Without the Right IP Protections, We Might Say Goodbye to our Biotech Innovation Sector
By Frank Watanabe
The United States lost its once-dominant position in semiconductor research and manufacturing thanks largely to shortsighted policy decisions. Thankfully, Congress, rightfully alarmed over the potential economic and national security implications, passed last year's bipartisan CHIPS Act to regain a foothold.
And yet, when it comes to our currently world-leading biotechnology industry, our leaders are repeating many of the same mistakes that ceded our leadership in semiconductors.
America's biotechnology sector is the envy of the world, at least for the time being. It develops about two-thirds of all new medicines invented worldwide.
But we can't assume that U.S. leadership in biotechnology will endure. In fact, we weren't always leaders in the field. As recently as the late 1970s, European drug firms dominated the industry. But an inhospitable policy environment in Europe, including drug price controls, drug price negotiation tactics, regulations limiting biotechnology research, and limitations on mergers, undermined European competitiveness in biopharmaceuticals, allowing the United States to assume a global leadership position.
Unfortunately, the United States appears to be moving toward repeating many of the same policy mistakes that destroyed Europe's innovation ecosystem. Bad policy choices could weaken incentives to innovate, allowing nations like China to overtake us. We need to reverse course at once.
Biotechnology stands out as the most R&D-intensive industry in the U.S. economy. As a percentage of sales, biotech investment exceeds that of all other manufacturing sectors by an average of six times.
Companies that invest resources on that scale need assurance that they will have the opportunity to recoup their investments if they are successful. Strong intellectual property (IP) protections are critical to the pursuit of new treatments and biotech applications. Yet the Biden administration is adopting or considering policies that would weaken IP rights at home and abroad, undermining essential incentives.
Under pressure from developing nations and activist groups, the United States agreed last year to a proposal at the World Trade Organization to waive global patent rights for COVID vaccines. Anti-IP activists are now working to build on their victory by persuading President Biden to expand the waiver to COVID diagnostics and treatments as well.
At home, lawmakers are pushing the administration to assert the government's supposed "march-in rights" to forcibly relicense patents for medicines developed even in small part with federal funding. The administration is now reviewing its authority to do so, with the aim of leveraging its patent-breaking powers to set drug prices.
Voices on both sides of the political spectrum are also pushing other damaging proposals for price controls that will distort or destroy the vital incentives to innovate. The Biden administration is laying the groundwork to use newly passed government power to set the price of certain drugs in Medicare. And the previous administration of Donald Trump attempted to introduce the type of international price referencing that has so badly damaged the European biopharmaceutical industry.
We let our dominance of the semiconductor industry slip through our fingers, just as Europe let its leadership in biopharmaceutical innovation evaporate. We cannot afford to let the US biotechnology sector suffer the same fate.
Frank Watanabe is president and CEO of Arcutis Biotherapeutics. He was a commissioned officer in the U.S. Navy Reserves for 25 years. This piece originally ran in The Hill.
