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HEHS-95-34R 1 (1994-12-15)

handle is hein.gao/gaobacksp0001 and id is 1 raw text is: Unitd States GAO) General Accounting Office Washngton, D.C. 20548 Health, Education and Human Services Division B-232863 December 15, 1994 The Honorable Tim Valentine, Chairman The Honorable Tom Lewis, Ranking Minority Member The Honorable Peter I. Blute Subcommittee on Technology, Environment and Aviation Committee on Science, Space, and Technology House of Representatives Members of Congress have expressed concern that cost containment efforts such as those considered in the recent health care reform debate could adversely affect the biotechnology sector's ability to finance research and development (R&D) for new pharmaceutical products. In the pharmaceutical industry as a whole, similar concerns have been expressed by both industry representatives and independent analysts. These anxieties may be heightened for the biotechnology sector because it consists primarily of young research firms that depend heavily on outside financing from investors and pharmaceutical companies. In light of these concerns, you asked us to describe the current state of biotechnology financing and to assess the potential impact of health care reform on the biotechnology sector. This letter contains the results of our review based on the literature on biotechnology financing and biotech and pharmaceutical R&D, and on interviews with industry experts. We found that the firms that constitute the biotech industry typically are small, have few or no products on the market yet, and are heavily dependent on outside financing for their continued existence. As the industry matures, however, biotech companies are developing alliances with the pharmaceutical industry to provide both financial and technical support. The increasing financial links between biotech companies and pharmaceutical firms mean that legislation that affects the prescription drug market may affect the biotech industry first directly, and then indirectly through its influence on the pharmaceutical industry. GAO/HEHS-95-34R Biotech R&D, Reform, and Market Change \~ S 32

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