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Small biotechs are getting a raw deal from the federal government's decision to exclude stimulus funding to the National Institutes of Health from mandatory participation in research and development programs, business and political leaders said Monday.
"This is a matter too important not to pursue," Sen. Benjamin L. Cardin (D) of Pikesville said during a field hearing of the Senate Committee on Small Business and Entrepreneurship at the Montgomery County Council offices in Rockville.
The exemption deprives small businesses of the opportunity to receive up to $200 million in grants they may have received through the American Recovery and Reinvestment Act of 2009, Cardin said. NIH normally would have been required to allocate 2.5 percent of its external research and development dollars to the Small Business Innovative Research and Small Business Technology Transfer programs as part of receiving stimulus money.
A representative from NIH was invited to the hearing but did not attend.
Aprile Pilon, CEO of startup biotech Clarassance in Rockville, said NIH has a history of contentious relationships with small businesses, as it believes investments in academia are more secure. She argued that small businesses are more likely to take the risks necessary to transform basic bioscience research into effective health care products and systems.
More than $1.2 billion in SBIR and SBTT grants has been awarded to 4,000 Maryland innovations since the program began in the 1980s. The recipients have generated four times the number of jobs as non-recipient companies and four times the revenues, said Karen Gordon Mills, administrator of the U.S. Small Business Administration. She said that one-third of the companies to receive grant money have generated at least one patent.
"Many of America's most powerful innovations occur in small businesses," Mills said.
Jonathan Cohen, president and CEO of 20/20 Gene Systems in Rockville, emphasized that NIH's involvement is especially important at a time when it has become 10 times harder to raise private capital than two years ago. He urged Congress to not only address the NIH exclusion but to also double the SBIR participation requirement to 5 percent for the next two years.
Joe Hernandez, president and CEO of Innovative Biosensors in Rockville, said small businesses do not care which grants they are receiving as long as they have quick access to capital.
"This fills a vital seed stage funding gap," Pilon said, adding that the SBIR program also complements academic research, which has rarely yielded products without corporate partnerships.
Rep. Donna Edwards (D-Dist.4) of Fort Washington said Congress might also review whether the total participation score for the U.S. Department of Health and Human Services for the grant programs can take into account NIH's lack of participation. She said her hope is that this may encourage NIH to rethink its non-involvement.