Predicting the business future of most industries has been nearly impossible for the past few years, and the recession has made any hazy image in the crystal ball downright scary. For those in the pharmaceutical, biotech, and medical equipment industries, the long debate over health care reform has complicated business conjecture.
Now that the downturn is receding and health care reform has been passed and signed, these industries can feel more secure about the future.
Health Care Reform
As tea partiers and other opponents talk of overturning health care reform, the biotechnology sector basks in the reform's possibilities. The legislation "includes the incentives necessary to attract the massive investment required to speed the discovery and development of the next generation of breakthrough therapies and potential cures for the world's most debilitating diseases," said Jim Greenwood, president and CEO of the Biotechnology Industry Organization, which hailed health care reform in March. "The bill also includes a critical provision that will provide some financial relief to research-intensive, small biotechnology companies that continue to suffer from tight credit markets."
That's a far cry from what industry insiders said a year ago. Credit and capital were so tight then that some companies seemed in jeopardy. Venture capital investments were down by more than 40 percent, and companies watched their cash on hand dwindle. But fundraising picked up in late 2009, and in 2010 the health care sector saw some $18 billion in new public equity and $49 billion in new public debt, according to Capital IQ.
Now, backers like Greenwood look forward to the help promised by the Therapeutic Discovery Project Tax Credit, a health reform component. By supporting research and development, Greenwood predicts the measure will save or create thousands of jobs nationwide. "The provision will help these companies continue their groundbreaking research that likely will lead to new therapies to treat patients living with chronic or acute diseases and help reduce long-term health care costs," he said.
Research and Development
Despite the recession, pharmaceutical companies spent on research and development, according to the Pharmaceutical Research and Manufacturers of America (PhRMA). Industry-wide research and investment, which totaled $63.2 billion in 2007, grew to more than $65 billion in 2008 and 2009.
Members of PhRMA spend about three-quarters of their research dollars in the United States. Most of the rest is spent in the United Kingdom, Japan, Canada, Germany, France, and other Western European nations. "Today there are more than 2,900 medicines in the development pipeline," wrote PhRMA president and CEO Billy Tauzin in its industry profile.
The medical device field also has a bright future. Medical device consultant Emergo Group surveyed industry insiders late last year and found that 72 percent expected their companies to see increased sales in 2010. However, only about half believed they would significantly hire this year. Like other industries, the device sector is taking a wait-and-see approach as corporate leaders wait for solid signs of recovery to begin hiring. Smaller companies are more likely to hire in 2010.
An American Society for Quality survey also reported positive feedback from medical device manufacturers. Some 57 percent said they will grow more in 2010 than in 2009. The hottest opportunities are expected in neurological, cardiovascular, and orthopedic advances. Respondents were also eager for nanotechnology, health care IT advances, minimally invasive surgery, and new combination devices that incorporate drugs and biologics.