Washington Examiner

Invest More in Cures for Infectious Diseases

By Rep. Devin Nunes (R-CA)

July 20, 2020

CLICK HERE to read the full op-ed.

As the federal government focuses on the immediate health effects and economic devastation caused by COVID-19, a crucial question is going unanswered: What can we do to ensure a pandemic never again spreads this widely and inflicts this much damage?

Discovering new medicines is one way. But the economics of quickly finding cures and treatments don’t always follow the normal laws of supply and demand. Over the last decade, investments in vaccines and antibiotics for infectious diseases have lagged behind financing to fight oncological disorders and respiratory diseases — 27% of drugs launched in 2018 were intended to treat cancer or its symptoms, significantly higher than the percentage of new drugs meant to fight infectious diseases.

Why is this? Drug development includes unique perils and hurdles. For good reason, new medicines must undergo a rigorous, yearslong Food and Drug Administration approval process — one that often results in failure. Other industries produce profits more quickly. Mobile gaming developers enjoy profits not long after writing the final line of code, a process that — including testing — could take a few short months.

But infectious disease research entails enormous risk. Consider those investing hundreds of millions of dollars to develop medicines to treat COVID-19. Though initially considered a breakthrough, their product could become obsolete in months if a vaccine is approved or if the disease simply burns itself out over time, which happened with the deadly Ebola virus. What happens to the hundreds of millions of dollars invested in a vaccine that no longer has a disease to guard against?

Antibiotic developers face their own set of challenges. Public health experts around the world warn us about the emergence of “superbugs” — antibiotic-resistant bacteria that could spread through hospitals and communities. Those with infections are left defenseless and likely to die.

The answer, we are told, is to build a bigger pipeline of novel antibiotics and use them sparingly. In other words, develop a product, but don’t sell a lot of it. That creates obvious incentive problems — if General Motors had to develop new lines of cars but keep sales low, they’d go bankrupt.

The federal government has made progress in resolving this problem by making direct investments through the Biomedical Advanced Research and Development Authority, which deems certain treatments critical. And we can create additional incentives today in order to save lives tomorrow and attract more capital to develop new cures.

First, much of the exciting drug development happening today is not just at “big PhRMA” but at smaller, pre-revenue biotech companies. The federal government should incentivize investments in these companies and encourage their focus on the research and development of infectious diseases and vaccines.

Because these biotech companies have no taxable income or tax liability against which to apply tax credits, the Ways and Means Committee Republicans’ plan allows companies to access the value of the research and development tax credits that they generate but currently can’t use. Permitting these companies to receive a refund on the credits they generate will provide significant new liquidity to firms engaged in infectious disease drug development.

Second, our proposal provides these small companies more flexibility to use the losses they generate against their tax liability. Currently, as these firms grow, they lose these tax benefits. This approach will both reduce the cost of capital for smaller companies and drive even more investment in infectious disease research enterprises.

Finally, we propose a bonus research and development tax credit to incentivize any company engaged in finding new antibiotics, vaccines, and antiviral therapies.

The coronavirus pandemic unmasked hidden vulnerabilities in our nation’s ability to address emerging infectious diseases. Responding with novel ideas to overcome the investment challenges will help ensure this never happens again.

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