, patent prosecution costs are a huge concern. It’s hard to see how it can be in the best interests of a start-up to have to race to file a patent on an invention or to risk losing the opportunity to own the rights on the invention altogether.

Moreover, I can’t help but ask the question: in light of the challenges posed by the current economy, why in the world did Congress and the President choose now to impose yet another burden on start-ups and innovators?

Stepping back from this issue a bit, as a small business owner myself, I’ve been very vocal in my criticism over what I think is our country’s recent misguided financial support for so-called too-big-to-fail businesses at the peril of small businesses, which I would argue are the backbone of our country and of our country’s future. The average small business in this country (with a few notable exceptions such as the scandal-ridden and bankrupt Solyndra) has not been able to so much as pay a financial institution to loan it money in this environment. Yet, all kinds of taxpayer money has been handed out to large institutions since the recession started. This is not a criticism of any particular administration, as both the Bush and Obama administrations have taken this approach, as well as the past few Congresses. Moreover, while I’ve listened over and over again to the arguments in support of why these decisions have been made, I continue not to agree with them. My position is that the innovation we are all seeking to give our economy a much-needed boost is just not going to come from a large business, and that starving small businesses of capital and funding instead the largest businesses in this country is just a very misguided policy approach. So, this is the perspective I come from as a small business myself, whose business is largely comprised of working with start-ups. And that is the perspective from which I approach this issue.

The bottom line: I would argue that the decision to move to a first to file system in a bad economy is yet another example of enacting policies that hurt the little guy in tough times. And I think that it ultimately is bad for the biotech start-up out there who is trying to come up with cash to fund a patent program, or for the inventor who is trying to do something productive with his or her invention.

Fourteen states filed suit yesterday to challenge the constitutionality of the health care reform bill.

The states of Florida, Alabama, Colorado, Idaho, Louisiana, Michigan, Nebraska, Pennsylvania, South Carolina, South Dakota, Texas, Utah, and Washington joined together in a suit filed in Florida.

Virginia filed its own suit separately.

The crux of these suits is the constitutionality of the new health care legislation, which will now increase the federal government’s regulatory powers into health care insurance, which had been traditionally regulated at the state level (along with most private insurance), and will impose penalties on individuals for failing to purchase private insurance policies.

If you have been following the commentary on this issue at all, you know that this argument is basically a classic states’ rights debate: that the legislation deprives the states of sovereignty and violates the 10th Amendment to the Constitution, which says that powers not delegated to the federal government are reserved to the states.

Of course, the other side of the argument says that the bill is constitutional because Congress has the power to regulate interstate commerce under the commerce clause of the Constitution.

As most lawyers recall from our Constitutional Law courses in law school, the commerce clause has been read in recent years to provide the federal government greater and greater powers to regulate interstate commerce in various ways.   For this reason, many commentators are predicting that the legislation will stand up under constitutional scrutiny.

But should it withstand constitutional scrutiny?   There is no question that insurance generally, and particularly health insurance, has up until now been entirely within the purview of state regulation.  Each state has its own regulatory requirements for what can be in health insurance plans offered under that state, each state has its own insurance commissioners, and each state makes independent regularly decisions about the activities of individual insurers.  We haven’t even been able to buy insurance over state lines–if you move to a new state, you have to get a new policy entirely.  So, clearly insurance has long been viewed as falling under the purview of the states.

Moreover, this legislation now allows the federal government to mandate that you buy health insurance, and if you do not, you will be penalized by the IRS.  While supporters argue that this is like state laws requiring that you buy car insurance, I think that there is a valid argument that this is different.  In the case of car insurance, states are imposing these requirements on residents of their state who choose to avail themselves of the privilege of driving, in order to protect other drivers from injury.  It’s hard to see the parallel when this is a federal instead of a state exercise of power, and when there is no privilege like driving involved with health care, which Democrats are now calling a “right.”

The bottom line is that the IRS is entwined in this bill, and there is a good chance that the Supreme Court will read this bill to be a valid exercise of commerce clause powers–even more so because a taxation component is involved.

However, if that happens, I think supporters of this bill should look beyond the current legislative debate and consider how continuing to broaden the commerce clause powers might be used in the future.  Extending the commerce clause is going to someday make it that much easier for a Republican Congress to use the new enhanced commerce clause powers in a way that may not be quite so palatable to Democrats.  Continuing to allow an encroachment of states’ rights does have consequences and they are consequences that may very well cut in both directions.   I think it is an open question as to whether we as Americans want to continue to see the commerce clause powers continuing to encroach on states’ rights.   The line is moving further and further over into the traditional purview of the states: where is the hard stop?  Do we as Americans care enough to draw a line in the sand and say it stops in any particular place or are we okay with the states’ powers continuing to dwindle?

Clearly, this challenge raises some very interesting constitutional and societal issues.  So, whether you support health care reform and this particular piece of legislation, or you oppose it, I would urge you to tune into this Constitutional debate.  How the issues are decided will have an impact that goes far beyond our recent health care reform debate. The California Biotech Law Blog will continue to follow this issue as it unfolds.

Well, unless you have spent the last few weeks stranded on a desert island, you probably know that yesterday was the big health care vote.  As expected, the Democratic majority in the House passed the health care reform bill–despite the fact that the bill was vigorously opposed by a large percentage of the American public.

While the legal battle challenging the constitutionality of the law is just getting started and is likely to continue for some time, the biotech industry is just starting to process what yesterday’s vote will mean for its industry.

BIO,  the biotech industry organization, released a statement on the vote yesterday, which took a decidedly positive tone.  In support of its position, BIO cited three key benefits of the bill:

1. The bill provides hope for Americans living with debilitating diseases.
2. The bill created a pathway to enable the U.S. Food and Drug Administration (“FDA”) to approve biosimilars.
3. The bill included a Therapeutic Discovery Project Tax Credit, which is designed to provide financial relief to some biotech companies that are suffering in tight credit markets.

Why was BIO so positive about this legislation?

Well, the remarks suggest that BIO is happy with several of the carrots that were thrown at the industry in this bill: biosimilar legislation and a tax credit for biotech companies.

Noticeably absent in the BIO statement, however, was any statement to the effect that health care reform will advance the biotech industry in any way.  Instead, the only reference made to reform itself was that it will bring “hope” to Americans suffering from diseases.  Is this an oversight on BIO’s part?  In my opinion, no.

While there is no doubt that most biotech industry members applaud the idea of providing health care to all Americans, and you can certainly say that reform will increase the potential customer base for biotech products, it is a definite  stretch to say that this reform bill will prove beneficial in any way to the biotech industry.   How could it?  Any enterpreneur in the biotech space knows that the U.S. market has always been the most lucrative due to compensation issues–the U.S. consumer finances the world’s drug development costs.  What happens when you impose drug price controls, which are inevitable in government-controlled health care?  It doesn’t take an expert to see that the world’s most lucrative market will become a lot less lucrative.  It will become like most of the other markets in the world, which have price controls, too.  This kind of change will inevitably impact entrepreneurship in the biotech space.  Launching a biotech company requires huge risk and tremendous investment capital.  Will the capital be there when the huge  potential payoff is not?  It will take a huge amount of increased business to make up for the loss of revenues in the U.S. market due to price controls.  Will what is left be enough to encourage drug development?

While the answer to that question is still unclear, I think it is a safe bet that true entrepreneurs will find away to adapt to the new realities of the market.  Many entrepreneurs–me included–have had to do this in the past year to survive the recession.  I have adjusted my business model completely to deal with the new realities of the legal market,  and I think it is a safe bet that many other small businesses who survive this recession will have done the same thing for their markets.  I am sure that there will be biotech entrepreneurs who can adjust their business models to the new realities of the U.S. market after the passage of this bill as well.

Having said this, there is no question that this bill is going to have an impact on the industry.  Change is coming to biotech–and it may not be the kind of change that members of the biotech industry wanted.

So, what about the carrots that got thrown into this bill for the industry?  What kind of impact will those carrots have on the industry?

Well, the tax credit may be beneficial to some companies, but my guess is that it will have a minimal impact on struggling companies who are unable to land the capital they need to survive this recession.   It seems a stretch to say that a tax credit is going to “save and create thousands of jobs across our nation” as the BIO statement claims.  A tax credit only helps if you are generating revenue to pay taxes with, and many stuggling biotechs likely need investment capital more than they need a tax credit at this point in time.

As for the biosimilars piece to the legislation, this topic has been heavily debated for some time and remains controversial.  It is legislation that is going to benefit some companies at the expense of other companies, so it is difficult to say it really will “benefit” biotech.  The legislation will benefit companies seeking to manufacture biosimilars at the expense of the brand.  The California Biotech Law Blog will explore this issue in more detail in a separate blog entry.  The bottom line is that BIO is supporting the legislation simply because it creates a pathway for the approval of biosimilars, which previously did not exist, and BIO is taking the position that this is the right decision for biotech.

All in all, the impact of this bill on biotech is one that may be debated and evaluated in the months to come.  The California Biotech Law Blog will continue to follow the developments as they unfold.

Despite ongoing negotiations in the Senate and House throughout 2009, the new year is beginning with the SBIR reauthorization effort at a continued standstill.

While Congress did successfully save the SBIR/STTR from extinction by implementing a series of five continuing resolutions (“CR”) since the authorization expired back in September 2008, no permanent solution has been reached and the current CR is set to expire on January 31, 2010.  Thus, the SBIR/STTR programs continue to be in limbo.

If you have been following this issue at all and are familiar with the SBIR/STTR programs, you may be wondering why these programs continue to be in a perpetual state of almost extinction.

According to the SBIR Gateway, which has been covering this issue, the problem is that the Senate and the House cannot agree on the terms of a reauthorization bill.  There are apparently eight issues that are still being debated:

1. Length of reauthorization;
2. Venture capital participation in SBIR;
3. Award levels;
4. Sequential Phase II award;
5. Retention of Phase I requirement;
6. Allocation increase;
7. Administrative funds; and
8. Rural and state outreach.

SBIR Gateway attributes the problems to the fact that ” the more the Senate was willing to compromise, the more the House wanted” and asserts that the “House Small Business Committee under the leadership of Nydia Velazquez and her staffer Michael Day wanted to hold the SBIR program hostage.”  According to SBIR Gateway, a key issue is that Velazquez is receiving large campaign contributions from the National Venture Capital Association (“NVCA”) and biotech investors, and they are the groups who would stand to benefit from the House Bill the most.   So, the argument is that Velazquez is unwilling to agree to more than a two year reauthorization for this very reason.

Regardless of what is going on here, it is clear that the whole SBIR reauthorization effort has become bogged down in politics and has been therefore left on the backburner.  Based on what I personally have observed this past year, I would argue that this seems to be the current state of affairs for anything involving small business: Congress seems to have put small businesses in general on the backburner for whatever reason, despite the fact that small businesses, which include biotech companies and other start-ups, provide the majority of jobs in this country and unemployment as well as underemployment continues to be the overarching concern of most Americans today. So, small businesses have largely been left to fend for themselves through this recession and deal with the fact that access to capital has all but dried up, while Congress has been out bailing out banks, failed auto companies, and other “too big to fail” institutions–which employ only a small percentage of the nation’s workforce–with our taxpayer dollars.

Does any of this really make sense?

The California Biotech Law Blog would like to see Congress to reassess its priorities in 2010:  it is time to put the focus on small business.   I am certain that many of you in the biotech community would agree that getting serious about finally passing a  SBIR/STTR reauthorization bill would be a good start.

Following up on our recent coverage of the patent reform debate, Genetic Engineering & Biotechnology News recently interviewed me for their article Patent Reform Battle Pits Biotech against High-Tech. The interview addressed the competing perspectives of the biotech and high tech industries on the issue of patent reform.

Here we go again. . . .Patent reform is back on the table: two bills have been introduced and are again being debated in Congress.

The first of the two bills, the Leahy-Hatch bill, S. 515, was introduced on March 3, 2009.  According to a summary by the Congressional Research Service, the key points of this patent bill, also known as The Patent Reform Act of 2009, are as follows:

Defines “effective filing date of a claimed invention” as the filing date of the patent or the application for patent containing the claim to the invention (thus establishing a first-to-file system).

Declares that, to the extent consistent with U.S. obligations under international agreements, patent examination and search duties are sovereign functions. Requires that those functions be performed within the United States by U.S. citizens who are federal employees.

Revises various other rights and requirements related to patents, including regarding: (1) damages; (2) post-grant procedures; (3) citation of prior art; and (4) inter partes reexaminations; (5) preissuance submissions by third parties; (6) venue and jurisdiction; and (7) the regulatory authority of the Patent and Trademark Office.

Replaces the Board of Patent Appeals and Interferences with the Patent Trial and Appeal Board.

Revises provisions concerning the residency of federal circuit judges and the facilities and administrative support which must be provided to them.

Two biosimilars bills have just been introduced in the House, each of which would establish regulatory path for biosimilars to be approved.

The first bill, HR 1427, the Promoting Innovation and Access to Life Saving Medicine Act, was introduced on March 11, 2009 by Representatives Henry Waxman (D-CA), Frank Pallone (D-NJ), Nathan Deal (R-GA), and Jo Ann Emerson (R-MO).

A second bill was introduced the following week. H.R. 1548, the Pathway to BioSimilars Act, was introduced on March 17, 2009 by Representatives Anna Eshoo (D-CA), Jay Inslee (D-WA), and Joe Barton (R-TX).

What are the key elements of each of the bills?

According to the HR 1427 Bill Summary, highlights of HR 1427 include as follows:

• FDA authority to approve biosimilars;
• approval process will require showing that (1) there are no clinically meaningful differences between the two products and (2) that the two products are highly similar in molecular structure and share the same mechanisms of action;
• biosimilar may establish that it is “interchangeable” with the original product, and the first such biosimilar able to make such a showing will receive six months of exclusive marketing;
• an original product with a novel molecular structure is entitled to five years of exclusive marketing, and a modification of a previously approved product is entitled to three years of exclusive marketing.  These periods can be extended by up to one year if it can be established that the product can be used for a new disease or that it conducts pediatric studies; and
• a new procedure is established to resolve patent disputes prior to approval of the biosimilar, and penalties are put in place for failure to timely litigate such disputes.

In contrast, highlights of HR 1548 are as follows:

• establishes safey standards for establishing interchangeability;
• establishes exclusivity for the first  product found to be “interchangeable”  for a period of 24 months after the product has either been deemed to be interechangeable or goes on sale;
• the reference product receives 12 years exclusivity, and that period of exclusivity will extend to 14 years in the event that a new indication is found for the product in the first 8 years after licensure;
• an additional exclusivity period is also established for pediatric studies and use of product;

Which bill has been more widely received by the biotech industry?

Well, the biotech industry group BIO has indicated its preference for the second bill, according to reports by Fierce Biotech.    Fierce Biotech explained as follows:

For biotech companies, the difference between five years and 12 years of exclusivity could amount to billions of dollars.

In contrast, BIO did not have such a positive opinion of the first bill, stating in a press release as follows:

Unfortunately, the legislation introduced today would take patients and our industry down the wrong path – a path that jeopardizes the continued development of new breakthrough therapies and potential cures for debilitating diseases such as multiple sclerosis, HIV/AIDS and Alzheimer’s. . . .

“This bill seeks to cut prices but instead cuts corners.  This proposal leads us off the map as we seek an effective, fair and safe pathway to a biosimilars market.

“The legislation introduced today does not strike the necessary balance for patients or the economy.   Any biosimilars legislation must ensure safe and effective biosimilars, promote the continued development of new therapies and cures, and ensure the benefits of additional competition among biologics through the entry of biosimilars.

The California Biotech Law Blog will continue to follow this issue as debate on each of the proposed bills continues.

The House and Senate have reached a compromise to extend SBIR through July 31, 2009, according to a report that broke late this evening by the SBIR Insider.

The SBIR Insider reports that the House will originate the bill and that the legislation will amend PL 110-235 (the current CR), which expires on March 20, 2009.

The compromise was announced on the same day that President Obama announced his new plan to assist small businesses.  The President’s plan is intended to unfreeze the credit markets for small businesses by providing additional liquidity and guarantees of small business loans, and to also reduce lending fees and provide tax breaks for small businesses.

As the California Biotech Law Blog previously reported, support for SBIR reauthorization has been waning in Congress and there were genuine concerns that Congress would let the SBIR expire without taking action to save it before the March 20th deadline.  Apparently there was a last minute change of heart, however, with the President’s announcement today of his plans to help small businesses.

Of course, this bill has not yet been signed, so it is not yet a done deal.  The California Biotech Law Blog will keep you posted as any news breaks on this effort.

As we reported previously, he SBIR/STTR program is set to expire on March 20th of this month, unless Congress takes last minute emergency action to save it.

Unfortunately,  SBIR Insider author Rick Shindell reports that there is growing opposition in Congress to saving the SBIR/STTR program.

In fact, the idea of even providing funding for the SBIR/STTR program was rejected with the passage of the Stimulus Bill in Congress, where according to The SBIR Coach’s Blog, a provision that would have provided the SBIR/STTR programs $250 million was struck at the last minute from the bill and language was inserted which explicitly precluded the NIH from using the stimulus money for the SBIR/STTR programs.

Does this really make sense?  Regardless of how you feel about the Stimulus Bill that was passed, does it make sense to exclude funding for small businesses from a bill that is supposed to stimulate the economy and create jobs?

The SBIR Coach’s Blog voices its opinion on this issue as follows:

What were they thinking? As Ann said in her alert, “Such an exclusion is underhanded and entirely inappropriate.” There’s the understatement of the year (so far)!

Entirely inappropriate for sure. Does it make sense for the NIH to not seek additional innovative solutions from our small businesses — a sector hailed by President Obama himself as being the most likely one to create the jobs that we so desperately need? 2.5% +0.3% of $7.4B is $207.2M that’s been inappropriately withheld from our small businesses. That could be used to create a whole bunch of jobs!

And underhanded to boot! They snuck the wording into the fine print in “code” so we wouldn’t spot it. A search for “SBIR” or “STTR” won’t turn anything up.

While I agree that the SBIR/STTR program is far from perfect, and I have been critical of the whole SBA program in the past based on my personal experiences with the SBA in trying to secure loans for my business, it is my personal opinion that, at a time like this when the economy seems to many of us to be in freefall, reauthorizing SBIR/STTR should be a no-brainer.  Why wouldn’t Congress want to maintain support for small businesses, which, in my opinion, are the lifeblood of our economy?  Moreover, why in the world wouldn’t Congress want to include funding for small business programs like the SBIR/STTR in a huge spending bill intended to stimulate the economy?

I can tell you personally that it is nothing short of impossible right now to secure funding for a small business, period.  The help seems to be going to Detroit, the banking system, and AIG, as well as to all kinds of random programs in various states across the country (which to be honest, have made me scratch my head a little bit and wonder why we are funding many of them with taxpayer dollars),  but there is little or nothing that small businesses can do right now  to get access to additional funding.  Supposedly there is some provision that did make it into the Stimulus Bill which will free up some funding fo help small businesses refinance debt, but this funding is not yet in effect and most small businesses have yet to get much in the way of details on this particular program.

So, back to the topic of the SBIR/STTR program, which will shortly expire: in this economic climate,  why in the world  isn’t Congress acting to ensure that this doesn’t happen?

Your guess is as good as mine.  However, the bottom line is that the expiration of SBIR/STTR is all but a done deal now.  If this is a concern to you, you have 16 days left to take action and get your voice heard by Congress.  Perhaps there is still time to save this program from extinction.

Rick Shindell has provided a list of instructions for how to get your voice heard on this issue:

Develop a brief message urging an SBIR extension for a year, stating its importance to you, your business and community. Stress that a collapse of SBIR could be catastrophic not just for you, but the entire high tech small business community. Stress that SBIR community is a pillar of America’s innovation and economic stimulus . Do it in your own words because boilerplate language is far less effective.

1. Call your Senators, both their local and DC offices. http://www.senate.gov/general/contact_information/senators_cfm.cfm
2. Call your Representative, both their local and DC offices. http://www.house.gov/house/MemberWWW.shtml
3. Go to their web sites and use the email or webmail links to send them your message.
4. Contact the Senate Committee on Small Business and Entrepreneurship info@small-bus.senate.gov – 202-224-5175
5. Contact the House Small Business Committee (202) 225-4038 www.house.gov/smbiz/
6. Contact the House Committee on Science (202) 225-6375 – http://science.house.gov/contact/contact_generalform.shtml
7. Go to the President’s web site at http://www.whitehouse.gov/contact/
8. Write to your local newspapers, TV and radio stations.
9. Work with other small business groups to form a united effort.

The California Biotech Law Blog will continue to keep you posted on any new developments on this issue, and will let you know if there seems to be any movement towards saving the program.