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:

Health Advocacy and Medical Specialty Groups Submitted a letter to Congress today arguing for Congress to rethink its position on SBIR eligibility in its upcoming consideration of the reauthorization of the Small Business Innovation Research ("SBIR") program.

As we previously reported in Congress to Consider SBIR Funding Increase , the SBIR program is set to expire in 2008, and Congress is currently considering legislation that would increase the amount that federal agencies with large research and development budgets would have to set aside for SBIR funding. 

The letter sent to Congress today articulated the position of biotech companies that the SBIR eligibility rules should be amended to reinstate funding for majority venture capital-backed companies:

After twenty years of participating in the program, the Small Business Administration (SBA) ruled in 2003 that small companies that are majority venture capital-backed could no longer apply for grants regardless of how few employees the companies have.  Because of the unique capital needs of biotechnology companies, most are now ineligible to be compete for grants.  As a result of the reinterpretation, the SBIR applicant pool is shrinking at the National Institutes of Health ("NIH)," and work on live-saving and life-enhancing technology is being postponed. . . .

Small biotechnology companies take basic scientific discoveries,  many of which originate from universities, and conduct further research and development to turn discoveries into commerically available treatments and cures. This collaborative relationship is one of the ways universities and academic researchers serve the public by contributing to the development of new treatments and cures and supporting the local economy.  Small biotechnology companies require significant venture capital investment, and unfortunately the SBA reinterpretation of the eligibility rules has hampered the continued research and development into biotechnology products, thereby delaying the delivery of future treatments to patients.

Fifty-two organizations signed the letter to Congress, including the Christopher & Dana Reeve Foundation, the Michael J. Fox Foundation for Parkison’s Research, and the Leukemia & Lymphoma Society.

Biogenerics legislation will likely be tabled until 2008, reported the Kaiser Daily Health Policy Report.

According to the Kaiser Daily Health Policy Report:

Rep. Henry Waxman (D-Calif.) in a speech before the Generic Pharmaceutical Association on Thursday said legislation (HR 1038) that would allow FDA to approve generic versions of biotechnology drugs is unlikely to reach the House floor this year. . . .

Waxman said that although “enormous strides” have been made since he introduced the measure in February, scheduling issues would prevent the bill from being included in House legislation (HR 2900) that would overhaul FDA and reauthorize prescription drug user fees. Waxman tried to attach the generic biotech measure to the FDA overhaul bill in July but was unsuccessful.

The biotech industry can breathe a sigh of relief.  With the battle over patent reform legislation looming ahead this fall, biogenerics is one fight that the industry will not have to take on this year.

The House passed its Patent Reform Bill on Friday with a 220-175 vote, reported the San Jose Mercury News.

According to the Mercury News, the passage of the Bill was in part due to a push by Democratic leaders, including Speaker Nancy Pelosi.  Sixty Republicans also supported the Bill, including Republicans in districts with large concentrations of high tech companies such as California, Virginia, and Texas.  The Senate plans to take up a similar bill this fall.

The passage of this Bill in the House is viewed as a victory for the high technology industry, but that victory comes at the expense of the biotech industry, which has not supported patent reform.

Ephraim Schwartz of InfoWorld reported on the differing views of the two industries last week:

One of the significant changes in the [Patent Reform] Act addresses the apportionment of damages clause. . . .

Because the high tech industry is built on thousands of small patents while the pharmaceutical industry typically would have one or two patents that covers years of research, pharmaceutical companies would like to see awards kept high to discourage patent infringement while high tech companies hope that by limiting damages it will also limit the huge number of so-called nuisance suits these large companies receive year in and year out.

Jim Greenwood, the President and CEO of the Biotechnology Industry Organzation (“BIO”), issued a press release on behalf of the organization expressing disappointment with the House vote.  The text of that press release stated as follows:

BIO appreciates the continued efforts by the House to improve the Patent Reform Act, but unfortunately cannot support the legislation passed today as it threatens continued biotechnological innovation.  We welcome improvements to the U.S. patent system, particularly those that increase patent quality, increase public participation, and provide additional resources to the Patent and Trademark Office (PTO).  However, the legislation that passed the House today and the legislation currently pending in the Senate do far more harm than good to our nation’s patent system.

While we are disappointed that the legislation passed the House, we were heartened that it did so narrowly and that there was strong bipartisan opposition to the bill.  This opposition demonstrates the serious concern of varied stakeholders — across many industries, research institutions and other interests — with the bill and the need for a more consensus-oriented approach to patent law reform.We look forward to working with the Senate to improve upon this legislation, particularly with respect to provisions relating to damages, inequitable conduct reform, post-grant review proceedings and PTO rulemaking authority.”

There is no word yet as to the official reactions to the House vote by our California biotech industry organizations, BIOCOM and Bay Bio, but their reactions are likely to be very similar to those of their national counterpart.

What will happen with patent reform when the Senate takes up its bill this fall?  We are likely heading for some heated debate.   The California Biotech Law Blog will keep you posted on the developments.

Congress is set to consider an increase to SBIR funding, according to a recent report by Mass High Tech: The Journal of New England Technology.

Sen. Evan Bayh, D-Ind., introduced the legislation, which would increase from 2.5 to 5% by 2013 the amount that federal agencies with large research and development budgets would have to set aside for SBIR funding.

Mass High Tech: The Journal of New England Technology reported on the significance of the SBIR program as follows:

The SBIR program — which doled out $1.9 billion nationwide in 2005 — is a major source of federal funding for early-stage technology development in the United States. The grants are used to explore the feasibility of technologies sought by government agencies, including the U.S. Department of Energy and the U.S. Department of Defense.

Supporters of the SBIR budget increase include biotechnology executives who argue that the funding fills the gap left by declining venture capital investment in the early-stage firms.

Of course, the article points out that the debate on the legislation will likely focus on the role of venture capital firms, since companies majority-owned by large venture-capital backed firms do not qualify for SBIR awards.

The SBIR program is currently set to expire in 2008.

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The Food and Drug Administration ("FDA") is exercising new caution in approving drugs in the wake of the Merck Vioxx scandal, according to an Associated Press Report published on MSNBC.com.

The Associated Press Report stated as follows: 

The agency has approved 61 percent of drug applications through mid-August, down from 73 percent in the same period last year, according to BioMedTracker, a biotech and pharmaceutical research service. . . .

James Kumpel at Friedman, Billings, Ramsey & Co. just published a report showing FDA approvals of "new molecular entities" — drugs made from new chemical compounds rather then just twists on existing drugs — so far this year are at their lowest level in at least a decade. Only seven were approved through the end of July, versus an average of 12 over the first seven months of each year since 1998.

What are some of the specific examples cited by the article of the FDA’s caution?

• Rejection of Merck’s Arcoxia, a successor to Vioxx;
• Asking for more time to review its approved migraine drug Frova for a new use, preventing menstrual migraines;
• Rejecting or delaying for approval Novartis’ diabetes drug Galvus, Sanofi-Aventis’ weight-loss drug Zimulti, and a higher dose of GlaxoSmithKline’s Advair Diskus for bronchitis and emphysema symptoms; and
• Rejecting Wyeth’s experimental schizophrenia drug bifeprunox and Wyeth’s Pristiq, which would have been the first nonhormonal drug for menopause symptoms.

It was almost inevitable that the FDA would tighten up its practices and exercise more caution in approving drugs following all the bad publicity over the Vioxx scandal.  In some ways, this was perhaps warranted.  However, the question now is: are they taking caution too far?  Are they delaying good medicines from going to market that could be saving lives, in the exercise of extreme caution?  Only time will tell, and I am sure many in the biotech industry will be closely watching.

The San Francisco Chronicle ran an interesting article last week on the steps that the biotech industry is taking to protect itself against the threat of generic copies, as patents run out and the threat of biogenerics legislation looms ahead.

The Chronicle reported on the issue as follows:

Whether many biotech companies will be able to beat the generic threat through innovation is an open question. But many will try. . . .

Traditional pharmaceutical companies, whose pills and tablets have been vulnerable to generic competition since 1984, have struggled to roll out significantly improved medicines before patents expired. Revenues for drugs such as the antidepressant Zoloft and the sleeping pill Ambien are plunging as generic sales rise.

“It remains to be seen if the same thing will happen in biotech,” Citigroup analyst Yaron Werber said. Some of the signs for biotech are favorable. “The industry continues to be a leader in innovation,” he said. That capacity for innovation is a significant added business risk for generic manufacturers who venture into the biotech realm, Werber said.

So what is the industry doing to prepare?

According to the Chronicle, Genentech is putting brand-names of its drugs on the market to compete with the drugs that are about to lose protection, and is also putting next-generation versions of its own drugs on the market.

In contrast, the Chronicle reported that other companies are racing to develop improved generic versions of the brand name drug.  The Chronicle stated as follows:

Two Bay Area companies, Affymax Inc. of Palo Alto and FibroGen Inc. of South San Francisco, are among the manufacturers working on next-generation drugs they hope will capture market share from Epogen and similar branded drugs. Affymax’s experimental compound Hematide requires less-frequent dosing. Theoretically, it could help patients avoid a very rare side effect associated with Epogen-like drugs.

All in all, the Chronicle put a positive spin on the issue, emphasizing that the industry was not concerned, arguing that the threat of biogenerics and the impending loss of patent protection just encouraged the industry to move forward with the development of more innovations.

Is this media spin or an accurate reflection of the mood of the industry?  My guess is that it is a little of both.  Smart industry players have to think ahead on how they will survive if biogenerics legislation becomes a reality, but one cannot help but question whether they are really as unconcerned as the Chronicle suggests.

Rebecca Zacks in XConomy provided an excellent overview of a blogosphere controversy that erupted last week over biogenerics legislation, in response to an article run by the Wall Street Journal on Genzyme’s recent difficulties in manufacturing the drug Myozyme at a second plant.

Zacks provided some background to the issue:

Myozyme, approved by the FDA last year for the treatment of an inherited muscle disorder called Pompe disease, could be a big source of revenue for Genzyme—the drug can cost more than $300,000 per year for an adult patient, according to the Journal article. But Genzyme has been unable to scale up production of the drug because the FDA has so far declined to approve a Boston plant meant to be its main source. While the company waits for that approval, it is providing some U.S. patients with free doses from a different plant in Framingham, MA—the one that produced the drug for the clinical trials—on an experimental basis. (The Framingham product is already approved for sale in other countries, but not the U.S.)

What’s stalling approval of the new factory, according the article, is a chemical difference between the Myozyme produced in Framingham and that produced in Boston.

Zack cited Wall Street Journal’s David Armstrong, who followed up on the Journal’s article with the following explanation:

Genzyme is having trouble persuading the FDA to sign off on Myozyme made in big batches. The agency wants to be sure the drug produced in large tanks is the same as the stuff Genzyme made successfully on a smaller scale.

Making biologics is complicated work, and that’s one reason the biotech industry has voiced caution about legislation to allow generic versions of the medicines.

In the case of Myozyme, billions of cells from hamster ovaries growing in large stainless steel tanks produce the enzyme Pompe patients lack. The fact that Genzyme, which has loads of biotech experience, is having such difficulty ramping up production of its own drug heightens worries about the ability of generic manufacturers to accurately copy brand-name biotech drugs.

Even small differences in these drugs could affect patients. Myozyme made in the big tanks contains less of a key carbohydrate that is believed to help certain muscle cells absorb the drug. Less absorption could reduce the drug’s effectiveness.

However, Zacks acknowledged that not all the bloggers give any real credence to the biotech’s industry’s position or to the argument that Myozeme should be a case study for why biogenerics legislation is a bad idea, citing Venture Beat’s David Hamilton, who had his own take on the controversy, arguing that the Wall Street Journal “missed a much more important point about biogenerics: [t]he double standard that the biotech industry holds” on determining the equivalence of different batches of drugs.  Hamilton wrote as follows:

The first issue here is that there’s nothing new about biotechs finding that new production batches of a complicated protein differ in certain ways from older batches. . . . Sometimes these differences are serious; more often, they’re not. . . .

The second issue — and those of you who’ve followed these debates can probably see where I’m going — is that the biotech industry wants to have it both ways when it comes to the “complicated work” of making biologics. Where biogenerics are concerned, the industry insists that copycat versions of biotech drugs must undergo those expensive and lengthy clinical trials in the interests of “patient safety.” When it comes to their own drugs, however, biotech companies are perfectly willing to rely on a battery of simpler tests to ensure that a new production batch is equivalent to an old one, and only run clinical trials as a last resort (and when forced to by the FDA).

All of which suggests that it would probably suffice to subject any would-be copycat drug to the same set of tests that biotech manufacturers themselves must meet for a new production facility. If it passes, it’s approved. If not, then it’s time to consider clinical trials. In fact, this is pretty much the “case-by-case” strategy adopted by the House and Senate biogenerics bills — ones that I’m pretty sure the Biotechnology Industry Organization opposed. In any event, it doesn’t seem too much to ask that journalists covering these debates realize that the case against biogenerics is a lot weaker than the industry would like us to think.

All in all, Zacks effectively captured a very interesting blogosphere debate on yet another aspect of the biogenerics controversy.  As you know if you follow this blog, I have indicated repeatedly in prior blogposts my view that biogenerics legislation is going to have a negative impact on the biotech industry.  I think I would agree with Venture Beat that this is the principal problem with biogenerics legislation, and that the argument that biogenerics legislation will somehow lead to dangerous copies of drugs being on the market is a fairly weak attempt at scaring the public and/or legislators into voting against such legislation.  There is already a mechanism in place to regulate drugs on the market–the FDA regulatory powers.  The much larger issue is what biogenerics legislation will do to discourage biotech innovations that should be a concern to all of us out there.  We all want to be able to afford to buy the drugs we need, but at the same time, we also want access to medications that will make us well when we come down with a horrible illness.  We should not lose sight that without a profit incentive to developing those medications, they won’t be available when we need them.

In his blog Secondhand Smoke, J. Wesley Smith makes an interesting argument that California’s stem cell priorities have been misplaced.  Wesley points to an article in today’s San Francisco Chronicle as evidence for his argument.  The Chronicle article is a human  interest story on State Senator Carole Migden’s push for a state system to collect and store umbilical cord blood.

J. Wesley Smith writes as follows:

This story illustrates how politics has twisted the proper pursuit of regenerative medicine in California. During the last six years or so, the legislature went GA-GA over ESCR and human cloning. It passed a state law explicitly permitting human cloning research. And then, under a $35 million propaganda barrage, state voters agreed to an initiative (Proposition 71) that created a constitutional amendment to permit human cloning research and to fund SCNT and ESCR to the tune of $3 billion over ten years using borrowed money–meaning the actual cost will be about $7 billion. And all to pursue utterly unproven and ethically contentious approaches to regenerative medicine–and to supposedly “defy Bush,” even though Bush has done nothing to prevent state jurisdictions from funding whatever they want.

And yet, the legislature is only now getting around to creating an umbilical cord blood banking policy

Smith certainly makes a strong argument that California’s priorities have been misplaced.  The question for those of us in California: is he right?

Certainly, there is evidence that State taxpayers’ decision to fund stem cell research was a purely political one.  It is no secret that President Bush will not go down in the record books as the most adored President in this state.  One can absolutely make the argument that the decision to fund stem cell research was in part a reaction to the President’s repeated opposition for stem cell legislation, particularly since stem cell research is such a popular issue in this state.

Of course, a counter-argument could also be made that this State’s economy will be supported by the investment into stem cell research, since the investment will go largely toward hiring people to conduct the studies.  Many jobs will likely be created by the investment, which will trickle down to the economy at large.

However, one cannot help but wonder if the money couldn’t have been better spent elsewhere, even if you are a supporter of the biotech industry and of the concept of the research generally.  Our schools, health care, keeping drugs off the street, illegal immigration, crime, overcrowded prisons, and terrorism are just some of the many issues facing this state that could have also been better funded with the same money.  Did we as taxpayers make a good decision when we voted to use the funds instead on stem cell research?

It’s a thought-provoking question that all Californians should  consider.

The International Herald Tribune ran an interesting article last week on the clash between biotech and high tech over patent reform.

The International Herald Tribune reported:

Both industries depend on patented inventions, but high-technology firms have been pushing for changes to lower the risk of expensive patent-infringement lawsuits. And much of what they want is reflected in a bill making its way through Congress.

Biotechnology companies, however, argue that such changes would make it harder to protect new discoveries. . . .

The biotechnology industry. . . . foresees damaging consequences. Biotechnology firms, major drug companies, and universities all stand to earn millions, sometimes billions of dollars on inventions that can be as small as a single molecule.

They attract financing based largely on the potential value of their inventions, whose profits may be many years in the future. If those inventions were more vulnerable to patent challenge, with decreased penalties for infringement, they would become far shakier foundations on which to build a company. 

The article raises an interesting question: is patent reform a bad idea for the biotech industry?

While clearly a case can be made that patent reform is not favored by the industry, I think it is a bit leap to say that patent reform is actually going to harm biotech companies.  Sure, proponents for patent reform are largely members of the high tech industry, which has increasingly had to worry about the phenomenon of "patent trolls" and high litigation damage awards, but that does not mean that patent reform is going to actually have a detrimental effect on biotechnology.  Isn’t it possible that, despite the gap between the industries on this issue, that in the end any patent reform measure passed will ultimately affect both industries to a similar degree? It is not as though the patent reform measures will be industry specific, although I am not so sure that the industries wouldn’t prefer otherwise.