Dr. Ron Cohen, president and CEO of Hawthorne-based Acorda Therapeutics, gave recommendations to strengthen federal support for the U.S. biotechnology industry in testimony March 27 before the Congressional Subcommittee on Technology and Innovation. Following is an edited summary of Cohen’s testimony.
“The United States is now facing unprecedented competition from around the globe to be the leader in biomedical research. In 2008, China pledged to invest $12 billion in drug development and in 2011 the Chinese government named biotechnology as one of seven industries that will receive $1.7 trillion in government funding over the next five years. The European Union’s Innovative Medicines Initiative is pumping $2.65 billion into Europe’s biopharma industry and India’s Bioconnect initiative has funded over 200 new biopharma projects. While America has developed more cures and breakthrough medicines than any other country, this is not a position that will be sustained without continued investment and policies focused on supporting and incentivizing the next generation of biomedical discoveries, treatments, and cures.
In order to fully realize these potential benefits, we must have a policy environment that fosters innovation.”
Improving FDA processes
“The government is now planning to reauthorize the Prescription Drug User Fee Act, also known as PDUFA. There are several specific proposals being considered by Congress that are positioned to improve our ability to develop and deliver innovative medicines in the United States:
• We need to have a well-funded FDA. While industry user fees play an important role in supporting FDA’s medical product review program, user fees should be complementary and additive to a sound base of appropriated resources for the FDA.
• A focus on innovation is critical to the success of the biotechnology sector. FDA’s mission statement should be updated to reflect the agency’s essential role in advancing innovation.
• We need to encourage the FDA to be more clear and consistent in its application of standards and its communications with drug developers. In many cases, these standards appear to be inconsistently applied, while guidance for industry often takes years to be published. We must take steps to streamline communications processes. In addition, when products are not approved by the FDA the reasons should be clearly articulated.
• We must make sure that the most experienced and appropriate medical and scientific experts are available and invited to participate in FDA advisory committees.
• Processes should be implemented to ensure that the views of patient groups are more actively solicited and heard within the drug approval process.
In addition to these recommendations, government must consider several actions to help drugs get approved faster. The Accelerated Approval Pathway was implemented by the FDA in 1992 in response to patient groups who advocated for earlier access to life-saving medicines to treat HIV/AIDS. Under Accelerated Approval, the FDA can approve the marketing of a drug to seriously ill patients based on earlier evidence of effect with a commitment from the sponsor to conduct post-market studies.
Application of the Accelerated Approval pathway has been largely limited and excludes drugs that treat many rare and serious conditions. This has created some confusion among sponsors on how to apply the pathway to different indications.
At this point there is significant uncertainty over how the FDA intends to apply the Accelerated Approval pathway in the future, which needs to be clarified. This uncertainty is directly impacting investment in innovative new therapies.
The Accelerated Approval pathway needs to be modernized to incorporate the remarkable advances in life sciences that have been and will continue to be made in such areas as genomics, molecular biology and bioinformatics.”
“ … Several economic strategies are positioned to strengthen the biotechnology sector by attracting more investment, especially in early-stage research.
• R&D partnership structure: Biotechnology companies have large capital burdens and long development pathways that often deter investment. We should amend the Internal Revenue Code of 1986 to allow certain tax incentives stemming from R&D to flow from life science projects through to their investors.
• Net operating loss reform: Development stage biotechnology companies typically generate significant losses, which can be used to offset future gains if the company becomes profitable. Section 382 of the Internal Revenue Code currently restricts the usage of net operating losses (NOLs) by companies that have undergone an ‘ownership change.’ There are two reforms to Section 382 that would be beneficial to many biotechnology companies. First, we should exempt NOLs generated by qualifying research and development by a small business from Section 382. Second, we must redefine “ownership change” to exclude certain qualified investments, like those in rounds of venture financing.
• Capital gains reform: Section 1202 provides a small business investment tax incentive allowing taxpayers to exclude 50 percent of their gain from the sale of a qualified small business stock that has been held for more than five years. We should change the definition of ‘qualified small business’ to include companies with gross assets up to $150 million, indexing the cap to inflation, and excluding intellectual property and follow-on rounds of financing from the gross assets test.
• Amortization reform: When the assets of an early-stage biotech company are purchased, the acquirer can amortize certain intangibles under Section 197 over a 15-year period. Accelerating this amortization period to five years could encourage large company investors contemplating acquisitions of specific intangible assets of small biotech companies to invest at an earlier stage in the product development cycle.”
“These recommendations are achievable and will deliver significant competitive advantages and opportunities for expansion in biotechnology in Westchester County and all across the U.S. The decisions that Congress makes now will play a key role in whether or not we hold on to our global leadership in this area and maximize the economic and public health solutions that the biopharmaceutical industry has to offer.”
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