… Three major areas reflecting government policy are compounding investors’ apprehensions.
•Regulatory risk at the U.S. Food and Drug Administration.
A 2011 report from the California Healthcare Institute and Boston Consulting Group documented declining performance at the FDA. Unexplained regulatory delays, unclear standards for what clinical data are necessary for product approval, and inconsistent communications – these factors have discouraged investments in biotech and device startups. In fact, several major California venture capital firms have either moved out of investing in life sciences companies altogether or sharply reduced their asset allocations.
•Constrained coverage and payment for innovative products.
The continuing healthcare cost crunch, beginning with federal efforts to contain the escalation of Medicare spending, is increasing pressure on drug and device margins. A number of government initiatives, including comparative effectiveness research and the Independent Medicare Payment Advisory Board, are raising new concerns about coverage and payment for medical technologies.
•Implementation of the Affordable Care Act.
While the Supreme Court has agreed to decide constitutional challenges to healthcare reform legislation before the 2012 election, many aspects of the new law are being implemented with direct consequences for the biomedical industry. These include new taxes on drug and devices, the establishment of healthcare insurance exchanges (with California leading the way), and a great expansion of Medicaid to cover the uninsured.
In the face of these challenges, our California companies are adaptive and resourceful. Increasingly, they are looking beyond California’s and our nation’s borders to countries with more certain regulatory pathways, regions with financial incentives and easier access to capital, and expanding markets. (…read more: http://bit.ly/yfpexW)
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