Posted on February 2, 2015
Justina Logozzo, NEHI
Venture Capital Declines in the Life Sciences, Threatens Advances in Biomedical Research
NEHI President Proposes Policy Actions to Re-Incentivize Early-Stage Investing
CAMBRIDGE, MA (February 2, 2015) – Some of society’s greatest medical needs – particularly in finding treatments for diseases such as Alzheimer's, Parkinson's and diabetes – will be left unmet without significant policy changes to incentivize an increase in investments into early-stage biomedical research.
That is the message of an analysis, published today in the February issue of the journal Health Affairs, detailing a precipitous decline in early-stage venture capital funding over the past five years. The drop-off in investments is due to rising costs and increasing uncertainty over regulatory and reimbursement policies of the Food and Drug Administration and the Centers for Medicare and Medicaid Services, according to the analysis.
“If policy makers want to encourage investments in startup and life science projects, especially in areas of great importance to public health, it is critical that they create measures to reduce the uncertainty of regulatory and reimbursement policies,” said Jonathan Fleming, the author of the article and President of NEHI (the Network for Excellence in Health Innovation).
Venture capitalists have been moving away from early-stage life science projects in favor of early-stage Internet and consumer related start-ups over the past five years, Fleming said. The investments that are being made in the life sickness have become more heavily weighted toward therapeutic areas such as oncology and rare diseases where the regulatory and reimbursement risks are smaller.
Fleming proposes five policy changes to make early-stage biomedical research more attractive to investors:
· Increase Small Business Innovation Research (SBIR) funding for targeted areas of interest. SBIR funding is a key source of funds for the experiments needed to justify larger investments from venture capitalists.
· Increase public support for expensive clinical trials in targeted areas of interest.
· Create a special regulatory pathway that enables early testing of experimental compounds in limited populations to obtain early signals of efficacy that could justify larger investments.
· Offer economic incentives in designated areas so that investors and developers of breakthrough products have more certainty about the pricing of their product.
· Establish a national prize for a breakthrough in Alzheimer’s disease that inspires entrepreneurs and early-stage investors to enter the field.
“Reducing the time, cost and uncertainty for early-stage venture capitalists to bring life science innovations to market should be a priority for policy makers,” Fleming said. “It is no exaggeration to say that the health of our nation depends on it.”
NEHI (Network for Excellence in Health Innovation) is a national health policy institute focused on enabling innovation to improve health care quality and lower health care costs. In partnership with members from all across the health care system, NEHI conducts evidence-based research and stimulates policy change to improve the quality and the value of health care. Together with this unparalleled network of committed health care leaders, NEHI brings an objective, collaborative and fresh voice to health policy. For more information, visit www.nehi.net. Follow us on Twitter at @NEHI_News and like us on Facebook at NEHINews.