In the final quarter of 2014, Chimerix, a biopharmaceutical company in Durham, lost over $20 million. Yet the company is hiring employees and ramping up spending in the local community. Wall Street can’t get enough of the pharma entity – its share price doubled last year.
To what can we attribute its fortuitous turn?
In short, innovation. Chimerix is testing a drug that could prevent deadly infections in people with weakened immune systems. Clinical trials like these probe lifesaving treatments, and the research activity behind them pumps millions into North Carolina’s economy.
Counterintuitively, federal lawmakers are considering changes to patent laws that would discourage biopharmaceutical companies from conducting trials. The Tar Heel state’s congressional representatives can’t let that happen.
North Carolina is a hotbed of life science research, boasting the highest concentration of life-sciences establishments in the nation. Many of these firms work on clinical trials and test drug safety and efficacy. These trials are essential for delivering novel treatments to patients. Over 45,000 North Carolina residents currently participate in more than 1,700 clinical trials.
The trials benefit not just patients, but the economy. North Carolina’s biopharmaceutical sector directly supports more than 52,000 jobs. In 2013, pharmaceutical companies spent $400 million on clinical trials in North Carolina. These tests generated $1 billion in economic activity.
Research and the jobs that flow from it require strong intellectual property protections, but pharmaceutical companies won’t invest millions if rivals can pirate their ideas. Yet the “Innovation Act” would weaken patents by making it harder for innovative companies to sue patent violators.
It costs about $2.5 billion, on average, to bring a drug to market. Companies can justify that investment only when they can expect reasonable returns.
If biopharmaceutical firms can’t defend their patents, they’d be unwise to risk billions researching and developing new medicines. The inevitable cutbacks in research spending would mean less work for North Carolinians and fewer new drugs for patients.
The “Innovation Act” wouldn’t be the first time Congress unintentionally undermined medical progress. In 2011, lawmakers passed the America Invents Act, which made it cheap and easy to challenge companies’ patents by petitioning a patent evaluation board known as “PTAB.”
PTAB was supposed to spur innovation by reviewing the legitimacy of disputed patents. But it inadvertently slowed the pace of medical innovation by inspiring Wall Street traders to file frivolous patent challenges against biopharmaceutical firms.
With increasing frequency, Wall Street hedge funds are identifying drug companies to “short,” essentially betting on declining stock prices. Those hedge funds then challenge drug patents. The risk of multimillion-dollar legal bills and lost patents scares investors away, thus causing share prices to fall and leaving less money for research.
This scheme is already harming drug researchers. When one hedge fund challenged a patent on a multiple sclerosis drug developed by Acorda Therapeutics, the company’s stock fell 10 percent.
New medicines bring life to North Carolina’s economy and help patients across the country. Carolina’s congressional representatives must vote to prevent Wall Street from jeopardizing medical research.
Dr. Tashni-Ann Dubroy, who holds a Ph.D. in chemistry, is the president-elect of Shaw University in Raleigh.