Without the right IP protections, we might say goodbye to our biotech innovation sector

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 — which invested $52 billion in domestic semiconductor research and manufacturing — 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. They’re creating an inhospitable policy environment that may well lead to the United States losing our preeminent position in that field as well. 

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. 

U.S.-invented COVID vaccines helped end the pandemic, and important new applications of the mRNA technology behind those vaccines are on the horizon. Innovations in oncology have driven cancer death rates down by 33 percent — saving an estimated 3.8 million lives. And we’re on the verge of important breakthroughs with revolutionary new medicines that have been shown to slow the progression of Alzheimer’s disease. Medical advances have been so swift and dramatic that some scientists are calling our era a “golden age for medicine.”

America also continues to lead in the use of biotechnology to address climate change and the production of food and fuel. 

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, introducing twice as many new drugs globally as U.S. firms. But an inhospitable policy environment in Europe, including intensive drug price controls, heavy-handed 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. 

Much of the innovation that happens in the biotechnology sector starts with small, emerging companies. For example, so far this year, 65 percent of new medicines approved by the FDA have originated at small companies. These companies are powerhouses of innovation and often work closely with larger companies in the later stages of drug development. This ecosystem is what helps make the United States the leader in the development of innovative medicines, providing Americans unique access to important new therapies and the job creation that supports this vital work. 

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. It didn’t matter that the supply of vaccines by then far outstripped demand. The point was the precedent the waiver set. 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 including Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.) 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 U.S. biotechnology sector suffer the same fate. We must apply to the biotech sector the lessons we learned the hard way from the decline of the European biopharmaceutical industry — before it’s too late. 

Frank Watanabe is president and CEO of Arcutis Biotherapeutics. He is a BIO board member. He was a commissioned officer in the U.S. Navy Reserves for 25 years.