BIO: The coming storm of healthcare reform

Despite all the other problems the industry currently faces, its healthcare reform that seems to be what really has biotech worried these days. Vaughn Kailian, General Partner at MPM Capital believes it all comes down to money and results. Innovators will find cash, says the investor, whose company has funded five biotechs so far this year. When it comes to the financial constraints the industry is facing, he said, "This is just a cycle. Those of us who have gray hair have been here before. We're just going through another cycle," Kailian told execs at the Weathering the Perfect Storm panel.  

But Kailian may be in the minority with the belief that future legislation will not change the problems biotechs currently face. The magnitude of healthcare changes being discussed is unprecedented. Panelist Broderick Johnson, Partner at Bryan Cave, disagreed with Kailian's assessment of the situation. "The fate of the industry is tied to healthcare reform," he predicted. Even now, investors could be scared away from further investment in biotech due to mounting problems, including healthcare reform, said Brent Del Monte, BIO's VP of Federal Government Relations. "Healthcare reform is going to define the biotech industry for the foreseeable future," Del Monte told attendees of the 111th Congress panel session. Everyone knows it's coming, but the concerns seem to stem from the fact that no one seems to know when, where or how.

The biggest risk and uncertainty is in the pricing policy, especially with respect to Medicare, says Dr. Scott Gottlieb, Resident Fellow
at American Enterprise Institute for Public Policy Research. The former FDA Deputy Commissioner says he's not as worried about the FDA. The agency lost control of its human resources unit and faces longterm challenges in recruiting talent. The FDA will also have some work to do in organizing and coordinating the different committees. The "bickering" between the different silos has slowed the review process. But "I'm relatively optimistic that the environment there will be improved," said Gottlieb, who also sat on the Weathering the Storm panel.

Then there's the issue of biosimilars. So far, discussion surrounding follow-ons has produced many more questions than answers: How will we know whether a biosimilar has the same clinical effect as the innovator? Will there be an expectation for biosimilars to be supported by clinical data? How much time does the innovator company have to protect its data on a particular product before the FDA's decision on the biosimilar can be based on the innovator's data? These decisions will impact both the company and the patient, Kay Holcombe, VP of Government Affairs at Genzyme, told the audience at the 111th Congress panel. One thing Holcombe seems to be sure of, the amount of time for data protection will be a political decision arranged in a give-and-take deal. It could be anywhere from five to 12 years. "Who knows," she said. "We hope it will end up at the high end, but it might or might not."

Biotech has some work to do. "If you're not at the table, you're probably on the menu," says Holcombe's fellow panelist Bruce Artim, Director, Federal Affairs at Eli Lilly and former chief counsel, senate judiciary committee. "The Obama Administration is really empowering Congress to draft this and Congress is really working with stakeholders," added Brent Del Monte, BIO's VP of Federal Government Relations.

Johnson believes the Obama Administration is committed to innovation, and that the biotech industry needs to do a better job of conveying that fact to officials. "Things have changed significantly with this new administration...the old way of hiring a lobbyists can be effective, but the new administration has changed things and pushed away the lobbyists," leaving more opportunities for companies to go and speak on their own behalf.