What BIO’s watching in the new Congress

Reforms to prevent middlemen from driving up drug prices and legislation encouraging the development of oral medications and rare disease treatments were called top priorities as the Biotechnology Innovation Organization (BIO) began work with a new Congress.

The 119th Congress could also pass tax breaks for R&D and many other measures supportive of biotech innovation, according to Aiken Hackett, BIO’s SVP of Federal Government Relations.

Some bipartisan legislation that matters to BIO and its member companies was included in a proposed spending package in December but “ended up on the cutting room floor” in the final days of negotiation, Hackett noted. That might be some of the first key health legislation ready for passage in the 119th Congress, she said.

“We hope to see those measures included in the spending legislation expected in March, because it has already been agreed in the four corners of Congress that these are measures folks really want to pass,” she said.

Along with asking Congress to take advantage of the chance to make substantial progress in its first few months, BIO will advocate for further legislation to accelerate biotech innovation for our health, food supply, and environment throughout the next two years. The following is an overview of some of BIO’s top legislative priorities.

Leftover legislation: PBM reform, PPRV and PAHPA

These measures that were set to pass in December could logically be reintroduced for a new spending bill, which is due by March.

Pharmacy benefit manager (PBM) reforms: Congress, the Federal Trade Commission, and BIO have consistently called for reform of practices by PBMs, “middlemen” who use their dominance of the prescription market to profit by driving up drug prices and limiting patient access to medicine. The reforms teed up for a vote in December targeted spread pricing—in which PBMs profit by paying pharmacies less than they receive from health plans. They also sought to limit PBM income to service fees and to make PBM operations more transparent.

Beyond that legislation, Congress has discussed additional types of reforms to rein in PBMs. BIO supports further action, noting that these middlemen cause patients to lose out on rebates, independent pharmacies to close, and drug prices to rise, among other abuses.

Renewing the Pediatric Priority Review Voucher (PPRV) program: Established by Congress in 2012, the PPRV encourages the development of treatments for children with rare diseases. Companies that gain approval for drugs targeting rare pediatric diseases can receive a voucher granting expedited review of the next drug they develop. Drug makers can also fund drug research by selling the voucher to another company. The program has begun to sunset, and without renewal, this incentive (which costs taxpayers nothing) will be lost.

The Pandemic All Hazards Preparedness Act (PAHPA): PAHPA provides policy to address pandemics, bioterrorism, and other public health emergencies. It enables public-private health partnerships to sustain medical countermeasure (MCM) development and to keep pace with emerging chemical, biological, radiological, and nuclear (CBRN) threats facing the U.S. Since its launch in 2006, PAHPA has been renewed regularly with bipartisan support, but it expired at the end of last year. One key provision is the Medical Countermeasure Priority Review Voucher program (MCM PRV), which offers incentives to encourage the development of MCMs against emerging biothreats. As concerns grow that pathogens like avian flu, which has mutated in humans, could cause the next pandemic, preparation through passage of PAHPA is essential.

Inflation Reduction Act (IRA) fixes

For the longer term, BIO sees many opportunities for legislation by the 119th Congress to support biotech. The “highest priorities” on that list are mitigations of the drug price control provisions in the IRA, according to Hackett.

“There’s bipartisan support for a number of IRA mitigations,” she said. “We’re continuing the drumbeat to ensure awareness that the IRA was not perfect, and changes are needed.”

Mitigations she mentioned include:

The ORPHAN Cures Act: Under the IRA, orphan drugs for rare diseases are exempt from price controls, but only if they are limited to use for one indication. Seeking approval to use a drug for a second indication is a proven strategy for rapidly gaining new treatments that patients need, but the IRA currently discourages this strategy. According to a report from Health Capital Group, “limiting the average drug in the clinic to just one orphan indication would reduce the number of expected patients treated by over 24%.” The ORPHAN Cures Act would allow orphan drugs to be used for more than one indication without losing their price control exemption.

The EPIC Act would alter the IRA provision that gives small molecule drugs only nine years of total protection from price controls while biologic medicines can be exempt for 13 years. This “pill penalty” discourages development of small-molecule drugs, typically oral medications, for no apparent reason. The EPIC act would set price controls for all drugs to 13 years, so drug developers are incentivized to work on the most important and promising treatments without giving undue consideration to the complexity of the molecules behind those treatments.

The MINI Act: Like the EPIC Act, the MINI Act would increase price control exemptions of small molecule drugs from nine to 13 years, but it specifically provides this extension to small molecule drugs with genetically targeted technology, a subset of small molecules. “Health care providers and patients need every possible tool to tackle the cardiovascular health crisis,” according to the Partnership to Advance Cardiovascular Health. “Given enough time, genetically targeted technologies could be a game changer for heart patients.” 

Policy to address AMR

Antimicrobial resistance (AMR) is a leading cause of mortality worldwide, on track to contribute to nearly 170 million deaths by 2050. Unfortunately, the market for new antibiotics and antifungals to combat AMR is broken, discouraging development of drugs patients need.

“The pipeline for new antimicrobials has slowed to a trickle, even as existing drugs lose effectiveness. Though there is exciting science in discovery and development, these innovations face a post-approval ecosystem that makes it near impossible to stay afloat. We’re facing a drought in bringing these innovations out of R&D and effectively to patients, just when we need a flood of new therapeutic options,” Emily Wheeler, BIO VP of Infectious Disease Policy, explained during her keynote address at the 2024 World AMR Congress.

In the previous Congress, BIO supported the bipartisan PASTEUR Act, which would encourage drug development by ensuring companies making new antimicrobials are adequately compensated, so they can recoup their R&D investment. BIO underscores the urgency of near-term action on a pull incentive policy mechanism to address this broken ecosystem.

Tax reforms impacting biotech

The 2017 Tax Cuts and Jobs Act (TCJA) passed during the first Trump Administration led to reduced deductions for orphan drug development and R&D. Senate Majority Leader John Thune (R-SD) has said he wants to pass a package of tax breaks that restore deductions, through a reconciliation package early this year, according to Bloomberg.

R&D amortization: BIO has been pressing for reinstatement of the 100% tax reduction for R&D that has existed for 40 years since its launch in 1981. As of 2022—under a provision in the 2017 Tax Cuts and Jobs Act (TCJA)—R&D tax credits must be amortized over five years. The full deduction for funding raised for R&D has been effectively reduced to a 20% deduction.

The major reduction in R&D tax credits has been especially hard for biopharma companies. The biotechnology industry spends an average of nearly 20% of its revenues on R&D, among the most of any industry. The change means that funds spent on research that has not produced any revenue are now taxed.

“Taxing research before it produces revenue ultimately means fewer therapies are available for patients,” according to Sutro Biopharma CEO Bill Newell.

Restoring the Orphan Drug Tax Credit to 50%: By definition, orphan drugs target rare diseases affecting fewer than 200,000 people in the U.S., making their development a risky investment. The 1983 Orphan Drug Act incentivized development of these drugs with a tax credit to help developers cover up to 50% of clinical trial R&D costs. Supportive measures in the Orphan Drug Act drove a boom in the number of orphan drugs approved by the Food and Drug Administration (FDA) from 38 before the law to more than 600 by 2023. But the law’s clinical trial tax credit was halved, to 25% by the TCJA.

“We need to return the 50% tax credit, so we are looking at a bill called Cameron’s Law, which would restore the cuts to the orphan drug tax credit, as a priority,” said Hackett.

Further tax legislation: BIO supports other tax measures that help all businesses and small biotechs in particular. Proposals range from allowing companies access to future assets from net operating losses to special payroll and stock tax provisions benefitting small companies, like the Qualified Small Business Stock Exemption. BIO also backs tax incentives favoring biomanufacturing and proposed legislation to incentivize small medical research startups, including the Start-Ups for Cures Act (H.R. 5206), More Cures Act (H.R. 5207), and Innovate to Save Lives Act (H.R. 6979).

Agriculture and environment

BIO members in the agriculture and environment space are strengthening food security and sustainability.

“Biotech enables transformative innovations in agriculture and biomanufacturing that allow us to increase production and sustainability at the same time,” according to Sylvia Wulf, BIO’s Interim Head of Agriculture and Environment. “Legislation that updates regulation to keep pace with the science and provides appropriate support can strengthen our food supply and help us transfer to renewable energy sources.”

The Farm Bill provides a major vehicle for passing legislation to support biotech for agriculture and the environment.

The Farm Bill, a package of legislation that sets U.S. agriculture policy for five-year periods, enables essential biotechnology innovation. The last Farm Bill was passed in 2018 and expired in September 2023, with the legislation and spending outlined in that package extended for short periods while negotiations continue over a long-term package with new provisions. The latest Farm Bill extension goes until Sept. 30.

Many individual pieces of legislation that would impact biotech and were proposed during the last Congress could be part of the new Farm Bill, including:

• The Plant Biostimulant Act: Biostimulants are biological substances, such as microorganisms, applied to seeds, plants, or soil to fight heat, drought or pests, or enhance crop quality or yield. This legislation would prevent environmentally friendly biostimulants from being subjected to the same regulation as other types of chemicals.
• Expansion of the BioPreferred program, which encourages federal purchase of biobased products. This includes provisions in the Biomanufacturing and Jobs Act and the development of the North American Industry Classification System (NAICS) to help clearly define biopreferred products so that their purchase can be better cataloged.
• Support for animal health by investing in the development and deployment of vaccines to protect livestock, prevent foreign animal disease outbreaks, and bolster rural economies.
• Eliminating unnecessary red tape from the Environmental Protection Agency’s Plant-Incorporated Protectants (PIP) rule to eliminate unnecessary, non-science-based barriers to market.

Energy-related measures: Biotechnology offers cleaner sources of renewable energy that can reduce carbon emissions and increase economic development opportunities in rural farm-based communities. BIO and its members are involved in activities to advance sustainable aviation fuel and other biofuels. 

Some legislation to support this bioscience could be included in the Farm Bill, while other provisions could be part of tax reform. Important proposals include ensuring accurate measures of the environmental benefits of biofuels for tax purposes. Energy investments can also be encouraged by retaining, expanding, and enhancing several tax credits. 

The value of these credits was underscored at a Jan. 22 House Ways & Means Committee hearing by several members, including Reps. Brad Finstad (R-MN), Mike Thompson (D-CA), Jim Baird (R-IN), Ashley Hinson (R-IA), Zach Nunn (R-IA), Jen Kiggans (R-FL), Andrew Garbarino (R-NY), and Mariannette Miller-Meeks (R-IA).

“One tax credit I want to focus on today is 45z or the clean fuel production tax credit. America First needs American biofuels,” said Rep. Finstad. “Homegrown American ethanol and biodiesel hold down gas prices, strengthen our domestic energy production, bring jobs and prosperity to rural America, and deliver cleaner air.” 

Along with the tax legislation mentioned above, some tax credits that matter for supporting biotech energy production include:

•  Sustainable Aviation Fuel Tax Credit.
• Clean Hydrogen Production Tax Credit.
• Clean Fuels Production Tax Credit.

Other legislation designed to forward biotech energy innovations includes:

• The CCU Parity Act to secure carbon capture and utilization parity with existing carbon capture and storage benefits.
• The Agricultural Biorefinery Innovation and Opportunity Act to increase funding to support innovation in #biofuels and biobased products.
• The Farm to Fly Act to expand use of biofuels for aviation.