Biotech Hits a Pothole

March 13, 1994|By SARA ENGRAM

The road to health-care reform is paved with good intentions -- but that doesn't mean there aren't potholes to avoid.

Most people now assume that any final reform will look quite different from the bulky plan submitted to Congress by the Clinton administration. But that's cold comfort to executives in the young, path-breaking biotechnology industry, which has a growing presence in Maryland.

Already, an obscure provision in the Clinton plan for an ''advisory council'' to evaluate prices for breakthrough drugs has cost them plenty. In the past 18 months, the industry has lost 40 percent of its capital value.

Investors shy away from uncertainty, and talk of reform always produces some jitters. In this case, however, the inevitable nervousness is exacerbated by the possibility that new products could be judged too expensive to be allowed on the market.

Could the proposed council actually ban a product or force a lower price than the company feels it needs to charge? What criteria would it use? Nobody knows.

But that's the point. In practice, such a council may prove to be a fountain of wisdom. It may even turn out to be entirely supportive of this fledgling industry, recognizing its value and encouraging prices that provide a fair return on investment. But that, too, is speculation. The bottom line spells uncertainty -- hence the investors' jitters. The dreaded phrase ''price controls'' is absent, but the practical effect is the same.

Unlike the larger and more powerful pharmaceutical industry, biotechnology firms don't have established products on the market that can support the cost of research and development. Moreover, these firms are mostly targeting ''niche'' diseases that affect thousands of people, rather than millions.

Carl Feldbaum, president of the Biotechnology Industry Organization, likes to point out that the easy drugs and treatments are already on the market. Biotechnology focuses on the hard ones -- even the seemingly impossible.

These companies do not develop new versions of existing products, as many pharmaceutical companies do, but rather take aim at the root causes of diseases. When they succeed, they can redefine prevention, diagnosis and treatment, often for formerly untreatable conditions.

One example comes from Cryomedical Inc. of Rockville, a public company which produces a medical device that freezes benign or malignant tumors at 190 degrees below zero Celsius. The frozen tumor is eventually absorbed by the body.

The probe has many potential applications, but one recent study found that about 80 percent of prostate cancer patients who underwent the treatment were free of cancer three months later. Although this procedure is not yet considered a replacement for radical prostate surgery, it provides a promising alternative. It also spares the patient the ordeal of invasive surgery and costs about 50 percent less than a radical prostatectomy.

Biotechnology holds hope for people suffering from Alzheimer's disease, AIDS, cystic fibrosis, hemophilia, multiple sclerosis and many forms of cancer. For these people and their families, anything that dampens the incentives for break-through research is bad news indeed.

Clearly, the administration did not set out to crimp a promising industry. In fact, President Clinton could have been referring to biotechnology in his State of the Union address in January, when he promised the nation that his reform plan would ''strengthen what is good about our health-care system,'' specifically mentioning ''cutting-edge research.''

Biotechnology is exactly the kind of industry the Clinton administration should love -- brash, risk-taking, high-tech, smart. the past decade it has created 100,000 high-paying jobs for highly skilled workers. If allowed to compete, it could employ many thousands of Americans in manufacturing jobs as more products come to market.

But investment funds are drying up, even as an economic recovery takes hold. A survey of 107 biotech companies, released this week, found that 60 percent of the companies that planned to raise capital in 1993 either missed their funding targets or canceled a planned stock offering. Each of these companies pointed to investor concern about price control proposals as being harmful to their ability to raise capital.

Industry executives say they are willing to compromise; they say they would be happy for an advisory council to pass judgment on the price of their products -- if it also looked at the cost of all other treatments available for that condition.

That seems fair and reasonable, but so far no one in the White House is listening.

Sara Engram is editorial-page director of The Evening Sun.

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