Biotech R&D, Reform, and Market Change

HEHS-95-34R: Published: Dec 15, 1994. Publicly Released: Dec 15, 1994.

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Pursuant to a congressional request, GAO reviewed the current state of biotechnology financing, focusing on the potential impact of health care reform on the biotechnology sector. GAO noted that: (1) biotech firms are typically small, have few if any products on the market, and are heavily dependent on outside financing for continued operations; (2) biotech firms are facing a cash crunch because investors have been reluctant to invest in biotech products due to disappointing clinical trials for once-promising biotech products; (3) investors have raised questions on how patent laws and health care reform will affect the future profitability of biotech firms; (4) in response to reduced resources, biotech firms have developed alliances with the pharmaceutical industry to provide additional financial and technical support; (5) legislation affecting the prescription drug market may affect the biotech industry directly and indirectly; and (6) if comprehensive health care reform legislation is enacted, the revenues from and demand for prescription drug products could increase or decrease depending on what cost controls are implemented.

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