BioPharm Executive: Change Comes to Biotech

Published: Nov 25, 2008

Change Comes to Biotech

It's beyond me why anyone would want to be President, particularly now, but come January Barrack Obama will take up the troubled mantle of state and probably even do it with a smile on his face.

And so the tongue-wagging begins. How will this reshape business as usual? Who will the new power-brokers be? For the life sciences industry, it could potentially mean some big changes, and industry is already gearing up to meet them head-on.

For instance, will drug reimportation suddenly be up for debate again? Obama (like his former opponent, Sen. John McCain) favors reimportation, but cooled somewhat on the idea as the scandal on tainted heparin from China broke. The drug industry naturally opposes the idea and with lobbying can perhaps delay any action.

Let's hope so. Reimportation would set off an unfortunate series of events, with drug companies limiting exports to countries like Canada, and Canada in turn threatening to authorize generic copycats of patented drugs. The only good outcome would be if companies were able to raise prices of foreign drugs enough to offset price reductions here, so that Americans didn't end up subsidizing so much of the rest of the developed world's medicines. But that would be far more likely to happen if it was negotiated among governments as part of trade agreements rather than being done scattershot by panicked drug manufacturers. In any case, with the huge demand that drives aggressive R&D coming disproportionately from this country, it's likely we'll always be shouldering more of the cost.

Obama has promised to give Medicare the power to directly negotiate lower drug prices, rather than using private insurers as intermediaries as it currently does. That could mean a huge reduction in profits for the industry (the degree depending on where the line is drawn between "negotiate" and "control"). This is kind of the same thing as reimportation, except instead of importing price controls it applies them directly. Manufacturers are already girding their loins for battle, and over the Thanksgiving holiday you may well see ads from the Pharmaceutical Research and Manufacturers of America (PhRMA) touting the glories of free market forces in preserving the industry.

Obama has promised to be more friendly to stem cell research than President Bush has been, and that's certainly good news...indeed, it has already caused a small boomlet in the sector since the election. However, since McCain held essentially the same views about federally supporting embryonic stem cell research, it's hard to understand why the election outcome is seen as changing the calculus significantly.

And finally, there are the issues of how FDA will be run (Obama is likely to put a reformer in charge, so expect a David Kessler-style commissioner but also probably some more funding) and how medical research will be funded (the National Institutes of Health likely come out winners with Obama's victory). All in all, it's probably going to be a challenging four years for the life sciences industry...but it was shaping up to be that way whether Obama or McCain was in the White House. Which may explain why, in opposition to traditional trends, Obama actually got more campaign contributions from the pharmaceutical industry than McCain did.

Soon we'll get to see if that largesse bought them anything.

--Karl Thiel

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