Even now there's no final resolution to the long debate over healthcare reform in America. But if anything passes--and it looks likely--biotech is poised to become one of the biggest winners among the many players looking to score new legislation in their favor.
Lawmakers started out looking for concessions, but it's hard to see how the biotech industry and BIO, its lobbying arm, could have come up with anything better than the 12 years of data protection offered by the House bill. It's been said by some savvy analysts that patents give biotech companies all the protection they need, but I'm guessing that lawmakers' willingness to establish a special protected status for biologics will be a material boon to the industry. Investors like to see everything nailed down nice and neat, and the new legislation nails down a lot of biosimilar competition for years to come.
Biosimilars are coming, or course. Merck started off the year with a $130 million deal to buy a portfolio of biosimilars. And its recent manufacturing buyout in the U.K. demonstrates just how interested some big players are in the future of this business. A slew of older anemia drugs, for example, will face new competition. But if you're in the development business, 12 years of umbrella protection makes it a lot easier to score development deals and earn an M&A premium.
Just how long biotechs can expect to live in a world like this, though, is open to question. If the Senate bill provides the overall template approved by Congress, there's nothing in it that can rein in the cost of therapeutics--which have zoomed up this year. Discounts in Medicare will likely spur increases in prices for all other payers. This is one balloon that swells on one end when you squeeze the other. One day, it could pop. But it won't happen in 2010.