California Biotech Law Blog

The Baltimore Business Journal is reporting that life sciences companies spent a record amount on lobbying efforts in 2007--some 32 percent more in 2007 than in 2006.

The Baltimore Business Journal reported:

The industry unleashed a $168 million lobbying effort last year, the largest among all sectors and 90 percent of which was dominated by three biotech and pharmaceutical trade groups and 40 global companies. . . . Among top company spenders were British-based AstraZeneca PLC, which owns Gaithersburg-based MedImmune and tallied $4.1 million in lobbying efforts, and Israel-based Teva Pharmaceuticals, which owns Rockville-based CoGenesys and tallied $2.3 million. Amgen Inc., based in Thousand Oaks, Calif., topped the company list with a $16.3 million total contribution last year.

As the California Biotech Law Blog previously reported, BIO spent $6.6 million in lobbying efforts in 2007.

According to The Baltimore Business Journal, the industry's investment seems to "have paid off." 

Was the investment really dollars well spent?  Well, clearly the industry has had some success with respect to delaying the passage of patent reform legislation, which was largely viewed as being more favorable to high tech companies than biotech companies.  Likewise, the lobbying efforts seem to have had some success in the SBIR area, as we previously reported in a recent blog posting.  So, the industry has definitely seen some success in Washington this past year, although that success has not been felt uniformly across the board.

There is no doubt that having a voice in Washington is taking on increasing importance for the life sciences industry, particularly in light of the lobbying efforts of the technology world.  It seems likely that the industry's investment in lobbying will continue to grow in the near future, as the topic of health care reform continues to be a key political issue and the interests of technology and life sciences companies continue to diverge.  As I've suggested before, however, it is rather stunning to consider how much money that has to be invested these days in order to maintain a presence in Washington politics: $168 million is certainly not pocket change.

Wired.com is reporting that three DNA testing companies are pulling out of the California direct-to-consumer market, as a result of California's recent action to send cease and desist letters to thirteen DNA genetics testing companies (See our recent  blog posting).

Alexis Madrigal for Wired.com reported yesterday that HairDx decided "on advice of legal counsel, to require California (and New York) residents to order their tests through a doctor."  Then today, Madrigal reported that two additional genetics companies, Sciona and SeqWright, have decided to pull out of the California market.  According to Madrigal, SeqWright "ceased allowing tests from the state without even getting rapped by regulators."

Will other DNA testing companies soon follow suit? It seems that the State of California's actions may very well prove to have had a chiling effect over the whole DNA direct-to-consumer industry.  As Madrigal in his Wired.com column suggests, this may have very well been the intended result.

At least one company, however, may be prepared to take this fight to the next level.  Madrigal reported today that 23andMe seems to be standing its ground.  The company appears to be taking the position that it is in compliance with California law and is going to continue to sell in California at this time.  There is no word yet as to whether any other DNA testing companies are prepared to stand up to the state and challenge its regulatory actions.

It's hard to see how these developments are good for the State of California.  One would have expected that a state as proactive as California with respect to promoting biotechnology and stem cell research would not have taken such a hard stance against direct-to-consumer DNA testing.  Will this incident ultimately prove to be the nail in the coffin for DNA testing services?  Certainly, California's actions have the potential to initiate a wave of similar actions across the country, as other states may feel pressured to follow California's lead.

The California Biotech Law Blog will continue to follow developments on this issue as they arise.

The fallout over California's attempts to regulate genetic testing continued today as more facts over the California action came to light.

As the California Biotech Law Blog reported earlier this week , California's Department of Health sent out cease and desist letters to thirteen genetic testing companies, including Navigenics, Inc. and 23andMe, Inc, demanding that these companies halt sales in the state until they can demonstrate that their laboratories are certified by the state and federal governments and that the tests have been ordered by a doctor as required by state law.

Wired.com is following the controversy, and has obtained copies of the letters that went out to at least two of the recipients.  Alleging that the companies violated California law, the letters cite eight statutory provisions of California's Business and Professions Code in support of their allegations: Sections 1206(a)(4), 1220(d), 1241, 1246.5, 1265(a)(1), 1281, 1287(b)(3), 1288. 

These provisions state as follows:

• 1206(a)(4):"Clinical laboratory test or examination" means the detection,
  identification, measurement, evaluation, correlation, monitoring,
  and reporting of any particular analyte, entity, or substance within
  a biological specimen for the purpose of obtaining scientific data
  which may be used as an aid to ascertain the presence, progress, and
  source of a disease or physiological condition in a human being, or
  used as an aid in the prevention, prognosis, monitoring, or treatment
  of a physiological or pathological condition in a human being, or
  for the performance of nondiagnostic tests for assessing the health
  of an individual.

• 1220(d) (1) Each clinical laboratory shall perform all clinical
  laboratory tests or examinations classified as waived under CLIA in
  conformity with the manufacturer's instructions.
     (2) Except for those clinical laboratories performing only tests
  or examinations classified as waived under CLIA, each clinical
  laboratory shall establish and maintain all of the following:
     (A) A patient test management system that meets the standards of
  CLIA in Subpart J (commencing with Section 493.1101) of Title 42 of
  the Code of Federal Regulations.
     (B) A quality control program that meets the requirements of CLIA
  in Subpart K (commencing with Section 493.1201) of Title 42 of the
  Code of Federal Regulations.
     (C) A comprehensive quality assurance program that meets the
  standards of CLIA in Subpart P (commencing with Section 493.1701) of
  Title 42 of the Code of Federal Regulations.

• 1241: This chapter applies to all clinical laboratories in
  California or receiving biological specimens originating in
  California for the purpose of performing a clinical laboratory test
  or examination, and to all persons performing clinical laboratory
  tests or examinations or engaging in clinical laboratory practice in
  California or on biological specimens originating in California,
  except as provided in subdivision (b).
     (b) This chapter shall not apply to any of the following clinical
  laboratories, or to persons performing clinical laboratory tests or
  examinations in any of the following clinical laboratories:
     (1) Those owned and operated by the United States of America, or
  any department, agency, or official thereof acting in his or her
  official capacity to the extent that the Secretary of the federal
  Department of Health and Human Services has modified the application
  of CLIA requirements to those laboratories.
     (2) Public health laboratories, as defined in Section 1206.
     (3) Those that perform clinical laboratory tests or examinations
  for forensic purposes only.
     (4) Those that perform clinical laboratory tests or examinations
  for research and teaching purposes only and do not report or use
  patient-specific results for the diagnosis, prevention, or treatment
  of any disease or impairment of, or for the assessment of the health
  of, an individual.
     (5) Those that perform clinical laboratory tests or examinations
  certified by the National Institutes on Drug Abuse only for those
  certified tests or examinations.  However, all other clinical
  laboratory tests or examinations conducted by the laboratory are
  subject to this chapter.
     (6) Those that register with the State Department of Health
  Services pursuant to subdivision (c) to perform blood glucose testing
  for the purposes of monitoring a minor child diagnosed with diabetes
    if the person performing the test has been entrusted with the care
  and control of the child by the child's parent or legal guardian and
  provided that all of the following occur:
     (A) The blood glucose monitoring test is performed with a blood
  glucose monitoring instrument that has been approved by the federal
  Food and Drug Administration for sale over the counter to the public
  without a prescription.
     (B) The person has been provided written instructions by the child'
  s health care provider or an agent of the child's health care
  provider in accordance with the manufacturer's instructions on the
  proper use of the monitoring instrument and the handling of any
  lancets, test strips, cotton balls, or other items used during the
  process of conducting a blood glucose test.
     (C) The person, receiving written authorization from the minor's
  parent or legal guardian, complies with written instructions from the
  child's health care provider, or an agent of the child's health care
  provider, regarding the performance of the test and the operation of
  the blood glucose monitoring instrument, including how to determine
  if the results are within the normal or therapeutic range for the
  child, and any restriction on activities or diet that may be
  necessary.
     (D) The person complies with specific written instructions from
  the child's health care provider or an agent of the child's health
  care provider regarding the identification of symptoms of
  hypoglycemia or hyperglycemia, and actions to be taken when results
  are not within the normal or therapeutic range for the child.  The
  instructions shall also contain the telephone number of the child's
  health care provider and the telephone number of the child's parent
  or legal guardian.
     (E) The person records the results of the blood glucose tests and
  provides them to the child's parent or legal guardian on a daily
  basis.
     (F) The person complies with universal precautions when performing
  the testing and posts a list of the universal precautions in a
  prominent place within the proximity where the test is conducted.
     (7) Those individuals who perform clinical laboratory tests or
  examinations, approved by the federal Food and Drug Administration
  for  sale to the public without a prescription in the form of an
  over-the-counter test kit, on their own bodies or on their minor
  children or legal wards.
     (8) Those certified emergency medical technicians and licensed
  paramedics providing basic life support services or advanced life
  support services as defined in Section 1797.52 of the Health and
  Safety Code who perform only blood glucose tests that are classified
  as waived clinical laboratory tests under CLIA, if the provider of
  those services obtains a valid certificate of waiver and complies
  with all other requirements for the performance of waived clinical
  laboratory tests under applicable federal regulations.
     (c) Any place where blood glucose testing is performed pursuant to
  paragraph (6) of subdivision (b) shall register by notifying the
  State Department of Health Services in writing no later than 30 days
  after testing has commenced.  Registrants pursuant to this
  subdivision shall not be required to pay any registration or renewal
  fees nor shall they be subject to routine inspection by the State
  Department of Health Services.

• 1246.5: Notwithstanding any other provision of law, any person may
  request, and any licensed clinical laboratory or public health
  laboratory may perform, the laboratory tests specified in this
  section.  A registered clinical laboratory may perform the laboratory
  tests specified in this section if the test is subject to a
  certificate of waiver under CLIA and the laboratory has registered
  with the department under paragraph (2) of subdivision (a) of Section
  1265. A program for nondiagnostic general health assessment that
  includes a laboratory test specified in this section shall comply
  with the provisions of Section 1244.  The results from any test may
  be provided directly to the person requesting the test if the test is
  on or for his or her own body.  These test results shall be provided
  in a manner that presents clear information and that identifies
  results indicating the need for referral to a physician and surgeon.
  
     The tests that may be conducted pursuant to this section are:
  pregnancy, glucose level, cholesterol, occult blood, and any other
  test for which there is a test for a particular analyte approved by
  the federal Food and Drug Administration for sale to the public
  without a prescription in the form of an over-the-counter test kit.
  A test approved only as an over-the-counter collection device may not
  be conducted pursuant to this section.

• 1265(a)(1):A clinical laboratory performing clinical laboratory
  tests or examinations classified as of moderate or of high complexity
  under CLIA shall obtain a clinical laboratory license pursuant to
  this chapter.  The department shall issue a clinical laboratory
  license to any person who has applied for the license on forms
  provided by the department and who is found to be in compliance with
  this chapter and the regulations pertaining thereto.  No clinical
  laboratory license shall be issued by the department unless the
  clinical laboratory and its personnel meet the CLIA requirements for
  laboratories performing tests or examinations classified as of
  moderate or high complexity, or both.
  

• 1281:It is unlawful for any person to own, operate, maintain,
  direct, or engage in the business of operating a clinical laboratory,
  as defined in this chapter, unless he or she possesses a valid
  clinical laboratory license issued by the department.  In the event a
  health facility does not perform clinical laboratory services, but
  provides laboratory services to its patients under an agreement with
  another person or entity that holds and is operating under a valid
  clinical laboratory license, the health facility shall not be
  required to obtain a clinical laboratory license.

• 1287(b)(3):  The enforcement remedies provided under this section are not
  exclusive, and shall not preclude the use of any other criminal or
  civil remedy.  However, an act or omission punishable in different
  ways by this section and any other provision of law shall not be
  punished under more than one provision.  Under those circumstances,
  the penalty to be imposed shall be determined as set forth in Section
  654 of the Penal Code.
  

• 1288:Any person conducting or operating a clinical laboratory may
  accept assignments for tests only from and make reports only to
  persons licensed under the provisions of law relating to the healing
  arts or their representatives.  This section does not prohibit the
  acceptance of evaluation specimens for proficiency testing or
  referral of specimens or such assignment from one clinical laboratory
  to another clinical laboratory, either licensed or exempt under this
  chapter, providing the report indicates clearly the laboratory
  performing the test.  A report of results issuing from a clinical
  laboratory shall show clearly the name and address of the laboratory
  and the name of the director.

The letters demand that the party submit a plan before June 23, 2008 advising how the company will prevent further violation of the law.

It is impossible to determine from these letters whether or not these companies actually are in violation of the law;  however, assuming the allegations are in fact accurate, is this really the whole story?  Or is something else actually responsible for this "attack" on genetic testing companies?  What is prompting this interest in genetic testing?

I cannot help but wonder if the medical community is at the heart of this controversy.  But if this is in fact the case, what is the issue?  Is there a concern by doctors that they are going to be found guilty of malpractice simply as a result of something they either overlook or do not know how to respond to in the genetic testing report?  As we suggested in our previous blog posting, there is certainly some debate as to how accurate various genetic tests actually are and what, if anything, should be done in response to certain results.  On the other hand, is there a fear by the medical community that the public will not know how to handle the data in the report?  Or is there at the heart of this issue an entirely different matter entirely?

It is interestng that in the same week that this controversy has erupted, Newsweek ran a story about Dean Ornish's new book, where he looks at how changing lifestyle can change genes.  The prospect of potentially changing your genetic predisposition by making lifestyle changes is perhaps the best argument for why the public should have direct access to these tests.  Thomas Goetz of Wired.com also makes a compelling argument for direct access, arguing that "Frankly, it's insulting and a curtailment of my rights to put a gatekeeper between me and my DNA." 

To date, this controversy has erupted in only two states: New York and California.  There are forty-eight other states yet to take this issue up.  Those states will be looking to New York and California to see how they deal with the controversy.  Perhaps the California legislature should jump to the forefront of this issue and look at changing the law to ensure direct public access to genetic testing.  Such an action would undoubtedly set an important precedent for the other forty-nine states, which might very well follow in California's footsteps.  California: will you rise to the challenge? 

The California Biotech Law Blog will continue following this controversy as it further unfolds.

California's Department of Health has taken a first step towards regulating genetic testing companies by sending out cease and desist letters demanding that they halt sales in state until they comply with quality and reliabilty standards, reported SF Gate. 

According to SF Gate, thirteen companies received the letters, including the two most visible genetic testing companies, Navigenics INc. and 23andMe Inc.

SF Gate reported:

All the companies have two weeks to demonstrate to regulators that their laboratories are certified by the state and federal governments, said department [of health] spokeswoman Lea Brooks. They must also show that the tests currently being sold to California residents have been ordered by a doctor as required by state law. . . . Companies face fines of up to $3,000 a day if they don't comply.

The California action follows a similar action taken by the New York Department of Health earlier this year, as we discussed in our May 14th blog posting.

Having just spoken last week at the Beyond Genome Conference in San Francisco, where we were discussing the ins and outs of the recent advances in genetic testing , I was a bit surprised to read that California--given our robust biotech industry--was following in New York's footsteps on this issue.  Moreover, I was surprised to discover that there is a state law in California requiring that genetic tests be ordered by a physician.

While perhaps it makes some sense to require the laboratories of these companies to be certified by the state and federal governments (although I confess that I do not know what is involved in the certification process), does it really make sense to require that all genetic testing be initiated by a doctor's order?  Is this really good public policy? 

As I indicated in my prior posting on this issue, I personally would be rather reluctant to pursue genetic testing even if I was interested in the results simply because I would not want the results to get into the hands of the insurance companies.  Requiring that no testing can be pursued without a doctor's order makes it virtually impossible to run the tests without the insurance companies obtaining copies of the results.  According to Ryan Phelan, the CEO and Founder of DNA Direct, who also spoke at the Beyond Genome Conference last week, genetic test results are not even considered uniformly reliable across the board; some tests are viewed as being more reliable than others.  Would this be understood, however, by the insurance companies evaluating the results?  I personally would not be willing to take that risk.  Then again, as I have shared with blog readers previously, I have had first-hand experience with the challenges that can be encountered with obtaining health insurance even when young and in relatively good health, as my COBRA insurance was terminated six months after my previous employer closed its doors and I was forced to go out and look for insurance on the open market before I had "exhausted" my COBRA under state law.  Based on my experience, it is not inconceivable to think that an insurer would label you "uninsurable" solely on the basis of your genetic testing results. 

In evaluating the debate over genetic testing, I cannot help but  wonder what is at the crux of the fears over confidential genetic testing.   Is the medical community concerned that a public that already has access to HIV and pregnancy testing over-the-counter somehow cannot handle genetic testing results?  Is there a concern about protecting the public from reliability issues arising from some of the genetic tests?  Is there a worry about what the public will do with the information, or what the public will expect physicians to do with the information? Or is something else entirely at the heart of these concerns?

I'm interested to hear any commentary on the genetic testing debate: should there be laws in place to require physicians to be involved with genetic testing, or to order the tests?  Would you be deterred from pursuing testing because of a physician's involvement?  Do the laws need to be changed so that states cannot in essence "shut down" genetic testing start-ups that are emerging in the marketplace? 

The California Biotech Law Blog will continue to follow this issue as it unfolds, and we will keep you posted on any feedback we receive on the issue.

The biotech industry may run into problems in 2008, despite having a banner year in 2007, according to a report by SF Gate.

The SF Gate reported:

[B]iotech companies may face some rough weather ahead, said Scott Morrison, Ernst & Young's U.S. life sciences director. New product approvals will slow as drug regulators scrutinize applications in the post-Vioxx era, Morrison said.

Drug prices may face more pressure in a political environment focused on health care reform and the federal budget deficit. Beyond that, constriction in the larger capital markets has finally started to affect biotech companies this year, he said.

"Biotech has not been immune from the ills of the subprime mortgage meltdown," Morrison said. "Total fundraising year to date in 2008 is down by 60 percent."

Yet, according to a recent Ernst & Young report, biotech had a record year in 2007.  The Jacksonville Business Journal wrote of fthe findings from this report as follows:

European and American companies raised nearly $30 billion in overall financing in 2007, a banner year only surpassed by 2000.

Global venture financing reached a new high in 2007, surpassing $7.5 billion, of which $5.5 billion helped seed or nurture companies in the United States.

Global biotechnology net losses were at $2.7 billion as of 2007, down from $7.4 billion in 2006.

Ernst & Young has also concluded that the U.S. biotechnology sector is almost profitable for the first time. 

 As a result of a good 2007, the tight economy is not expected to hit the biotech industry as hard as is expected in other industries.  According to SF Gate, the Ernst & Young report indicated that nearly half of the 386 publicly traded U.S. biotechnology companies have more than two years of cash on hand, and another 27 percent have more than five years of cash. In addition, venture capitalists remain interested in biotech--more so than in other industries.

All in all, the SF Gate article suggests that the outlook is mixed for the biotech industry in 2008; however, I think that those of us working in the industry would agree that we are not overly worried about the industry's future.  I think that it is safe to say that the future remains very bright for biotechnology.

China is in the process of positioning itself to compete in the major world generics markets, according to a report by Reuters.  The Chinese move is expected to drive down generics prices below current market rates.

 Reuters reported on the Chinese strategy as follows:

Pharmaceutical information group IMS Health Inc said last year's first okay from the U.S. Food and Drug Administration for a Chinese generic -- a copy of AIDS drug nevirapine -- was a sign of things to come. . . .

Zhejiang Huahai Pharmaceutical Co Ltd won a U.S. green light last July to sell generic nevirapine, once the patent held by Germany's Boehringer Ingelheim expires in 2012.At least 10 other Chinese companies are set to follow suit with other generic products, according to IMS. Some could be available as early as this year. The result will be increased competition in a generic drugs industry that is already struggling with tumbling prices.

"In order to ensure their success in the market, the Chinese manufacturers are likely to undercut all others on price," IMS said in its annual Intelligence.360 report.

According to Reuters, the one potential roadblock that Chinese companies are likely to encounter is the fact that they do not have a good reputation for quality, particularly in light of the recent heparin scandal.  This may give Indian companies, which are also trying to enter the generics market, a competitive advantage.

As a consumer, I welcome the additional competition, which will ultimately result in lower prices at the drugstore.  With all the recent Chinese safety scandals, however, I cannot help but wonder if the increased presence of Chinese generics companies in the marketplace is going to end up generating even more safety problems for American consumers--and perhaps even more legal problems as well.  Hopefully the FDA is following what is happening in China and responds accordingly to better ensure that U.S. consumers are not purchasing unsafe Chinese products.

McCain set out more details this week on his healthcare reform plan; while the plan contains some new features, it falls short of providing any comprehensive plan that would really resolve the country's healthcare woes.

Marketwatch reported on McCain's plan as follows:

McCain espouses some ideas that have broad bipartisan appeal: the use of generic drugs; incentive pay for doctors and hospitals that achieve good health results; and electronic medical records to reduce wasteful spending. But several of his proposals, such as changes in the tax treatment of employer-sponsored coverage, raise more questions than he seems prepared to answer. . . .

Tax credits that encourage the purchase of individual health insurance form the centerpiece of McCain’s health plan, and would be a dramatic departure from the way health insurance is distributed today. . . . McCain proposes to give refundable tax credits of $2,500 for individuals and $5,000 for families to offset the cost of coverage in exchange for eliminating tax breaks that employees and employers currently have. If you get your coverage through a job, gone would be the tax exclusion that allows your premium dollars to come out of your pretax pay. He argues that would level the playing field for people who don’t get their insurance through work while preserving choice — you could take that money and keep your employer plan or use it to buy one on the individual market. . . .McCain also wants to allow people to buy health insurance across state lines. . . .

[H]e wants to create a Guaranteed Access Plan “that would reflect the best experience of the states” and function as a health insurer of last resort, kind of like the high-risk pools 30 states have set up.

While some of McCain's plans make sense such as the idea of being able to carry insurance across borders and having a Guaranteed Access Plan, his focus on encouraging individual plans fails to address the issue of how people with minor health problems will get coverage as individuals.  The reality is that many Americans would have no other option but to go with the Guaranteed Access Plan: how exactly would the U.S. fund such a plan?  Obviously, if businesses no longer receive tax benefits for the payment of premiums, it will become increasingly difficult for such business to justify offering their employees such benefits.   

Another problem: how would insurance across state lines be regulated?  I am completely in favor of the idea, as I had terrific insurance when I lived out of state and was sorry to lose it when I moved to California; however, in a multi-state model, it seems likely that a new federal entity will be needed to provide oversight over the regulation of insurance in all of the states.

All in all, while Americans should be happy to see that McCain has a health care reform plan, they may be disappointed to see that his plan has no groundbreaking solutions--certainly none that will resolve the current system's problems.  Is this really a surprise though?  Unfortunately,  we remain a long way from electing anyone who can really  resolve all of health care's problems. 

Attached is a copy of McCain's speech on healthcare in full.

The San Diego Consortium for Regenerative Medicine has announced its plans to build a $115 million stem cell research facility in San Diego, according to the Associated Press. 

The Associated Press reported as follows:

The facility would be located on more than 7 acres owned by the University of California at San Diego in the Torrey Pines area biotechnology cluster. . . . The state is expected to provide a large portion of the facility's funding. Californians in 2004 approved a measure creating a $3 billion stem cell research agency.

A panel for the state agency has determined the San Diego consortium is eligible for $43 million. A condition to receive the state funds is that the building be completed by 2010.

Consortium officials estimate they would need to raise at least an additional $72 million to complete the center's funding. They said an out-of-state donor whom they decline to name has agreed to contribute $30 million.

It will be interesting to see how the plans for this new center compare to the California Institute of Regenerative Medicine ("CIRM") facility.  We will keep you posted. 

The Biotech Industry Organization ("BIO") spent $6.6 Million on lobbying efforts in 2007, reported the Associated Press.

BIO's lobbying efforts last year addressed a range of issues from patent reform to generics to FDA-related issues.  The Associated Press reported as follows:

[BIO's] lobbying efforts went toward cloning issues ahead of the Food and Drug Administration's ruling that cloned meat and milk is safe for consumers. Several members of Congress tried to compel the agency to do more studies before issuing a ruling, but FDA cleared the products for consumption in January. 

The biotech industry also lobbied on legislation to allow the Food and Drug Administration to approve generic copies of biotech drugs. Generic drug companies already market cheaper versions of regular, chemical drugs, but the FDA does not have the authority to approve copies of biotech drugs, which are more complicated.  Biotech makers opposed a bill that would have made generic biotechs medically interchangeable with the originals. The industry also argued generic biotechs should be classified as similar, but not interchangeable.

They also want biotech medicines to be guaranteed at least 12 years on the market before having to compete with generic copies. Generic drug makers say any protection beyond five years is unreasonable. Senate lawmakers attempted to pass a compromise bill last year, but negotiations broke down over the length of exclusivity.

This report raises some interesting questions about how much various industries spend today on their Washington lobbying efforts.  One of the issues that has repeatedly come up in the patent reform debate is how minimal the biotech industry's lobbying efforts are in contrast with the high tech industry.  The argument has been that the proposed patent reform legislation favors the high tech industry, which has traditionally had more of a voice and presence in Washington.  However, as this report makes clear, the biotech industry's expenditures on lobbying--at least BIO's expenditures on behalf of the industry--are not inconsequential.  So, this report begs the question: if biotech's lobbying efforts pale in comparison to high tech's lobbying efforts on Washington, just how much is the high technology industry spending on Washington lobbying?  What kind of lobbying money is considered adequate to have a voice in Washington?

California, the District of Columbia, and seventeen other states have filed suit against Abbott Laboratories for allegedly entering into a scheme to block the generic version of the cholesterol lowering drug TriCor, reported the East Bay Business Times.

The East Bay Business Times reported on the suit as follows:

The prosecutors are suing Abbott as well as two subsidiaries of Brussell-based Solvay -- Fournier Industrie et Sante SAS and Laboratoire Fournier SA -- in federal district court in Delaware. The prosecutors say the pharmaceutical companies illegally attempted to monopolize the market for drugs containing the ingredient fenofibrate, which regulates cholesterol and triglyceride levels. Abbott licenses from Fournier American rights to the drug and Solvay sells the drug on the European market. . . .

According to the AG's office, the companies made trivial changes to the formulations of TriCor, and marketed those while withdrawing the original drug from the market. The companies deleted references to the original forms of the drug from national drug databases, according to prosecutors, making it more difficult for a generic version of TriCor to obtain generic status. Meanwhile, the prosecutors say, Fournier obtained patents covering the variations of TriCor, and then filed patent infringement lawsuits against generic companies that tried to compete. The litigation triggered mandatory 30-month periods in which the Food and Drug Administration could not approve generic versions of TriCor.

The companies intend to fight the charges, according to the East Bay Business Times, and argue that they have not engaged in any wrongdoing.

The California Biotech Law Blog will be following this story as it unfolds.

Fraud charges were filed this week against the former CEO of Brisbane-based InterMune, reported AP writer Paul Elias for SF Gate. 

Elias reported as follows:

Dr. W. Scott Harkonen served as the Brisbane-based company's top executive from 1998 until 2003. During that time, he is accused of making false and misleading statements about how effective the drug was in combatting the fatal lung disease idiopathic pulmonary fibrosis, known as IPF.

A press release Harkonen wrote touting the benefits of Actimmune to treat the lung disease in August 2002 is at the heart of the government's case. The press release stated that a large-scale scientific test of Actimmune showed it helped IPF patients live longer, prompting many doctors to start prescribing the drug for IPF even though it wasn't approved for that disease. . . . Doctors are allowed to write so-called "off-label" prescriptions for drugs, but companies are prohibited from directly marketing those uses. Prosecutors allege that the test Harkonen cited in the press release was a failure and that there's no proof the drug played any role in extending life. .. ."

According to Elias, Dr. Harkonen, who is now the CEO of CoMentis, Inc. in South San Francisco, intends to plead not guilty. 

According to the Wall Street Journal Health Blog, the government does on occasion come down on a company for off-label marketing, sometimes even naming individuals; however, it is unusual for the investigation to focus on a single executive and file criminal charges against him rather than the company.  In this case, Harkonen is being indicted on charges of wire fraud and for violations of the Food, Drug and Cosmetic Act.

With all the talk by the candidates of reforming healthcare this political season, it is interesting to consider the impact that a win by each candidate will have on the biotech industry.  As this race unfolds, the California Biotech Law Blog intends to follow the positions of the candidates that may have an impact on the industry. 

Robert Goldberg wrote an interesting column this week for Drugwonks and The Weekly Standard  looking at the John McCain healthcare plan, which has received little if any attention by the media.  Goldberg first addresses the plans proposed by the Democratic presidential candidates.   In contrast to McCain, who views the current Veteran's Health Administration ("VA") as being severely broken, Goldberg explains that Barack Obama and Hillary Clinton view the VA is the "starting point for the Democratic plans for universal health care."

Goldberg writes:

Both Hillary Clinton and Barack Obama want to expand the VA's electronic health care system to the rest of the country. Obama has promised to spend $50 billion on electronic health records based on the VA model. And Clinton likes to claim credit for that model, which she calls an astounding success. . . .

In fact, as a government audit discovered, the VA's paperless system has created a huge bottleneck, losing track of 53,000 veterans.. . . according to internal VA audits, 25 percent of all vets wait more than 30 days for their first exam. Of the veterans kept waiting, 27 percent had serious service-connected disabilities, including amputations and chronic problems such as frequent panic attacks. Iraq war vets often have to wait six months for their first appointment. In some VA hospitals, vets wait 18 months for surgeries--a record worse than Canada's or England's national health care systems. The VA's budget for its health care system has doubled since 2001. . . .

In contrast, Goldberg says that the McCain plan "boil[s] down to freedom of choice," explaining as follows:

McCain's plan is based around patient-centered initiatives that already have broad support among Republicans in Congress. They include letting people buy health insurance nationally instead of only from state-regulated firms; giving people the choice of purchasing coverage through cooperatives or other organizations (churches or civic groups, for example); expanding health savings accounts; and making health insurance portable by giving people tax credits of up to $5,000 per family to buy their own coverage instead of getting it through an employer.

His chief concern is for people to take ownership of their health care. McCain likes to note that "Ronald Reagan said nobody ever washed a rental car. And that's true in health insurance. If they're responsible for it, then they will take more care of it." At the heart of McCain's proposals is his effort to allow veterans, particularly soldiers returning from Iraq with traumatic brain injury and mental illness, to get care anywhere rather than just through the Veterans Health Administration (VA). . . .

It is likely that the McCain's plan will receive additional scrutiny down the road, as healthcare is likely to continue to play a key role in the election.  However, Goldberg gives us a first glimpse of the McCain position on healthcare reform.  There is little doubt that the candidates have a very different perspective on what that reform might look like. 

But how might the McCain view affect the biotech industry?  Well, all in all, I would argue that the biotech industry would most benefit from the McCain position, since ownership of health care would likely lead patients to pursue the best available treatments, to the extent that they can afford them.  In contrast, the Obama and Clinton positions would increase health care availability for the population as a whole, but would likely limit options and treatment availability and potentially even limit the profitability of the biotech industry as a whole.

The California Biotech Law Blog will continue to look at these issues as further information about the candidates' positions is revealed.   We welcome comments on these issues from our readers.  What do you think: how would the candidates' positions on healthcare reform likely affect the biotech industry as a whole?

Stem cell biotech companies are looking forward to the next presidential administration, reports CNN Money.  All three of the leading presidential candidates--Senator John McCain, Senator Barack Obama, and Senator Hillary Clinton--have expressed a more tolerant view toward stem cell research than has the current President Bush. 

CNN Money reported:

Bush has twice vetoed legislative attempts to expand the funding, including those backed by McCain, Clinton and Obama. In reference to Bush's policies, Obama has said, "Stymieing embryonic stem cell research is a step in the wrong direction." Clinton has called for funding for "additional cell lines in order to pursue the promising avenues for research." McCain has said "stem cell research has the potential to give us a better understanding of deadly diseases and spinal cord injuries affecting millions of Americans."

Following his second veto in 2007, Bush said the legislation "would compel American taxpayers - for the first time in our history - to support the deliberate destruction of human embryos." Instead, the president touted the therapeutic potential of stem cells taken from adult tissue.

Given the support by President Bush of the concept of taking taking stem cells from adult tissue and umbilical cords, the companies that have utilized this methodology such as Aastrom, Cytori Therapeutics , Stemcell, and Osiris Therapeutics have been somewhat shielded by the ongoing controversy, reported CNN Money. In contrast, the companies using the methodology of deriving stem cells from human embryos such as Geron, Advanced Cell Technology, Novocell and Neuralstem have found themselves right in the middle.

CNN Money predicts, however, that the new administration will benefit all of these companies, regardless of the methodology used, since investors will have a more positive view about the political climate for these companies and the funding is likely to be made available to them. 

The Washington Post ran a column today by Jon Leibowitz of the Federal Trade Commission, which addresses a suit recently filed by the agency against Cephalon, Inc., which will test the legality of the practice of entering into "pay for delay" settlements.

 Liebowitz describes the  "pay for delay" settlement controversy at the root of this case as follows:

When these troubling deals first came to light in the late 1990s, the FTC fought them -- and stopped them cold. Between 2000 and 2004, no brand and generic companies entered pay-for-delay deals; in other words, companies resolved patent disputes without anticompetitive payoffs.

Unfortunately, that success is under siege. Two federal appeals courts -- in rulings that conflict with the analysis of a third appellate court -- have found that a brand-name drug company facing a patent challenge is free to pay any amount to keep a generic producer from entering the market until the patent expires. These rulings depart from the spirit of Hatch-Waxman and our nation's antitrust laws, and they harm consumers by subverting the competition at the heart of our free-market system.

Courts that have sided with pharmaceutical companies believe, in essence, that even an infirm patent gives its owner the right to pay competitors not to compete. . . .Not surprisingly, after two courts blessed such payoffs, the frequency of these settlements has increased sharply. In fiscal 2006, fully half of all pharmaceutical patent settlements (14 of 28) contained such payments. Brand-name manufacturers, seeing the potential to continue reaping monopoly profits, have taken advantage of this apparent judicial leniency. . . .

This dispute clearly puts Hatch-Waxman to the test: should a patent owner have the right to pay to keep a competitor out of the market until the patent expires? 

Clearly, insurers and the public would say yes.  According to Liebowitz, Cephalon made an additional $4 billion dollars as a direct result form entering into this "pay for delay" settlement--this is money that came directly out of the pockets of insurers and patients.  As a member of the public who lost my health insurance following the collapse of my former law firm just over four years ago, when my former employer terminated COBRA at the six month mark, leaving me in the position of having to pay full price for prescription medications, I know all too well how expensive it can get to pay for prescription medications, when no generic is available.   There is definitely an impact on the public at large, insurers, and individuals when they have to foot the bill for a more expensive medication.

On the other hand, as an IP lawyer, I can't help but scratch my head a bit over this case: the FTC is effectively taking issue over a patent owner trying to protect its exclusivity until the patent expires.  Isn't that the patent owner's right?   

Not according to the FTC.  The FTC's position is that patent owners do not have the right to enter into these types of settlements--that such deals violate the spirit of Hatch-Waxman and antitrust law.

It makes perfect sense to me why certain courts have sided against the FTC on this particular issue, and also why the FTC anticipates this case going to the Supreme Court.   According to Liebowitz, however, a bill is also making its way through Congress that would prohibit such agreements.  The FTC, of course, supports this legislation. 

The California Biotech Law Blog will keep you posted as this battle unfolds.

The Boston Business Journal ran a story this past week on the increasing number of contract research organizations in the Boston area and around the nation.

The article profiled Blue Stream Laboratories, a Woburn contract research organization with eight employees that launched the summer of 2006, reporting that Blue Stream Laboratories President Michael Kouchakdjian had indicated that "his client base is growing as biotechnology companies and contract pharmaceutical manufacturers try to save money by farming out development work to companies like his."

The Boston Business Journal article provides further evidence that  outsourcing is on the rise in the biotech and pharmaceutical industries--a trend we have been following at the California Biotech Law Blog since last year (see our blog postings from May 23, 2007 and April 2, 2007).  As we have indicated previously, it is almost inevitable that outsourcing will continue to play an increasing role in the biotech and pharmaceutical industries, given the success that the high tech industry has had with offshore outsourcing in recent years. If companies can dramatically cut their costs by outsourcing work, why wouldn't they pursue that option in order to become more profitable?  I think it is difficult to deny the clear business case for utilizing outsourcing to the extent possible.  I expect that we will continue to see more stories on outsourcing in the life sciences industry over the next few years.

The Supreme Court declined yesterday to review a ruling by the U.S. Court of Appeals for the Federal Circuit that there is no constitutional right to access experimental drugs, reported the Associated Press. 

The California Biotech Law Blog reported on this case back in August 2007:

My best guess without reading the decision is that the Court felt that this is a policy issue that should be decided by Congress, which seems to be what was reported. . . .

It will be interesting to see what the Supreme Court says on this case, if it is indeed heard by the Court.  As those of us who have studied Constitution Law know, the concept of "rights" has been liberally interpreted on occasion, according to Constitutional scholars, to reach a particular result that seems "just" from a policy perspective.  Could the current Court do the same? 

I somehow doubt it.  We have a "conservative" Court in place right now, so I doubt this Court will be reading new rights into the Constitution.  Granted, I am not a Constitutional Scholar, but that is my take on the current Court.

The California Biotech Law Blog accurately predicted that the Court would decline to read a new right into the Constitution.  While the Court did not provide any explanation of its decision not to hear the case, it can be assumed that the Court agreed with the Federal Circuit's decision: that no right to experimental drugs exists, even when the patient is terminally ill.

So where does the Court's decision leave this issue?

Clearly, a ruling on the issue in one federal appellate court does not preclude other appellate courts from hearing cases on similar facts and ruling differently on the same issue.   Thus, the possibility exists that another appellate court will revisit the issue down the road.

Having said this, in my opinion, a more likely scenario is that Congress decides to take up the issue at some point in the future.  This issue raises some valid public policy issues, and Congress is arguably the most appropriate forum to address them. 

I continue to take the position that there should be some mechanism by which the terminally ill can access experimental medications that offer a real promise to treating the terminal illness.  While I agree that perhaps the moral arguments in favor of making experimental medications available to the terminally ill do not rise to the level of a Constitutional right, I still think those arguments are compelling.  Doesn't this issue merit some additional debate?

The U.S. Appeals Court in D.C. has ruled in an 8-2 decision that the terminally ill have no right to take unapproved drugs, even when their doctor says it is their best hope for survival.

The Mercury News reported on the decision as follows:

[T]he court said federal drug regulators are entrusted by law with deciding when new drugs are safe for wide use.

The families of terminally ill patients, several of whom died after they were denied promising drugs that were still in tests, filed the lawsuit. They said that dying patients were far more willing to take risks and argued that they should not be forced to wait for new treatments to win final approval from the Food and Drug Administration.

The judges said the families should take their pleas to Congress, not the courts.

However, the two dissenters said the ruling ignored the Constitution's protection for individuals and their "right to life" and instead bowed to "a dangerous brand of paternalism" that put the government's interests first.

According the The Mercury News, the next step is going to be to take this case to the Supreme Court.  It goes without saying that this is not likely to be the last we are hearing on this issue.

I have not seen a copy of the decision yet, so I'm interested to see how the majority reached the decision that they did.  My best guess without reading the decision is that the Court felt that this is a policy issue that should be decided by Congress, which seems to be what was reported above.  

Clearly, from a pure policy perspective, the denial of access to potentially life-saving drugs to the terminally ill does not seem to be sound policy.   While the guinea pig argument (i.e. we want to protect the dying from being guinea pigs to be experimented on in their last days) may sound compelling to some, the reality is that most doctors are not going to do that to their patients.  They are only going to recommend possible treatments that hold some hope of working.  And why shouldn't a patient who chooses to take a chance on an unapproved drug have that opportunity?  What is likelihood that any patient will really face a fate worse than what they are already going to face?

DrugWonks voiced a similar opinion today on the outcome of this case:

I believe the Abigail Alliance and others can make the case that they are not asking for wide use but targeted, tailored and scientifically responsible use that is consistent with their constitutional rights under the Fifth Amendment. This notion that somehow such rights are trumped by Padzur's effort [to] take a wrecking ball to accelerated approval is a joke. The FDA is inconsistent on who gets what and when with respect to access to medicines and I don't think the Supreme Court is going to let this "wide use" nonsense pass particularly since the Alliance is not asking for patients to determine when a product is safe but only to have the FDA create a regulatory pathway for allowing dying patients access.

It will be interesting to see what the Supreme Court says on this case, if it is indeed heard by the Court.  As those of us who have studied Constitution Law know, the concept of "rights" has been liberally interpreted on occasion, according to Constitutional scholars, to reach a particular result that seems "just" from a policy perspective.  Could the current Court do the same? 

I somehow doubt it.  We have a "conservative" Court in place right now, so I doubt this Court will be reading new rights into the Constitution.  Granted, I am not a Constitutional Scholar, but that is my take on the current Court.

So, it's quite possible that this will ultimately be placed in the lap of Congress, which will hopefully do the right thing and change the current policy.  There should be some way to legally access unapproved drugs in this country that might save your life when you are dying.  If someone wants to continue to fight to live until the bitter end and not throw in the towel, even if that person is grasping at straws, why should the FDA have the right to deny him or her that chance?  Who is the FDA really protecting in such a case? 

To follow up on a post I ran in February 2006 on Biotech Valuations, I wanted to alert you to a recent series of postings on biotech valuations on sizz's biotech blog. 

Sizz's biotech blog says that in making valuations of biotech companies, a good valuation method is risk-adjusted net present value, which is described as follows:

Risk-adjusted net present value (rNPV) attempts to value a company by taking into account not only the future cash flows, but also the probabilities that those cash flows will even take place. This is especially useful for small biotechs that have not yet obtained FDA approval for a product. In using rNPV, we are able to find a company's value while taking into account significant events that could affect the stock price (like moving from Phase II to Phase III trials).

NPV is the same as a discounted cash flow analysis. It finds the present value of a firm's future cash flows. rNPV is similar. It is the present value of future cash flows, but those cash flows are adjusted by the probability of effect.

In a follow-up posting, sizz's biotech blog states:

Risk-adjusted net present value is most useful for biotechs because it can place a value on an individual drug. This helps us out for small biotechs because most of these firms' value is derived from drugs in their pipelines. With rNPV, we can find the value of each drug in a company's pipeline, add them up, and get a value for the whole company. This could also be applied to larger biotechs, but rNPV really only values the pipeline, so we would also have to find a value for the drugs that are already marketed using a traditional discounted cash flow method.

Sizz's biotech blog also provides in subsequent postings a specific example of how this valuation can be put into practice using GenVec, Inc.  In GenVec: Profile, sizz's biotech blog profiles the company, discussing its risk factors and drugs.In GenVec: Potential Markets and Financials, Sizz's biotech blog examines the potential markets for GenVec, which are the foundation for the valuation.

This series of postings provides a very informative overview to the art of biotech valuations, along with specific examples to show how the formulas can be applied in practice.   All in all, these entries are definitely worth checking out.

In case you missed it, The New York Times ran an interesting story yesterday: "A Challenge to Gene Theory, A Tougher Look At Biotech."

The New York Times article stated:

Last month, a consortium of scientists published findings that challenge the traditional view of how genes function. The exhaustive four-year effort was organized by the United States National Human Genome Research Institute and carried out by 35 groups from 80 organizations around the world. To their surprise, researchers found that the human genome might not be a “tidy collection of independent genes” after all, with each sequence of DNA linked to a single function, such as a predisposition to diabetes or heart disease.

Instead, genes appear to operate in a complex network, and interact and overlap with one another and with other components in ways not yet fully understood. According to the institute, these findings will challenge scientists “to rethink some long-held views about what genes are and what they do” . . . .

With that link now in place, the report is likely to have repercussions far beyond the laboratory. The presumption that genes operate independently has been institutionalized since 1976, when the first biotech company was founded. In fact, it is the economic and regulatory foundation on which the entire biotechnology industry is built.

The article goes on to state the following:

Evidence of a networked genome shatters the scientific basis for virtually every official risk assessment of today’s commercial biotech products, from genetically engineered crops to pharmaceuticals.

“The real worry for us has always been that the commercial agenda for biotech may be premature, based on what we have long known was an incomplete understanding of genetics,” said Professor Heinemann, who writes and teaches extensively on biosafety issues.

“Because gene patents and the genetic engineering process itself are both defined in terms of genes acting independently,” he said, “regulators may be unaware of the potential impacts arising from these network effects.”

Needless to say, the article was provocative.  Does this new finding that scientists don't know quite as much as they thought they did really shake the foundations of biotechnology?  Does this now mean that biotech commercialization is actually putting the public at risk?

With all due respect to The New York Times, I can't help but thing that this is "much ado about nothing."  The biotech industry may have some new challenges to face, but I hardly think that news of this research is going to have a significant impact on the industry.  So, scientists decide that they didn't know as much as they thought they did--how does that change all the discoveries and innovation that have already come out of the industry?  Do these new findings really erase those achievements?  Of course not.

The New York Times pointed to a possible effect on previously granted gene patents as one possible effect of these findings.  While it is plausible to think that gene patents could be affected by this new research, I think it is a stretch to extend the reach of those findings much further.  But apparently everyone does not share that view--certainly not The New York Times.  It will be interesting to watch and see how this story unfolds in the future.

The California Stem Cell Report reported on the plan released by the California Institute for Regenerative Medicine ("CIRM") on how to distribute the $85 million in research money to twenty-five researchers. 

According to author David Jensen of the California Stem Cell Report, the plan "shed some light on issues related to have and have-not institutions, quality of grant recipients and spreading the CIRM wealth geographically around the state."  Jensen writes:

Under the plan, the awards would go to persons who hold fulltime, faculty-level positions at academic or non-profit institutions in California and who are "young," meaning in the early stages of their careers. Academic institutions with a medical school could submit four applications in support of new Ph.D.'s and two new physician-scientist faculty members. Institutions without a medical school would be limited to two applications. The grants would go for research, salaries and possibly educational loans. They are akin to Pioneer grants awarded by the National Institute of Health. . . .

The discussion of the faculty award program reflected some of the questions recently rippling through CIRM. Do the big, well-established programs continue to receive generous grants? How much should go to institutions without the reputations and facilities that UC San Francisco and Stanford have? Should the location of institutions be a consideration? Does spreading the money around mean that unworthy science is being funded?

These are questions that we as taxpayers should all be considering: how should the CIRM be dividing up all that research money?  Did Californians intend that young researchers should get the money and build their careers in part on this research money?  Or did taxpayers envision something different taking place?

I have mixed feelings on the issue myself. 

As a young attorney myself in my early thirties, I tend to believe that young professionals are in large part hungrier for opportunities than are more established professionals.  I am a hard worker, but let's be honest--I really don't aspire to be putting in the kind of hours I have been working the last three or so years in getting my business off the ground twenty years from now.  If I am still working that hard, it may have the effect of cutting my own life short.  In truth, I already feel like it has, and it has only been a little over three years--not twenty.   While there are late bloomers, i.e. professionals who really "bloom" as experts in their fields later in life, I think that by and large it is a fair statement to think that younger professionals will be more driven in the early years of their careers.

On the other hand, there is a good argument that the money should be distributed to those researchers who are already experts in the field so that they can do more research on the areas they built their life's research on.  If you go back to the analogy of me as a young attorney, there is no doubt that in twenty years I will be much more expert in my field than I am today.  In fact, my expertise grows little by little each year. 

So, what's more important: the "young drive" and "hunger" for success?  Or the years of establishing a career and developing expertise?  That seems to be the question grappled with in every field.  But should we be grappling with it here in distributing all of this taxpayer money?  Well, the decision seems to have already been made.  Now, it's up to us as taxpayers to decide whether or not our tax dollars have been put to good use.

The blogosphere is buzzing today about Freeman Dyson's article in The New York Review of Books titled, "Our Biotech Future."  In this column, Dyson describes a world where biotechnology predominates every aspect of life.

Among Dyson's predictions are as follows:

Will the domestication of high technology, which we have seen marching from triumph to triumph with the advent of personal computers and GPS receivers and digital cameras, soon be extended from physical technology to biotechnology? I believe that the answer to this question is yes. Here I am bold enough to make a definite prediction. I predict that the domestication of biotechnology will dominate our lives during the next fifty years at least as much as the domestication of computers has dominated our lives during the previous fifty years.

Dyson further states:

I see a bright future for the biotechnology industry when it follows the path of the computer industry. . . . .Every orchid or rose or lizard or snake is the work of a dedicated and skilled breeder. There are thousands of people, amateurs and professionals, who devote their lives to this business. Now imagine what will happen when the tools of genetic engineering become accessible to these people. There will be do-it-yourself kits for gardeners who will use genetic engineering to breed new varieties of roses and orchids. Also kits for lovers of pigeons and parrots and lizards and snakes to breed new varieties of pets. Breeders of dogs and cats will have their kits too.

Domesticated biotechnology, once it gets into the hands of housewives and children, will give us an explosion of diversity of new living creatures, rather than the monoculture crops that the big corporations prefer. New lineages will proliferate to replace those that monoculture farming and deforestation have destroyed. Designing genomes will be a personal thing, a new art form as creative as painting or sculpture.

Few of the new creations will be masterpieces, but a great many will bring joy to their creators and variety to our fauna and flora. The final step in the domestication of biotechnology will be biotech games, designed like computer games for children down to kindergarten age but played with real eggs and seeds rather than with images on a screen. Playing such games, kids will acquire an intimate feeling for the organisms that they are growing. The winner could be the kid whose seed grows the prickliest cactus, or the kid whose egg hatches the cutest dinosaur. These games will be messy and possibly dangerous. Rules and regulations will be needed to make sure that our kids do not endanger themselves and others. The dangers of biotechnology are real and serious.

Dyson makes some interesting predictions in his article.  While many of them are very likely uses of biotechnology, others seem to take science a bit too far.  However, he does pose an interesting question for us all: what should be the future of biotechnology?  Where should we go with the science?  Should biotechnology be as integrated in our lives as high technology now is? 

These questions are, of course, far from new, but perhaps the reason they are getting so much discussion today on the blogosphere is the timing of them being posed again to us.  So much of what was envisioned previously in high technology has become a reality to us all in today's world.  It's a fair question to ask again: where will all of these novel biotech developments take us?  And, more importantly, do we as a society really want to go there?

Big-cap biotech stocks are no longer exceeding expectations on Wall Street, according to a report by Asx300.blogspot.com.

That report states as follows:

Shares of Genentech (DNA) the world's biggest biotech by market cap, have declined 15% since reaching a 52-week high on Jan. 22. The stock fell 5% in June, even after a two-day surge last week. Amgen (AMGN) is down 19% for 2007 and 16% the last two months.Celgene (CELG) has dipped 13% since reaching an all-time high on May 22.  Financial returns aren't the problem. Those three firms along with peers like Gilead Sciences (GILD), Biogen Idec (BIIB) and Genzyme (GENZ) regularly have double-digit sales and profit growth. Most are expected to continue doing so over the near term. Genentech has grown sales and earnings at least 36% in each of the last 10 quarters, but analysts expect growth to decelerate in each of the next four.

What is to blame for this change?

The report points to new challenges facing the industry such as the Food and Drug Administration requiring more data and causing more delays in drug approvals, and also to the new fears of generic competition, which traditionally were only an issue that big pharma had to contend with. 

These statistics provide a first glimpse at how biotech may be impacted by the newly proposed generics bill as well as some of the other issues currently facing the industry.  While factors other than these issues are likely affecting the stocks too, there is certainly reason for the industry to take note of how issues in the news may already be affecting sales of stock. 

The California Healthcare Institute ("CHI") is warning that the California's biotech industry is at risk as a result of recent court decisions, according to the San Jose Mercury News.

The San Jose Mercury News reported:

[The organization was] critical of several recent Supreme Court rulings, including its decision in January in MedImmune vs. Genentech, which eliminated a longstanding requirement for businesses licensing another company's patented technology.

The decision allows companies licensing such technology to challenge the patent without first having to breach their license agreement and risk being sued.  As a result, many biotech executives fear the ruling could trigger a flood of patent challenges.

In other cases, the report said, the Supreme Court has made it tougher for biotech companies to obtain court injunctions against companies that infringe upon their patents and to prove their technologies are novel enough to warrant patents in the first place.

According to the San Jose Mercury News, CHI also expressed concern about the patent reform debate in Congress and the potential effects of patent reform on the industry.  At the heart of its concern is the fact that biotech products take many years and significant expense to develop.  If biotech companies are forced to overcome additional obstacles, what will this do to the industry?

I agree with CHI that California's biotech industry will be impacted by some of the recent decisions by the courts as well as by patent reform; however, I can't help but think that CHI is focusing on the wrong issues.  In my view, the issues that pose the greatest risk for the biotech industry are not these recent patent decisions, nor patent reform, but rather the push for biogenerics and for adopting universal healthcare, both of which could have serious and even devastating consequences for the industry.  How will the industry survive and flourish in a world, where biotech companies are unable to profit from the next big blockbuster?  As an entrepreneur myself, it's difficult to believe that biotech entrepreneurs will be out there launching new biotech start-ups to the same degree they are today without the promise of a big payoff at the end.  How many well-intentioned people would really do that to themselves?  As much as I enjoy what I'm doing in building my firm and practice, I'm not sure I would do it if you took away the profit potential.  It's just too much work.

Don't get me wrong--I am as concerned as the next person with the rising costs of healthcare and the challenges with obtaining affordable health insurance and medications.  When my former law firm closed its doors unexpectedly and decided to terminate my COBRA six months later, I was surprised to find myself uninsurable.  Then, I had the pleasure of paying full price for brand-name medications for a year as I struggled to get my firm off the ground in a bad economy.  I even became very ill at one point and found myself in the situation of not being able to go to the doctor due to the expense and the fear of being hospitalized.  Coming from a family of healthcare professionals, it was a shock to the system to experience first-hand the other side of the story and to realize how easy it was to find myself--when I was young and basically in almost perfect health--in the position of not being able to obtain the insurance I needed.

And, of course, now that I do have insurance, I just received a letter from my insurer that the prescription drug benefits are being slashed this summer as a cost-saving measure--a move that will likely hit me and a lot of other Californians in the pocketbook.

However, the flip side of argument is that the biotech industry is a for-profit industry, which is just not going to thrive if you take away the "profit" element.  You don't have to be an entrepreneur to understand that reality. 

With all of the innovation coming out of the biotech world today, a profitable industry could be the difference between any one of us dying from a horrible illness and our being able to avoid getting sick altogether.

So, does CHI have the right focus?  I guess it is up to us to decide.  

In case you missed it, Google is not the only company making news for investing in biotech.  Pfizer has announced that it will be setting aside $10 million to invest in biotech companies. 

Terri Somers of Bend Weekly reported:

In a modern, tile-and-glass building on its campus on the San Diego coast, the pharmaceutical giant is planning to spend $10 million annually for at least the next five years, incubating promising innovations or ideas as they germinate into startup companies. The incubator's board met for the first time in April and reviewed the initial applications from interested entrepreneurs. The incubator is set up to operate as a separate and distinct business unit from the drug company. But Pfizer expects to favor innovation that may one day help it strategically, either by providing new drug candidates or technologies that make finding drugs more efficient, said Catherine Mackey, a senior vice president of Pfizer Global Research & Development and head of the laboratories.

Tenants will have to agree to an upfront equity-share agreement with Pfizer. When research is done, Pfizer will have an option to acquire rights at a fair market price. Or the incubator could spin out the company as an independent businesss.

There has been significant commentary in recent years about the failure of big pharma to generate a pipeline of new products.  Evidently, this new move by Pfizer is an attempt to secure a pipeline.

Is Pfizer's new strategy good for biotech? 

Obviously, it does provide some benefits to start-ups who want to get up and running, but based on the article, it appears that the strategy will tie the hands of those start-ups as they go forward, since Pfizer will have the first option to acquire the rights.  As a transactional attorney, I wince at the idea of giving up your bargaining ability before you even get off the ground.  I can only imagine representing such a client down the road and trying to negotiate the deal with Pfizer to transfer the rights.  No doubt it would be a frustrating experience at best.

Does Pfizer's move signal the launching of a new trend in the biotech world, and if so, what will be the industry impact of such a trend?   Could it ultimately result in a stifling of innovation?  Only time will tell for certain.  Those of us in the industry will be watching to see.

To follow up an earlier posting from April 2, 2007 on  Outsourcing Trends in the Biotech Industry, a new report is out which provides more evidence that outsourcing is on the rise in across all of the life sciences industries.

Drugs-about.com News reported:

In EquaTerra’s newly-released Pulse Survey report covering the first quarter of 2007, the firm’s advisors cited pharmaceuticals as the leading vertical industry segment in terms of outsourcing demand. The report also found that outsourcing demand in the pharma industry has increased since the first quarter of 2006. . . .

The report also disclosed that there is far higher interest among pharmaceutical, life science, and biotech companies than among companies in general in expanding their current use of outsourcing. In this industry, 44 percent said they planned to expand outsourcing into new process areas – compared with 28 percent of companies overall. Also, 39 percent said they planned to expand outsourcing into new geographies or business units, compared with 30 percent of companies overall.

This report further bolsters the argument that outsourcing is going to become as widespread and important to the biotech and life sciences industries as it already is in the high tech world.   

Will outsourcing leave even more of a mark on the life sciences landscape than what we previously anticipated?  One can't help but wonder if it will ultimately result in at the very least  the  modification of the current practices of certain companies, which current run early clinical trials in some of the same countries to which they are now outsourcing.  

The biotech world is buzzing about Google's newfound interest in biotechnology. 

Of course, if you pay attention at all to Bay Area news, you are likely aware of the fact that Google co-founder Sergey Brin just got married this past month to biotech entrepreneur Anne Wojcicki.  However, the latest news is that Google has now decided to invest in his wife's start-up.

The New York Times reported:

Google said Tuesday that it invested $3.9 million this month in 23andMe, the biotech company co-founded last year by Ms. Wojcicki, a former health care industry analyst.

Google’s investment was disclosed in a regulatory filing, which also officially confirmed that Mr. Brin, 33, and Ms. Wojcicki are married. . . .

The filing with the Securities and Exchange Commission also stated that Mr. Brin had provided $2.6 million in interim debt financing to 23andMe and that his loan was being repaid as part of the financing of 23andMe.

“Our audit committee requested that we disclose this in order to be completely transparent with our investors about the facts underlying this investment,” said Jon Murchinson, a Google spokesman.

Mr. Murchinson said the search giant, which has invested in other start-ups, made the investment in 23andMe because it furthered Google’s goal of organizing the world’s information. “They are developing new ways for people to make sense of their genetic information,” Mr. Murchinson said.

Needless to say, Google's new investment in biotechnology has caught the attention of the media as well as the blog world, and there is speculation that this step by Google signals a change in focus by the company. 

Blogger Mark McQueen writes in the  Seeking Alpha blog:

For all of the biotech entrepreneurs out there having a hard time raising an early financing round, Google might be your next roadshow stop.

According to the New York Times, Google invested US$3.9 million in 23andme. 23andme is in the genetics information business, which may well indicate that Google’s cookies are about to get dramatically more invasive into your personal affairs and web habits.

I can see the next generation of the permission form now: “By using Google’s web search technology, you agree and consent to provide a sample of your DNA to us for our own use.”

It will be interesting to see what Google has up its sleeve with this latest move.  Does this action signal a new focus by the company in biotechnology?  Or is this just a case of a company co-founder wanting to help get his new wife's business off to a good start?  Those of us who follow news over at Google are watching with interest for the answer to those questions.

The Mercury News reported today that valuations for venture-funded life science companies in the Bay Area increased in 2006, according to a survey taken by Mountain View, CA law firm Fenwick & West.

As The Mercury News reported:

The percentage of local life-science companies that saw their per-share price increase from previous financing rounds rose to 79 percent last year, up from 65 percent the year before. . . "Down" rounds were reported by 15 percent of the companies surveyed, while no change was recorded by 6 percent.

For non-life-science ventures, 67 percent reported up rounds in 2006, while 22 percent recorded down rounds and 11 percent said there was no change.

The average price increase for life science companies receiving venture capital in 2006 compared with previous rounds was up 50 percent, with medical-device valuations increasing 55 percent on average compared with a 41 percent average increase in pharmaceutical valuations in 2006.

Non-life-