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Penn.’s $500M Biotech Bill Looks Shaky, But Startups In State Could Have Reason to Cheer

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Pennsylvania Gov. Edward Rendell’s proposal to boost state biotech spending by $500 million won’t pass the state Senate this year — if ever — but the outlook is brighter for small portions of the measure designed to nurture early-stage life sciences companies, an aide to the chamber’s top leader told BioRegion News last week.
 
“I don’t see any momentum … for the remainder of the session this year” behind the proposal, known as the Salk Legacy Fund, Drew Crompton, counsel to Pennsylvania Senate President Pro Tempore Joseph Scarnati III (R-Jefferson), told BRN. “I actually see a little less momentum now than earlier this year.”
 
Crompton said the state Senate’s Republican majority instead supports a narrower, $13.4 million bill that includes two commercialization components of the original fund: One would require the state to direct 2 percent, or $6.7 million, of its tobacco settlement into a new Health Venture Investment Account to encourage venture capital investments in early-stage life science companies. The other would direct an equal amount to the state’s three regional biotechnology centers, called Life Science Greenhouses, in Philadelphia, Harrisburg, and Pittsburgh.
 
This bill, Senate Bill 800, was introduced May 8 by Jake Corman (R-Bellefonte) with 10 co-sponsors and has the support of State Senate leaders.
 
According to Crompton it is too early to predict whether such a bill could be passed this year or next. He added that Scarnati and other top Republicans will fight off any attempt by Democrats to expand the bill to include Salk. One such proposal was introduced to the House of Representatives under House Bill 1142 May 18 by Chelsa Wagner (D-Allegheny) with 33 co-sponsors.
 
The governor has included the provisions as part of a larger bill the state plans to fund by borrowing against 9.5 percent of its tobacco-settlement money that would help construct new biotech laboratories and incubator facilities statewide.
 
Another roadblock to Salk has emerged in a feud between Rendell, a Democrat, and legislative leaders over an unrelated topic. Senate Republican leaders accused Rendell and House Democratic leaders of retreating from an earlier understanding on funding the Hazardous Sites Cleanup Act after Rendell angered them by proposing to divert $40 million to the program from a land-preservation fund.
 
The governor retreated as part of a series of deals leading to the adoption of the $27.2 billion general fund portion of the state’s operating budget on July 16, more than two weeks late.
 
“Since that didn’t get done, there was a belief that there was no urgency on Salk,” Crompton said. “There are policy issues that have nothing to do with Salk being entangled with the Salk plan.”
 
Also, the heads of the technology councils for the Philadelphia and Pittsburgh regions said earlier this year that the state’s system for subsidizing life sciences functions well enough not to need the proverbial shot in the arm that the Salk fund represents [BioRegion News, May 7].
 
Crompton cited that divide as another factor in Senate opposition to the Salk fund: “No one is really wedded … to Salk except the governor’s office.”
 
Rendell’s administration is still holding out hope on Salk, at least publicly. A spokesman for the state economic development agency said last week the governor remained hopeful that the senate will ultimately pass some form of the fund.
 
He chalked up the senate’s stance to the nature of the legislative process: “Would we have liked to have passed it in ’06? Yes. Would we have liked to have passed it at the beginning of this year? Yes. But we’re optimistic that at some point, this will get done,” said Kevin Ortiz of Pennsylvania’s Department of Community and Economic Development.
 
“We are basically waiting for Senate Republicans to act,” he said, adding that Rendell had no plans to rewrite the legislation as he did earlier this year after lawmakers last year spurned the original plan. “That’s not to say further change wouldn’t be possible.”
 
The House, which is controlled by Democrats, passed Salk 103-98 on June 25, largely along party lines. But the GOP-controlled state Senate has not advanced Salk since receiving the legislation and referring it to its finance committee on July 14.
 
The Senate has balked at the cost of Salk as well as its requirement for borrowing — concerns that have not changed in the nearly two years since Rendell first proposed the fund. Rendell tried to win over senators this year by changing the bill, in part by identifying tobacco funds as the funding source for Salk.
 
‘On the Back Burner’
 
The prospect of a bill focused solely on commercialization was predicted by the head of Pennsylvania’s life sciences group in an interview with BioRegion News earlier this year [BioRegion News, May 7].
 
“If they don’t pass Salk but they pass the commercialization piece, that will also help,” Dennis (Mickey) Flynn, president of Pennsylvania Bio, told BRN in April. “Is [Salk] better? It will draw more companies. But we feel that we could get the commercialization independent of Salk. It could happen.”
 
Even more significantly, Pennsylvania Bio never explicitly endorsed the Salk fund as proposed by Rendell, though the group on Jan. 30 issued a statement calling on the General Assembly to “support the industry's growth through greater assistance for emerging companies, ensuring patient access to innovative therapies and devices, and investing in the industry's future workforce.”
 
 A spokeswoman for the group last week did not return two phone messages and an e-mail with written questions from BioRegion News.
 
Crompton’s pessimism on the Salk fund was echoed in an interview by a longtime observer of state government who heads a nonprofit policy research group.
 
“I’m pretty sure that that’s going to stay on the back burner, that it will not be something that the General Assembly takes up,” said Matthew Brouillette, president and CEO of the Commonwealth Foundation, referring to the Salk fund. “I would be quite surprised if they … do, although I guess we’ve been surprised many a time in Harrisburg.”
 
The foundation has equated Salk with pork-barrel spending and included last year’s version of the bill in its Pennsylvania Piglet Book 2006, a catalog of government projects and plans deemed wasteful by Brouillette’s group and Citizens Against Government Waste.
 

“No one is really wedded … to Salk except the governor’s office.”

“Because of the other priorities that exist out there, there is probably very little willingness to go borrowing further than what we have already,” Brouillette said.
 
For their part, Rendell and his aides have been selling the fund by claiming it will create 13,000 new life sciences jobs in the state, attract to the state new biotech and pharmaceutical companies, help academic medical centers draw top-tier researchers, and obtain new facilities.
 
The facilities would be for institutions and their affiliated medical centers now eligible for health research grants under the state’s current research funding program, Commonwealth Universal Research Enhancement, better known as CURE.
 
Since last year, Rendell has sought legislative approval for a fund that would pay for construction of new biotech laboratories and incubator facilities statewide for institutions and their affiliated medical centers now eligible for health research grants under CURE. Institutions receiving Salk funds would be required to match the funding they receive from the state.
 
Recipients of CURE grants could use Salk funding to buy specialized equipment that would be used by their newly recruited faculty to colleges and universities throughout Pennsylvania. Institutions receiving Salk funds would have to get matching funds from the state.
 
CURE uses 19 percent of the state’s tobacco settlement money to fund biomedical and health services research through non-competitive “formula” grants to hospitals, universities, and nonprofits based on their proportion of the state’s NIH funding; and competitive grants awarded to any applicant in response to a request issued annually.
 
CURE awards grants based on priorities established by its Health Research Advisory Committee annually. The committee has set a Nov. 20 meeting to finalize its research priorities for the competitive grants it will issue this fiscal year.
 
For the fiscal year that ended June 30, CURE awarded a total $45.7 million in formula grants to 38 organizations, as well as more than $16.8 million to four organizations carrying out collaborative research on vaccine development or gene-environment interactions.
 
‘Corporate Welfare’
 
Two other issues revolving around money have also taken legislators’ attention away from Salk in recent weeks.
 
Rendell has come under fire from state auditor general Jack Wagner over what the AG has termed lax oversight of the $215 million in opportunity economic development grants awarded by the state between July 1, 2000, and June 30, 2005, to 724 employers. They include biotech and pharma companies. A spokesman for Wagner, a Democrat, referred a BRN request for their names to DCED, where a spokesman could not furnish them at deadline.
 
In a “performance audit” released Oct. 31, Wagner faulted the state for waiving more than $49 million in penalties it could have assessed against 187 companies that failed to meet job-creation goals in grants dating back to 1996.
 
In response to the 104-page audit, Ortiz said, DCED has begun requiring that grant recipients provide progress reports one year after receiving their money, instead of the previously required three years.
 
The agency said it will also maintain “early and regular” contact with applicants, but has yet to define that term. DCED will also require future grant recipients to notify the agency whenever a “significant adverse change in status of the grantee or the project” takes place such as a sharp drop in market value, though Ortiz said circumstances would vary from company to company.
 
According to DCED, since Rendell took office in 2003 the opportunity grant program has created 14,792 new jobs, or 97 percent of the jobs projected; retained 33,877 existing jobs, or 98 percent of the projection; and stoked private investment in projects totaling $2.1 billion, or 115 percent of the amount projected by the state.
 
DCED also said enforcement of grant contracts has been stepped up under Rendell, with $10.5 million collected since 2003 from companies that fail to meet goals, and another $3.7 million in payments committed but not yet received by the agency. Ortiz told BRN DCED returns the money it collects into the grant program.
 
Lastly, DCED has trumpeted the endorsement of Salk by seven of the state’s top 10 academic and research institutions: The Alleghany-Singer Research Institute, Carnegie Mellon University, Children’s Hospital of Philadelphia, Drexel University, Penn State University, Temple University, Thomas Jefferson University Hospital, University of Pennsylvania, University of Pittsburgh Medical Center, and the Wistar Institute.
 
Senate Republicans have fired back, supporting a bill now being drafted by Sen. Jane Clare Orie (R-Allegheny) that would require annual reporting recipients, DECD visits to their facilities, and public reporting of jobs created and penalties assessed. The bill will be submitted shortly. “We’re still circulating for co-sponsors,” Orie spokeswoman Brenda Pera told BioRegion News.
 
The Commonwealth Foundation’s Brouillette said the grant program is wasteful “corporate welfare” and should be replaced with across-the-board tax cuts.
 
Rendell has also been denounced by Brouillette, along with state lawmakers, for agreeing to impose tolls on Interstate 80 some time in the next three years. Both sides agreed to the tolls as part of a deal to adopt the state’s $27.7 billion general fund portion of the state’s operating budget for the fiscal year that began
July 1.

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