How to satiate Washington’s $11 billion biotech industry
by John Stang
A helix-inspired pedestrian bridge between Seattle's Elliott Avenue and Prospect Street. Credit: Photo: Flickr user greenplasticamy
The state's biotech industry wants lawmakers to extend a pair of industry tax breaks and to regulate "biosimilar" drugs.
That's what roughly 20 leaders of the Washington Biotechnology and Biomedical Association (WBBA) told Gov. Jay Inslee Tuesday in Seattle. Washington has roughly 570 life sciences, biopharmaceutical, medical device and related research companies and institutions, directly employing more than 34,000 people, and supporting an additional 58,000 jobs.Those firms contribute almost $11 billion to the state's economy. While other state industries suffered during the recession, Washington's biotech firms grew.
"People in labs are working. They don't have hard hats on, but they're working," Inslee said.
The association's representatives asked Inslee to help preserve a state tax exemption on reach and development expenses and to extend a tax deferral on the purchase and manufacture of biotech devices. Both are scheduled to expire in the next few years.
"We want to make sure we're competitive and remain competitive, and this is one of the few tools we have," said Chris Rivera, president of the WBBA.
Currently, "biosimilar" drugs, or copies of drugs grown from living cells, are not regulated in Washington. The problem is that a biosimilar drug is not an exact copy because the original cell operation is not used. That means that while the formulas and test results for a biologic drug can receive Federal Drug Administration approval, there is no guarantee that the biosimilar copy would have the exact same results in a patient. Washington's current regulations only cover generic drugs, which are exact chemical copies of original brandname drugs.The FDA has recently established protocol for testing and approving biosimilar drugs.
"It's all about patient safety and patient awareness," said Donna Morgan Murray, president of ZymoGenetics Inc.
The WBBA also asked Inslee to appoint a state Life Sciences Director within the governor's office, which Inslee said he would try to do. In fact, that and keeping the R&D tax credit intact were among his campaign promises.
Stabilizing state funding of the Life Sciences Discovery Fund was another of the WBBA requests. In 2005, then-Gov.Chris Gregoire and the Legislature established a program to spend $350 million — supposedly $35 million a year from 2008 though 2017 — to bolster life sciences research and turn that research into jobs. The money comes from an annual lawsuit settlement from tobacco companies to numerous states, including Washington.
The fund finances projects that cover a broad spectrum of health-related undertakings: brain, breast cancer, blood and diabetes research; developing technologies for human cell therapies; creating gluten-free wheat; improving surgery safety in at least three-quarters of the state's hospitals; helping rural communities deal with mental health and substance abuse issues; developing "smart home" technology for the elderly and providing gene sequencing equipment for researchers.
The actual tobacco payments and allocations for research from the Life Sciences Discovery Fund have been close to the projections — about $33 million each in fiscal 2008 and fiscal 2009 — but the Legislature has been dipping into Washington's tobacco settlement revenues to pay for other programs, sending less than $15 million to life sciences research in 2010.
The fund received $9 million to $10 million between 2011-2013, plus $4 million from other state appropriations, said the fund's executive director John DeRosier. He expects the fund to receive up to $19 million from the state in 2013-2015.
Meanwhile, Brian Bonlender, director of the Washington Department of Commerce, said the state is also exploring using a federal investors visa program to funnel more money to Washington's biotech industry.
Currently, the program feds allow foreigners to obtain a permanent visa — but not citizenship — if they provide $1 million in investment capital to new businesses, troubled businesses or regional funds to tackle bigger investments.That threshold is lowered to $500,000 if the investment targets specific financially troubled fields and geographic areas.
Washington commercial department experts are discussing how to participate in that federal program, including goram exploring whether the state, a public-private partnership or a regional fund should control the nuts-and-bolts of where this money goes and how it is controlled in Washington,said James Palmer, economic development manager for the agency. No deadline has been set yet for the commerce department to pick which path it wants to follow.
In the past session, the state Legislature had a back-and-forth, love-hate relationship with tax breaks. Inslee and the House Democrats wanted to close 15 tax exemptions worth $751 million in 2013-2015 to fund court-mandated improvements in K-12 education. At the same time, Inslee wanted to add some tax credits for research and development work. The R&D credit proposal died silently early in the session.
Meanwhile, the Senate Majority Coalition Caucus took a hardcore stance against any new taxes and were adamant about keeping existing tax exemptions intact.
That was a major factor in the two-month-long, mostly closed-door budget impasse that sent the Legislature into double overtime. When the smoke cleared, only two tax exemptions — on landline phones and an inheritance tax loophole totaling at least $250 million — were closed. However, mostly due to the majority coalition, 16 new tax exemptions were created. Before the last session, Washington had roughly 640 tax exemptions worth tens of billions of dollars. Now it has at least 655 exemptions.
However, Democrats and Republicans agreed that expiration dates and specific job-creation targets will be required for all new and extended tax exemptions. They hope that these will help lawmakers measure whether exemptions are actually working. Consequently, if the Legislature extends the tax breaks sought by the WBBA, those exemptions will have measurable goals. Currrently, most Washington tax exemptions — including these two — don't have specific job targets.