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The Biotech Bailout: A Good Idea?

Reality Base
By Melissa Lafsky
Dec 19, 2008 5:10 AMNov 5, 2019 1:29 AM


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Car companies are doing it, banks are doing it, and magazines may (ahem) soon be doing it—bailouts are all the rage these days. Which makes it less surprising that the biotech industry is getting in on the action. Lobbyists for the biotech industry are pushing Washington to pass a law granting biotech companies that are currently hemorrhaging money (a.k.a. nearly all of them) a chance to get cash now in exchange for not taking tax credits in the future should they become profitable. According to the New York Times, the proposed bill:

could enable the industry to receive potentially hundreds of millions or even billions of dollars, on the condition that the money would be used for research and development. The effort comes as many smaller biotechnology companies, particularly those trying to develop drugs, are facing a severe cash shortage that is forcing them to dismiss workers, curtail research and even file for bankruptcy protection or liquidation.

In fact, it's so bad that BIO, the main lobbyist for the industry, is saying that a quarter of the 370 publicly traded U.S. biotech companies have less than six months of cash on hand. And, of course, creating an effective drug can take millions of dollars and years—even decades—to accomplish. Not to mention that, if clinical trials go badly, it's back to the drawing board, making biotech one of the riskiest industries out there. And risk is not something lawmakers are loving these days. Still, the potential health benefits of the drugs biotech has/could/will produce are massive, and we do have that whole aging population and health care crisis to contend with. So if we're already writing $850 billion checks, we may as well throw a little biotech's way. Related: RB: Reality Check: Biotech RB: Another Facet of the Health Care Crisis: Miserable Doctors RB: Get Thee to Medical School!

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