Tax Proposals Promote, Discourage Bioscience Investment

Public hearings were held for several important biopharma bills at the state Capitol this week, while the while the Human Services Committee’s Prescription Drug Task Force had its final meeting.

The PDTF co-chairs—Sen. Matt Lesser (D-Middletown), Sen. Jeff Gordon (R-Woodstock), Rep. Jillian Gilchrest (D-West Hartford), and Rep. Tracy Marra (R-Darien)—issued a 15-page report Feb. 26.

The report includes a review of PBMs, prescription drug supply chains, pricing regulations, and alternative cost-saving mechanisms such as bulk purchasing programs and the federal 340B Drug Pricing Program.

Lesser indicated that a bill reflecting the report’s findings and a related public hearing would be released in approximately two weeks.

R&D Tax Credits

The Finance, Revenue, and Bonding Committee held a Feb. 26 public hearing on SB 1246, which implements Gov. Ned Lamont’s budget proposals, and SB 742, which imposes a capital gain tax surcharge on certain taxpayers.

Bioscience Growth Council executive director Paul Pescatello applauded a provision in the proposed budget increasing the refundable research and development tax credit from 65% to 90%.

“This is wise economic development policy and a wise competitive stance to take in relation to the states with which we compete for biotech companies and jobs—Massachusetts and New York,” he told the committee.

“The refundable R&D tax credit was a Connecticut innovation, but now New York and Massachusetts have copied it and exceeded its refund rate: New York is at 100% and Massachusetts is at 90%.”

“Biotech is all about R&D spending—more than any other industry,”

Bioscience Growth Council’s Paul Pescatello

Pescatello added that it can take 10-12 years and up to $2.7 billion for a biotech company to bring a product to market.

“Biotech is all about R&D spending—more than any other industry,” he said.

“The ability of biotech companies to use R&D tax credits early rather than at the end of a research cycle is a powerful incentive to set up shop here in Connecticut and stay here.

“R&D tax credit exchange refund money is money companies don’t have to raise from investors; money they can put right back into R&D.

“Finally, bear in mind that the R&D tax credit is a credit against money already spent in Connecticut by biotech companies.”

Capital Stock Tax

Pescatello also noted the Bioscience Growth Council’s support for accelerating the phase out of the corporate minimum tax, also known as the capital stock tax.

“The capital stock tax is essentially a tax on cash, on hard-raised capital sitting in money market savings accounts for deployment for huge life sciences R&D spends,” he said.

Pescatello called the capital stock tax “unfair and counter-productive.”

“Most states have done away with this tax.

“It disproportionately hurts biotechs because of the huge amounts of cash they must raise and hold to do their R&D.

“The capital stock tax is unfair, counter-productive to our efforts to build and nurture a biotech sector, and makes us less competitive in relation to other states.”

Capital Gains Surcharge

Pescatello warned committee members that the proposed capital gains tax surcharge will disincentivize private sector investment in Connecticut.

“We want people and companies to make long-term capital investments,” he said. “SB 742 would disincentivize such investment.

“Bear in mind two things drive thriving biotech sectors—the strength of the local research institutions and venture capital.

“We want people and companies to make long-term capital investments.”

Pescatello

“We are not likely to recruit another Yale or UConn to Connecticut. But we can recruit more venture capital firms to Connecticut.

“One way not to recruit venture capital firms here, for firms not to make their investments here, is to add on a capital gains surcharge.”

Pescatello added that a capital gains surcharge will only “incentivize venture capitalists to arrange their lives and businesses and operations to spend six months and a day outside Connecticut.”

Pharma Rep Names

The General Law Committee also held a Feb. 26 public hearing on SB 1355, a wide-ranging measure addressing prescription drugs.

Pescatello testified in support of the bill’s section that removes the posting of the names of pharmaceutical representatives from the Department of Consumer Protection’s website.

He told committee members that Section 4(d) of the bill “is prudent, for significant privacy and safety concerns.”

“Unfortunately, we live in an age of significant animosity toward large institutions, organizations, and corporations.”

Pescatello

“Unfortunately, we live in an age of significant animosity toward large institutions, organizations, and corporations,” he said.

“This can manifest itself in harassment and violence toward representatives of such institutions, organizations and corporations.

“For the sake of privacy and safety, I hope you see that it is counterproductive to post a public billboard on the DCP website with the identity of pharmaceutical representatives.”

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Paul Pescatello is the executive director of CBIA’s Bioscience Growth Council and chair of We Work for Health Connecticut. Follow him on X @CTBio.