By Standish Fleming
At the risk of looking a gift horse in the mouth, or more precisely two gift horses, I would like to reconsider the BRAIN initiative that President Obama announced as part of the budget package he sent to Congress on April 2.
I am all for initiative. I am no fan of big government, but government-sponsored large-scale basic research works. In fact, it is essential if we are to provide healthcare to a country with an aging population, a shrinking workforce and a growing burden of chronic disease. The task is daunting at best and, without new insights and therapeutic tools, virtually impossible.
Not only do we not know how to treat conditions like Alzheimer's disease, in some cases we don't even know what they are. We can be sure that the difficulty of treating these conditions is far greater than one CNBC commentator's concern that "Alzheimer's [is] … mutating faster than we can treat it." As far as we know, Alzheimer's disease is not caused by a bug or a virus; the problem is us, a failure of our operating system. Projects like BRAIN can help us understand that system.
The Human Genome Project demonstrated the potential of government-sponsored research to make a substantial contribution not only to basic research but also to our understanding of human health in ways that have already begun to improve our quality of life and promise to transform it in the not-too-distant future.
Projects like the moon landing and the Human Genome Project, and now possibly BRAIN, will be among the hallmarks of our civilization, the tracks we leave on the sands of time. Undertakings of this scale and scope with payouts measured in the future of mankind exceed the resources of any individual, even a Bill Gates or a Paul Allen, and the largest research institutes and corporations, though their involvement enhances the program.
So what is my concern regarding BRAIN?
My objection is that BRAIN is not big enough and not properly funded. Washington cannot properly fund the initiative because the Affordable Care Act (ObamaCare) (the second gift horse) has massively shifted government healthcare/life sciences priorities and as a result has put in jeopardy the ability of this country to sustain its commitment to research in general and BRAIN in particular.
ObamaCare moves resources from investment in the future to consumption today. It threatens to upset a precarious balance that was already moving away from innovation. Our ability and will to invest in new product development is being eroded by the voracious demands of the healthcare sector on society, the spiraling costs of pharmaceutical development (Bernard Munos estimated that the real cost of a new drug ranged from $4 billion to as much as $12 billion), the downsizing of pharma R&D, the crashing of the bioventure industry and the shifting of focus by both industries downstream to late-stage, "lower risk" investments.
The sad fact is that with today's business models, it doesn't make financial sense for anyone--pharma, venture, angels--to invest in early stage pharmaceutical development. The shift of government healthcare priorities away from research downstream to patient care will exacerbate an already difficult situation for innovation in this country.
I am afraid that the president who proclaimed that "Today, our scientists are mapping the human brain to unlock the answers to Alzheimer's. … Now is not the time to gut these job-creating investments in science and innovation" has done just that. Since the U.S. is the engine of medical innovation for the world, the potential consequences are serious.
The problem lies as much with how the shift was done as with what was done. No one knows what the ultimate effect will be on government budgets and the availability of funds. David Stockman says catastrophic; Paul Krugman says no problem. Take your pick. Max Baucus, Democratic senator from Montana and architect of the law, predicted that implementation would result in a "train wreck"; predictably, Karl Rove agreed with him.
We will provide benefits to millions before we know what they will cost or how we will pay for them. Once voters come to see healthcare as a God-given right and get accustomed to "free" services on a scale unprecedented in history, everything else in the federal budget becomes expendable.
Most frightening of all: We will have no way of undoing the system should it prove ruinous. The loudest screams triggered by sequestration erupted over the threat to the healthcare benefits of patients denied chemotherapy.
Rove makes the point that the challenge of getting $10 of healthcare with $1 of government spending will fall hard on providers like physicians and pharmaceutical companies. Will Congress continue the annual ritual of postponing the draconian fee reductions required by Medicare? Using its monopolistic purchasing power, the government is already moving in the direction of de facto price controls on drugs, which would draw capital out of the industry and undermine its ability to translate the scientific achievements of BRAIN into effective treatments for disease.
Delivery on most of the promise of BRAIN will take place long after this president has left office. At a time when Congress is staring into a budgetary abyss, he has made no commitment for permanent funding. Instead, the White House has cobbled together the first $100 million from a number of different government sources, apparently relying on the theory that future payments are unlikely to fall victim to cuts, being only a small part of a whole lot of budgets. ;
Even if the small-ball approach to funding a long-term, large-scale project were somehow to work, the amount provided will be tiny relative to the size of the undertaking, a third of what California is spending on its stem cell initiative. As the California Institute for Regenerative Medicine, a successful but far less ambitious program, approaches the end of its 10-year life, it is clear that effort has only scratched the surface.
It may be clever politics to use a small, uncertain commitment to BRAIN to dress up a budget that puts medical research in jeopardy on a massive scale, but it is bad policy.
A 27-year veteran of early-stage venture capital investing, Mr. Fleming co-founded Forward Ventures in 1993. His investment experience includes pharmaceuticals, biologicals, diagnostics, devices, services and software, and covers the entire spectrum from starting companies through managing investments post-IPO. The firm has been involved in establishing 35 companies. He has helped start more than 15 companies and served as founding CEO of 8.
Editor's note: The views shared in this guest column do not necessarily reflect the views of FierceBiotech's editors, who welcome all informed opinions on industry-related topics in this space.