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.

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.

Congress is examining backlog issues at the United States Patent and Trademark Office ("USPTO"), according to a report by Peter Zura’s 271 patent blog.   The report indicated that Howard Berman, Chairman, Subcommittee on Courts, the Internet, and Intellectual Property recently sent a letter to USPTO Director Jon Dudas asking a number of questions relating to these issues.

Peter Zura’s 271 patent blog reported on the highlights of the letter as follows:

• According to the recent GAO report titled "Hiring Efforts Are Not Sufficient to Reduce the Patent Application Backlog, " the GAO found that the USPTO cannot hire enough patent examiners to reduce patent pendency in the next five years. It seems, however, that this projection is based on estimates provided by the USPTO. . . . Please provide all data related to these "USPTO estimates, " including mathematical models, and underlying statistics and assumptions such as examiner retention and productivity. Under these same assumptions, hypothetically, how many patent examiners would have to be hired in the next five years in order to reduce the patent backlog?
• After release of the above mentioned GAO report, the USPTO issued"a press release on October 4, 2007 that stated the USPTO would"review assumptions the agency uses to establish production goals for patent examiners." Then, before the Subcommittee, Director Dudas confirmed that the USPTO has begun to study patent examiner production goals. Please provide details on the methodology of the study and personnel conducting it. What is the current progress of the study and when can Congress expect the study to be completed? To what extent is the Patent Office Professional Organization and the Patent Public Advisory Committee involved in this study. . . . .
• Examination on Request (or, as the USPTO called it, Deferred Examination) is used in many countries such as Canada and Japan. Under such a system, applications are not examined automatically, as in the U.S., but only upon a specific Request for Examination within a set time period, say 3 years. If no request is filed within that period, the application is deemed abandoned and is never examined. From experience of other patent offices, 10% to 40% of applications are never examined under Examination on Request systems, resulting in substantial workload reduction. This is due to applicants’ voluntary abandonment of obsolete applications prior to the Request for Examination deadline. Under current USPTO practice, applications that become obsolete, but receive examination by the USPTO, are the worst investment the USPTO can make because their obsolescence means that the patents are unlikely to fetch any renewal fees.
• Why did the USPTO reject such a method that has the potential to reduce its workload and increase efficiency?

There is no word yet on the USPTO’s response to this inquiry.  We will keep you posted of any developments that arise.  To review the full text of the letter, please see attached.

According to an Associated Press report, Harvard researchers have been reviewing the recent rash of problems with approved drugs and have come to a "disturbing" conclusion: drugs that were approved by the FDA in a rushed timetable have had more problems than drugs that were approved on a more leisurely timetable.  The results of this research have just been published in Thursday’s New England Journal of Medicine and provide support for the researchers’ conclusion.

The Associated Press explains as follows:

Deadlines were first imposed on FDA by a 1992 law that allowed drug makers to pay millions of dollars in fees directly to the cash-strapped agency so it could hire more reviewers and clear a backlog of pending drug applications. In return, FDA had to make a decision — either approve or reject — on 90 percent of all drug candidates within 12 months of their application, or lose money. The deadline was 6 months for drugs so novel or potentially lifesaving to be classified high-priority.  Congress tightened the deadline for most drugs to 10 months in 1997.

Amid concern about risky drugs, Harvard professor Daniel Carpenter took a closer look at the impact. First, he found approval is 3.4 times as likely in the two months leading up to the user-fee deadline as at any other time.  Drugs approved in that just-before-deadline period had a four-to five-fold higher rate of later being withdrawn or requiring serious safety warnings, compared with drugs approved faster — presumably slam-dunks — or those that miss the deadline, Carpenter concluded.

While the FDA is denying that an accelerated review timetable is responsible for the recent wave of problems with approved drugs, the New England Journal of Medicine report certainly suggests that the contrary may in fact be true. 

In light of this evidence, what should be done to protect the public? 

Two possibilities quickly come to mind: first, there is the option of bulking up the FDA staff to more effectively deal with accelerated review timetables, and second, there is the option of lobbying Congress to loosen the tight deadlines, so that the FDA has more time to do a more thorough review of new drugs.  Given the current budget deficit, the second option is likely more realistic.

Perhaps patients who are pursuing class action suits against Merck and other companies who have sold these problem drugs should redirect their efforts towards lobbying for new legislation in Congress to relax the current FDA approval deadlines.  Taking this action–rather than pursuing class actions suits–may very well be the step most likely to produce real change in order to best protect the public. 

The Pharma Marketing Blog ran an interesting column today on the new proposed legislation, which would require doctors to disclose gifts received from drug companies. 

Introduced by Rep. Peter DeFazio (D-OR) and Ways and Means Health Subcommittee Chairman Pete Stark (D- CA), the new legislation is called The Physician Payment Sunshine Act  and is a companion bill to S. 2029, which was introduced by Senators Chuck Grassly (R-IA) and Herb Kohl (D-WI).  According the the press release issued by U.S. Congressman Peter DeFazio, the purpose of the bill is as follows:

The legislation builds on existing laws in Minnesota, Vermont, Maine and West Virginia to require prescription and medical device manufacturers to publicly report any gifts with a value of $25 dollars or more provided to doctors in connection with their marketing activities.  Under the new legislation, this information would be made widely available to the public. . . ."Americans are being gouged by pharmaceutical companies that spend more on marketing than they do research and development." DeFazio said.  "They enjoy generous subsidies from the government, but have no accountability when it comes to the billions of dollars they spend promoting high priced drugs.  I am proud to introduce this legislation which would shine a light on the marketing practices of drug companies and give patients the information they need to make an informed decision about their healthcare."

The question, of course, being debated is whether it is a good idea to enact The Physician Payment Sunshine Act.  The Pharma Marketing Blog argues that this legislation goes too far in attempting to curb the potential for conflicts of interest, stating:

This "sunshine" bill also has a few dark clouds associated with it. I have to agree with Bob Ehrlich of DTC Perspectives that "this bill seems overly onerous" and "is meant to discourage payments to doctors by outing them and the drug company on a public site". . . .
Do I agree with this? I hate to sound like a Clinton, but it all depends on what "large" means. Is "large" more than $100? This is the cutoff amount specified in PhRMA’s voluntary guidelines on gifts to physicians. Usually, these types of bills attempt to codify such voluntary guidelines and I’m not sure where the $25 limit came from other than the idea of setting the bar so low that it would put the pharma "tchochke" industry out of business.

What is our view at the California Biotech Law Blog on the proposed legislation?  In my opinion, there is a definitely a need for legislation to regulate potential conflicts of interest in the medical profession.  Lawyers certainly receive close scrutiny on potential conflicts of interest, and I see no reason why physicians should not receive the same treatment.  I certainly would think twice about taking any drug recommended by my physician if I knew that the physician making the recommendation had received compensation of any nature from the drug company, and as a lawyer, I would expect any doctor to disclose such an association.  I’m frankly surprised that rules are not already in effect to require this type of dislosure.

As far as the issue of whether the $25 limit is reasonable, this does sseem a bit ridiculous and arbitrary.  Is receiving $25 really a conflict of interest, when it is only a fraction of the doctor’s total earnings? The standard on legal malpractice applications for weeding out potential conflicts of interest is typically ownership of more than 5% of the company at issue.   Perhaps a more reasonable conflict of interest standard would be 5% of the doctor’s total earnings in the year.  Or even 3% of the doctor’s total earnings. But $25? 

What are your thoughts on the new legislation?  Please let us know your thoughts on the issue and we will share them with our readers.

Baybionotes provided a short update this month regarding the implementation of recent legislation expanding the obligations of clinical trial sponsors to submit information regarding their trials to the federal data bank. 

Author Robert Church of Hogan & Hartson LLP discussed the legislation as follows:

Title VIII of the Food and Drug Administration Amendments Act of 2007 expands the federal registry in several important ways. First, it is no longer limited to trials of drugs intended to treat serious or life-threatening diseases, but rather requires registration of all clinical trials other than Phase I and requires significantly more content. As of December 26, new data points for initial registration became required, even reaching back to include some clinical investigations that began before the law was passed.

The NIH has also been directed to expand ClinicalTrials.gov to include trial results. By this fall, sponsors will have to submit results information about approved products. Soon thereafter, adverse event data will be required on the site as well. Still more, the law requires the promulgation of regulations by September 2010, further expanding the results database “to provide more complete results information and to enhance patient access to and understanding of the results of clinical trials.”

What are the penalties for failure to comply with the new legislation?  According to Church, the penalities are as follows:

Not only will failure to submit the required information in a timely fashion be posted on ClinicalTrials.gov, but sponsors may also face civil fines up to $10,000 for all violations adjudicated in a single proceeding. If noncompliance continues thirty days after notice, the fine may be increased $10,000 each day until the matter is resolved.

The Washington Post ran a column today by Jon Leibowitz of the Federal Trade Commission, which addresses a suit recently filed by the agency against Cephalon, Inc., which will test the legality of the practice of entering into “pay for delay” settlements.

Liebowitz describes the  “pay for delay” settlement controversy at the root of this case as follows:

When these troubling deals first came to light in the late 1990s, the FTC fought them — and stopped them cold. Between 2000 and 2004, no brand and generic companies entered pay-for-delay deals; in other words, companies resolved patent disputes without anticompetitive payoffs.

Unfortunately, that success is under siege. Two federal appeals courts — in rulings that conflict with the analysis of a third appellate court — have found that a brand-name drug company facing a patent challenge is free to pay any amount to keep a generic producer from entering the market until the patent expires. These rulings depart from the spirit of Hatch-Waxman and our nation’s antitrust laws, and they harm consumers by subverting the competition at the heart of our free-market system.

Courts that have sided with pharmaceutical companies believe, in essence, that even an infirm patent gives its owner the right to pay competitors not to compete. . . .Not surprisingly, after two courts blessed such payoffs, the frequency of these settlements has increased sharply. In fiscal 2006, fully half of all pharmaceutical patent settlements (14 of 28) contained such payments. Brand-name manufacturers, seeing the potential to continue reaping monopoly profits, have taken advantage of this apparent judicial leniency. . . .

This dispute clearly puts Hatch-Waxman to the test: should a patent owner have the right to pay to keep a competitor out of the market until the patent expires?

Clearly, insurers and the public would say yes.  According to Liebowitz, Cephalon made an additional $4 billion dollars as a direct result form entering into this “pay for delay” settlement–this is money that came directly out of the pockets of insurers and patients.  As a member of the public who lost my health insurance following the collapse of my former law firm just over four years ago, when my former employer terminated COBRA at the six month mark, leaving me in the position of having to pay full price for prescription medications, I know all too well how expensive it can get to pay for prescription medications, when no generic is available.   There is definitely an impact on the public at large, insurers, and individuals when they have to foot the bill for a more expensive medication.

On the other hand, as an IP lawyer, I can’t help but scratch my head a bit over this case: the FTC is effectively taking issue over a patent owner trying to protect its exclusivity until the patent expires.  Isn’t that the patent owner’s right?

Not according to the FTC.  The FTC’s position is that patent owners do not have the right to enter into these types of settlements–that such deals violate the spirit of Hatch-Waxman and antitrust law.

It makes perfect sense to me why certain courts have sided against the FTC on this particular issue, and also why the FTC anticipates this case going to the Supreme Court.   According to Liebowitz, however, a bill is also making its way through Congress that would prohibit such agreements.  The FTC, of course, supports this legislation.

The California Biotech Law Blog will keep you posted as this battle unfolds.

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.

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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