The Race Between Science and Politics

A growing army of bureaucrats and regulations threaten to reduce the pace of new medical technologies right when we 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.

Seen in that light, the recent biotech sells off makes more sense. 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.

Recently, the big news was the Supreme Court’s ruling upholding Obamacare. Stocks, already down that day, plummeted further on the news. Emerging biotechnology companies appeared to be among the hardest hit.

Much of the focus of the opposition to the health care bill has been focused on its costs, as well as on its restricting 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 U.S. 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 U.S., whether native-born or otherwise.

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

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 U.S. 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?

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. You can’t stop the signal.

Ad lucrum per scientia (toward wealth through science),

Ray Blanco

The Daily Reckoning