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Why you should vote YES to SBIR Reauthorization, and vote NO to HR 1425

May 17, 2011 / Ed Jameson / Blog Posts
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From the Small Biotechnology Business Coalition (SBBC):

H.R. 1425 “Creating Jobs Through Small Business Innovation Act of 2011”

Bad for Jobs, Bad for Small Business and Bad for Innovation

The Small Biotechnology Business Coalition (SBBC), the leading advocate for America’s 2,000+ small, independently owned biotechnology and medical device companies, urges the House Small Business Committee to vote “NO” on H.R. 1425 at its May 11 Markup – unless that bill is substantially amended. If passed into law HR 1425 would fundamentally alter the NIH SBIR program in ways that would put hundreds of small biotech companies out of business, costing thousands of jobs and ending the development of lifesaving innovations to combat cancer, heart disease, diabetes, trauma, infections, AIDS, autoimmune disorders, and orphan diseases.

The NIH SBIR/STTR program is the primary funding source for small biotechnology companies that are developing cutting edge technologies to cure or ameliorate disease while creating substantial high wage jobs with greater speed and efficiency than larger private or public sector organizations. Many important medical products now on the market were developed with funds from the SBIR/STTR program thereby creating jobs that can be sustained without continued government funding. Thus, the SBIR/STTR allocations should grow not be reduced in the manner of H.R. 1425.
The number of SBIR/STTR grant applications at the NIH is at an all time high while the percentage receiving funding are at an all time low. 2010 applications increased by 40% from the prior year while the number of applications that received funding plummeted to 17.0% from 24.5% in 2009. At the National Cancer Institute 2010 SBIR applications rose by 68% from the previous year.
H.R. 1425 would dramatically reduce by as much as half the number of grants going to small businesses and transfer significant SBIR dollars to Wall Street backed firms government bureaucrats, and university administrators.
 Companies that have received tens of millions of investment dollars from pension funds, endowments, and large private equity firms would be entitled to compete against start-ups with limited access to capital. Nearly half of all NIH SBIR funds could go to deep-pocketed companies owned by large institutional investors under H.R. 1425.
 For the first time in the 30+ year history of the SBIR, significant funds will be shifted to government bureaucrats and away from small company entrepreneurs. H.R. 1425 lops off 3% of the SBIR to support NIH administration and transfers $10 million from the STTR program to fund Federal Labs and University administrators conducting “market research.”
 Increased grant sizes authorized by HR 1425 without a corresponding increase in the allocation pool reduces the number of SBIR awards by nearly one third. This will be particularly consequential for earlier stage R&D that is most in need of government support.
 Despite the documented success of the SBIR/STTR programs (firms receiving SBIR grants now account for nearly a quarter of the annual R&D 100 Awards), its growing demand, and importance as a job creator the House legislation (unlike its Senate counterpart) does not increase the SBIR/STTR allocation by even one cent. To the contrary, H.R. 1425 creates a vast net decrease in funds available to small businesses by permitting nearly half of all funds to go to companies owned by institutional investors.
H.R. 1425 from should be amended in these important ways:
1. Increase the NIH SBIR/STTR Allocation by at least one percent in FY2012. This would at least address the increased demand and anticipated new competition from well-funded companies owned by private equity firms (the Senate SBIR bill provides a one percent increase for all agencies phased in over 10 years). This increase could be accommodated by a corresponding one percent decrease in the administrative or overhead rates for all NIH grantees. The Biomedical Research Authority of the European Union awards about 15% of their research funds to small businesses, and other countries (India, China) are following suit. A funding increase to this program is essential to maintaining US global competitiveness in innovation.
2. Limit access to SBIR/STTR by firms owned by institutional investors to no more than 25%. This brings the House bill in line with its Senate counterpart and was agreed to in writing by representatives of both small businesses (SBTC & SBBC) and venture capital firms (BIO, NVCA). It would reduce the number of small companies crowded out of SBIR by companies that have raised $50 million or more from pension funds or private equity firms.
3. Continue to fund administration of the program from outside the SBIR/STTR allocations. Shifting 3% of SBIR funds to NIH administration would result in a cut of as many as 200 grants to job-creating small business. As long as the SBIR/STTR allocation remains at only 2.8% small businesses must be continue to be the sole recipients of these funds, not government or university administrators.

For further information please contact Dan Backer or call the SBBC at 301-917-6538.

You can also visit their website at

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Ed Jameson, CPA, Managing Partner

I’ve been in practice for over 40 years helping our small business clients procure, manage, and survive audits on more than $6 billion in federal government contract and grant funding. We’ve been featured presenters and panel moderators at Tech Connect’s National SBIR/STTR conferences since 2010, and I’ve presented at the DOD’s Mentor Protégé Summit and present regularly for several state and local organizations.