Ray Blanco

“There are two consequences in history; an immediate one, which is instantly recognized, and one in the distance, which is not at first perceived.”

— Frederic Bastiat

Last week, the big news was the Supreme Court’s ruling upholding Obamacare. Stocks, already down for the day, plummeted further on the news. Emerging biotechnology companies were among the hardest hit…briefly. Most biotech stocks have already re-bounded from the one-day Obamacare selloff and have soared to new multi-year highs.

NBI Greatly Outperforms DRG During Last Few Years

But that selloff, brief though it was, illustrated a very real battle that is just now unfolding. It is a battle between science and politics — a battle between innovators and price-fixers. This campaign promises to be a difficult and prolonged one, but biomedical innovation will emerge triumphant.

Those who oppose Obamacare rail against the program’s price tag and against the fact that it restricts the freedom of choice of American citizens. These are the most immediate issues, and they are important. The downside, however, doesn’t end there.

For decades, the US has been a world leader in biomedical innovation. From 2001-2011, for example, I count 15 Nobel Prizes in physiology or medicine that have been awarded to scientists working in the US, whether native-born or otherwise.

Today, the bulk of global biomedical research takes place in the US.

If we discount academic research and focus solely on privately funded commercial research and development, America’s share is even higher. Often, when I visit labs or speak with biotechnology innovators, I can’t help but notice how many of the researchers are from overseas and choose to pursue their careers here. There is a reason for that, and that has been the relatively free US health care market.

This bill, however, could be bad for biotechnology development. For example, it contains a special tax on medical devices — and much of the innovation taking place in the market is in improved diagnostic devices and gene-sequencing equipment. We also have to consider what effect increased government control will have on biomedical innovation.

Faced with growing deficits that this bill will only exacerbate, politicians will focus on cutting costs, rather than funding basic research. Rationing and capping compensation for new, lifesaving technologies will become inevitable. A breakthrough therapy could be seen as an expense by a bean-counting government panel.

Think of all of the lifesaving advances in biotechnology of the past decades. These were developed by private companies because they expected a profitable market for their inventions and discoveries. Reduce the incentive to innovate and what will the technological landscape look like in a few years, all other factors being equal?

A growing army of bureaucrats and regulations threaten to reduce the pace of new medical technologies right when we are on the verge of mind-boggling lifesaving breakthroughs. Enormous advances are being made in treating disease at the genetic and molecular levels, and they show unbelievable promise in treating cancer, cardiovascular disease and even aging itself.

We are in a race. On the one hand, we have scientific advance, unraveling the mysteries of life and developing revolutionary new therapies. On the other, we have politicians trying to lock everything down into a stasis, whether they know it or not.

Nevertheless, the biotech revolution will continue. The coming breakthroughs will be so huge that no government will be able to stop them. Investors enabling them will earn fortunes. A substantial increase in life spans will bankrupt entitlement programs. New technologies will accelerate a fundamental transformation of the economy. This has been the case all through history. This trend is your friend.

Regards,

Ray Blanco,
for The Daily Reckoning

Ray Blanco

In 8th grade Ray Blanco was in his basement learning how to build what's called a "Wilson Cloud Chamber," a supercooled device for detecting particles of ionizing radiation. Now, he is an expert in advanced robotics, avionics, genomics, and biotechnology. Blanco was raised in Miami,FL, after his family fled Cuba in the 1960s. He is co-editor of Technology Profits Confidential and contributes to Breakthrough Technology Alert and Tomorrow in Review.

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