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Morning Read: Why health reform is a boon for biotech

Highlights of the important and the interesting from the world of healthcare: Biotech gives thumbs up to reform: The (almost) final health-reform package gave the biotechnology industry “everything it wanted and more,” says Richard Gayle, writing at Xconomy. The big issue for biotechs, of course, was patent protection for biotech drugs, and the industry came out […]

Highlights of the important and the interesting from the world of healthcare:

Biotech gives thumbs up to reform: The (almost) final health-reform package gave the biotechnology industry “everything it wanted and more,” says Richard Gayle, writing at Xconomy. The big issue for biotechs, of course, was patent protection for biotech drugs, and the industry came out a winner. The legislation preserves the 12-year period of market exclusivity after a drug receives approval from the U.S. Food and Drug Administration. That’s huge for biotechs because the number of years could’ve dropped to seven, as President Obama proposed, or even five, as the Generic Pharmaceutical Association wanted.

But Gayle cites two lesser-known provisions of health reform that could be a boon for biotechs. The first would provide a tax credit of up to 50 percent of the costs associated with a “therapeutic discovery project.” The credit could help some biotechs save money on pre-clinical research and clinical trials, but isn’t as helpful as it might first appear. The amount of the tax credit is capped at a total of $1 billion, and as Gayle points out, that money will start to disappear very quickly once clinical trials are involved, so it’s likely that some companies that would like to take advantage of the credit won’t be able to.

The component of the legislation that’s likely to excite biotechs more deals with the FDA approval process as it relates to generic biotech drugs. Once a generic drugmaker files a new drug application, it has to turn over all relevant documents to the company that developed the original drug. “Not upon approval, but upon application,” Gayle says incredulously. “To its direct competitor.” That’s very different than the process for non-biotech generics and could provide big advantage to the original drugmaker. “Lawyers at multiple organizations now get to examine all the confidential data and determine whether there are any patent infringements,” according to Gayle.

Back to the House: You’ll hear a lot this morning about how Republicans spotted some parliamentary flaws in the health reform “sidecar” bill and have forced another House vote. For the most part, just ignore it. It’s just a minor blip and not expected to create any substantive problems. And remember that President Obama has already signed the main reform bill into law.

The myth of first-mover advantage: Being the first to market won’t help a startup much. Rather, it’s timing the market and entering when it’s ready to take off that’s key, writes Nic Brisbourne at the Equity Kicker. Brisbourne cites a paper by University of Southern California researchers that found 47 percent of market pioneers failed in a sample of 500 brands in 50 product categories. The key is to be the “market leader,” which is not the same as the first mover. “You don’t need to be the first to market to become the early market leader, much more important is to show up at the right time with the right product and execute well.” Brisbourne cites one rather astounding figure from the USC research: On average, early market leaders launched 13 years after the first movers in their respective markets.

A broken promise by Obama? Not really, but if you’re in the mood to nitpick, remember that candidate Barack Obama promised to bring health are “to all.” And while health-reform proponents rightly crow about bringing insurance to 32 million American who would’ve gone without it, the Congressional Budget Office estimates that 23 million people won’t have insurance in 2019, NPR reports. So who are these people? About a third are undocumented immigrants who the reform package was never supposed to cover.

The others fall into a few categories: those exempted from the “individual mandate” that requires most Americans to buy health insurance because they have low incomes, those who are eligible for Medicaid but choose not to enroll, and those who simply would prefer to violate the individual mandate and pay penalties. One potential weakness of the reform bill is the weakness of the individual mandate at least at first. It kicks in at $95 in 2014, but five years later gains a little more teeth. In 2019, the penalty for not buying health insurance rises to $695 or 2.5 percent of income, whichever is greater.

Photo from flickr user U.S. Army Environmental Command

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