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NATIONAL BIOTECH POLICY BOARD CALLS FOR PERMANENT R&D TAX CREDIT

Executive Summary

NATIONAL BIOTECH POLICY BOARD CALLS FOR PERMANENT R&D TAX CREDIT, restoration of preferential capital gains credits for biomedical/biotechnology companies and other tax code changes to maintain the leadership position of the U.S. biotechnology industry. In a draft final report issued by the board Oct. 9, the advisory body states that the R&D tax credit "should be made available not only for firms that increase annual R&D expenditures, but for those that make R&D investments in an area for the first time." Although it does not establish a permanent tax credit for research and development, the tax bill passed by Congress this session provides for a one-year extension of R&D credits (see related story, p.8). That bill is likely to be vetoed by the President; however, both industry and the Administration repeatedly have endorsed permanent tax credits in this area. The National Biotechnology Policy Board is housed at the National Institutes of Health and was created in fiscal 1989 by order of Congress. The board was chartered to address biotechnology issues that occur not only in healthcare but in agricultural and environmental products overseen by agencies including the U.S. Department of Agriculture and the Environmental Protection Agency. The report also recommends that government agencies should continue to participate in joint research ventures with private industry, particularly in areas such as vaccines. "Agencies should ...direct money towards projects that have large benefits, but for one reason or another do not meet private sector investment criteria, such as certain vaccines, or food crops," the draft report states. However, the board cautions that Cooperative Research and Development Agreements (CRADAs) "should be designed with a sensitivity to the need for a reliable contract with the private partner, and the need for secure intellectual property rights without which a private party cannot proceed." Because of CRADAs, biotech companies that would otherwise be eligible for reduced patent application fees through the filing of a Small Entity Statement with the Patent & Trademark Office have been disallowed because they are filing with a large federal agency, patent attorney Bernhard Saxe (Foley & Lardner, Alexandria, Virginia) told the board. Saxe proposed altering existing PTO provisions in this case. The advisory body voted to issue a letter noting this specific problem. The report also urges regulators of biotechnology to "broaden [their] experience in post-approval surveillance" through a "post- approval pilot study." Benefits gained from a new product and observed in the study "would indicate the magnitude of the social cost of regulatory delay," the study contends. At the request of FDA Center for Biologics Evaluation and Research Director Kathryn Zoon, PhD, a voting federal member of the board, a footnote was added observing that FDA is preparing a final rule on accelerated approval of drug and biological products. During the meeting, the board also added to its report an endorsement of user fees for FDA and recommended that "this process be encouraged to proceed rapidly." In its report, the board endorses the Office of Technology Assessment's recommendations for streamlining the patent approval process. OTA issued its report, entitled "Biotechnology in a Global Economy" in October 1991 ("The Pink Sheet" Nov. 4, 1991, T&G-5). OTA's report also suggests modifications in the tax code to benefit biotech firms. The National Biotechnology Policy Board also notes that the PTO, FDA, USDA, and EPA "all need to take steps to acquire and retain personnel who are able to review the applications adequately." The board last met in October 1991, following September public hearings. Comments from the hearings were incorporated into the report. Following several final, minor revisions, the biotech policy board's report will be sent to Congress, the President, the HHS secretary and the director of NIH. The report was developed to address two areas of concern: capital formation in the biotech industry and field testing of genetically-modified organisms in the environment. A third concern, "perceived ethical issues related to technology transfer," will be addressed separately, the report notes.

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