Is BioTech under threat in Maryland?

As the home to the National Institutes of Health, Johns Hopkins University and the University of Maryland, among others, our region is a hub of biotech success and opportunity. The biotech industry is responsible for 6% of Maryland’s economic output and around 71,000 jobs.

But thanks to a new budget proposal currently before the US Congress, the investment climate of the biotech industry nationwide could be changing, and the effects would be felt in Maryland immediately.

The proposal concerns the time period in which competitors of, say, biotech firm X are barred from access to company Y’s research data. Current federal statute has given a company 12 years of exclusivity for their research data on “biologic” drugs—drugs manufactured in living systems such as a plant or animal cells, or in microorganisms—but the new proposal attempts to bring that number down to seven years. As it turns out, secrecy is one of the engines driving investment in biotech.

Considering the fact that it takes on average 10-15 years and 1.2 billion for a biologic product to hit the shelves at your local CVS or hospital, it is no wonder that protecting the secrecy of the process is such a big incentive for investors. When the time for data exclusivity is cut short, the investment will be curtailed since it increases the time and speed in which copycat drugs can hit the market, potentially cutting large percentages of income from the original drug manufacturer.

According to the Feng Tao at the Baltimore Sun, this measure is not only “short-sighted,” but will eventually lead to biotech firms going overseas for a better investment climate.

On the plus side, the state of Maryland is also actively encouraging the health of the industry by offering a Biotechnology Investment Incentive Tax Credit, a credit currently used by 60 companies in our region.

According to the Maryland Department of Business and Economic Development, an individual or business may be eligible for a tax credit of up to 50% of an eligible investment in a qualified Maryland biotechnology company, with a cap at $250,000.

A qualified biotechnology company must have:

  • Its headquarters and base of operations in Maryland
  • Fewer than 50 full-time employees
  • Been in active business for up to 12 years
  • cannot be a publicly-traded company

See more details here on how to qualify for the 2014 Biotech Tax credit, since the deadline for the 2013 tax credit has already passed.

Prepared by Mark Rapson, CPA, CGMA, Director and Chair of the Health & Life Sciences Service Group.







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