Health Care Reform — What's in It for Life Sciences Companies?

On March 23, 2010, President Obama signed the Patient Protection and Affordable Care Act (the Act). This Legal News Alert provides a brief outline of different provisions within this complex piece of legislation that may affect life sciences companies, including a new tax program, new grant programs, and a new research institute that may be of particular interest to life sciences companies.

New Tax Credit

Title IX, Subtitle B (Section 9023), creates a new tax credit, the Qualifying Therapeutic Discovery Project Credit, for entities with 250 or fewer employees. Such entities can apply to receive a tax credit under the following guidelines for certain research expenditures, including:

• Tax credit of 50 percent of a qualified investment in a qualified therapeutic discovery project:
  
  
  • Designed to treat or prevent diseases or conditions by conducting pre-clinical activities, clinical trials, and clinical studies for FDA approval
  • Designed to diagnose diseases or conditions or determine molecular factors related to diseases or conditions by developing molecular diagnostics to guide therapeutic decisions
  • Designed to develop a product, process, or technology to further the delivery or administration of therapeutics
• HHS will set an application period and decide applications within 30 days
• HHS will grant certification according to various requirements with priority given to projects:
  
  
  • To treat diseases with unmet needs, or chronic or acute conditions
  • Likely to reduce long-term health care costs
  • Likely to significantly promote the goal of curing cancer within 30 years
  • Likely to generate high-quality U.S. jobs
  • Likely to promote U.S. competitiveness in life, biological, and medical sciences
• Qualified entities can apply for a grant in lieu of a tax credit

New Grant Programs

Cures Acceleration Network (CAN)
Title IV, Subtitle C (as amended by Title X, Subtitle D) (Section 10409), directs NIH to create a Cures Acceleration Network having a mission that includes:

• Awarding grants and contracts to accelerate the development of “high needs cures” (including drugs, biological products, and devices) for priority conditions where commercial market incentives are inadequate
• Conducting and supporting research (including translation “from bench to bedside”)
• Promoting innovation through the development of medical products and behavioral therapies
• Accelerating the development of medical products, behavioral therapies, and biomarkers that demonstrate safety or efficacy of medical products
• Reducing barriers between laboratory discoveries and clinical trials and facilitating FDA review

CAN will be governed by a board composed of 24 members, including one each from areas relating to basic research, medicine, biopharmaceuticals, discovery and delivery of medical products, bioinformatics and gene therapy, medical instrumentation, regulatory review, and approval. The board also will include four experts in venture capital/private equity as well as eight representatives from disease advocacy organizations.

Under this new grant program:

• Any size entity can apply for a grant from CAN
• Maximum grant will be $15 million per project for first year
• Entity must match grant at 1:3 rate with non-federal funds (subject to waiver)

Other Grant Programs

A sampling of other grant programs in the Act include:

Title III, Subtitle F (Section 3504), establishes support for NIH grants to study the basic science of emergency medicine and to study the efficacy, safety, and health outcomes for medications used for infants, children, and adolescents in emergency care settings.

Title III, Subtitle F (Section 3509), establishes an Office on Women’s Health within HHS and the CDC, both with the general authority to issue grants to support research into women’s health conditions. This section also establishes an Office on Women’s Health in the FDA, which has the following duties:

• Reporting on women’s participation in clinical trials and the analysis of data by sex
• Consulting with pharmaceutical, biologics, and device manufacturers on policy with regard to women

Title IV, Subtitle B (Section 4102), establishes grants for research-based dental caries disease management, with a focus on children’s health.

Title IV, Subtitle D (Section 4304), establishes grants to improve surveillance for and response to infectious diseases, including strengthening epidemiologic capacity, enhancing laboratory practice, improving information systems, and developing and implementing control strategies. While the grants are targeted for state and local health departments, they also may be available to academic centers that assist state and local health departments.

Title IV, Subtitle D (Section 4305), “encourage[s]” NIH to pursue an aggressive program of research on the causes and treatments of pain.

Title X, Subtitle D (Section 10411), provides that NIH may “expand, intensify and coordinate research” into the causation of congenital heart disease, including genetic causes, diagnosis, treatment, and prevention.

Title X, Subtitle D (Section 10413), directs NIH to conduct research to develop and validate new screening tests and methods for the prevention and early detection of breast cancer in young women (ages 14 – 44).

New Taxes

Of course, not all of the news is good news. Title IX, Subtitle A (Sections 9008, 9009), also includes the negotiated tax contributions from branded prescription pharmaceutical and medical device manufactures.

• Branded prescription pharmaceutical manufacturers will pay a share of $2.3 billion, based on market share
• The first $5 million in sales and orphan drug sales are excluded
• Medical device manufacturers will pay a share of $2 billion, based on market share, with the first $5 million in sales excluded

Personalized Medicine

Patient-Centered Outcomes Research Institute
Title VI, Subtitle D (Sections 6301, 6302), authorizes a new nonprofit, non-government corporation (Patient-Centered Outcomes Research Institute) to be funded by a new Patient-Centered Outcomes Research Trust Fund.

The mission of the new Institute will include:

• Assisting patients, clinicians, purchasers, and policy-makers in making informed health decisions through research and evidence synthesis that considers variations in patient subpopulations
• Disseminating research findings with respect to relative health outcomes, clinical effectiveness, and appropriateness
• Supporting research that takes into account the potential for differences in subpopulations such as racial and ethnic minorities, women, different comorbidities, genetic and molecular subtypes, and quality of life preferences

The enumerated duties of the Institute will include:

• Establishing national research priorities (to be promulgated for public comment) and setting a research project agenda
• Contracting with government and private entities to conduct research under terms that ensure publication of the research
• Establishing a methodology committee to develop and improve the science and methods of comparative clinical effectiveness research
• Appointing expert advisory panels, particularly for the design/conduct of clinical trials and research for rare diseases
• Providing a peer-review process for primary research
• Releasing results of research findings in a format that is comprehensible to patients and providers and that conveys considerations specific to certain subpopulations

Foley recently discussed other provisions of the Act related to Personalized Medicine in a March 6, 2010 Legal News Alert, available online at http://www.foley.com/publications/pub_detail.aspx?pubid=7003.

Medicare Payments for Companion Diagnostics
Title III, Subtitle B, Part I (Section 3113), provides for Medicare payments for certain companion diagnostic tests.

• Establishes a two-year “demonstration project” for direct payment to laboratories for certain qualified “complex diagnostic laboratory tests” that provide “an analysis of gene protein expression, topographic genotyping or cancer chemotherapy sensitivity”
• At the end of the “demonstration project,” HHS is to report on the impact on access to care, quality of care, health outcomes, and expenditures

Biologics Price Competition and Innovation Act of 2009

Title VII, Subtitle A (Sections 7001, 7002), provides long-awaited Follow-On Biologics provisions, which include:

• Twelve-year data exclusivity for the original (reference) biologic product
• Availability of additional pediatric exclusivity
• Pathway for potentially abbreviated approval of “biosimilar” or “interchangeable” biologic products
• Exclusivity period for first “interchangeable” biologic product
• Complex procedures for resolving patent issues that include an exchange of confidential information between the biosimilar applicant and reference product (patent) holder regarding manufacturing details for the biosimilar product

Foley recently discussed this act in more detail in a February 29, 2010 Legal News Alert available online at http://www.foley.com/publications/pub_detail.aspx?pubid=6965.

Title III, Subtitle B, Part III (Section 3139), provides for Medicare payments for biosimilar products.

View other news alerts related to the Patient Protection and Affordable Care Act:

• "United States Enacts Approval Pathway for Biosimilars," at http://www.foley.com/publications/pub_detail.aspx?pubid=6965.
• “Health Care Reform Bill Offers Support for Personalized Medicine” at http://www.foley.com/publications/pub_detail.aspx?pubid=7003.

Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and colleagues. If you have any questions about this alert or would like to discuss the topic further, please contact your Foley attorney or the following:

Courtenay C. Brinckerhoff
Partner
Washington, D.C.
202.295.4094
cbrinckerhoff@foley.com

Jackie Wright Bonilla
Partner
Washington, D.C.
202.295.4792
jwrightbonilla@foley.com