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Biotechs face challenges as the industry’s annual bash returns to Boston

The industry is juggling slower growth and a host of other challenges

On Friday, workers set up for the BIO 2023 convention at the Boston Convention and Exhibition Center.Vincent Alban For The Boston Globe

The world has changed since 2018 when the Biotechnology Innovation Organization last brought its annual road show to Boston, complete with entrepreneurial boot camps, beer-flowing receptions, and four days of nonstop networking.

Since then, a global pandemic showcased the industry’s prowess in rushing out lifesaving vaccines — elevating scientists to the status of saviors, at least for a fleeting moment. But complaints about steep prices for drugs have grown louder, sparking a backlash in Washington, D.C., that threatens to disrupt the biotech business model crucial to the Massachusetts economy.

As more than 15,000 executives, investors, and promoters from around the world arrive at the Boston Convention and Exhibition Center for the BIO 2023 convention, which opens Monday, industry leaders are bracing for tougher challenges even as they trumpet their triumphs.

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Industry insiders from around the world are gathering in Boston.Vincent Alban For The Boston Globe

“We’re battling some headwinds,” said Rachel King, chief executive of BIO, a Washington-based trade and lobbying group. “Incredible research breakthroughs are continuing to happen. But there are some negative policies and barriers being put in the way of innovation.”

One change at this week’s BIO will be visible from the dais. At an event long dominated by men, the hosts will be two women who were born in Massachusetts: King, a former biotech entrepreneur who took the helm at BIO last fall, and Kendalle Burlin O’Connell, an attorney promoted to chief executive of the Massachusetts Biotechnology Council in January.

They and others at the convention are focused on mounting business and regulatory changes: a slowdown in funding, calls to rein in fast-tracked drug approvals, and a new law empowering Medicare, the federal agency that insures Americans over 65, to negotiate the price of some medicines for the first time.

Those trends are being carefully watched in Massachusetts, a long-time biotech hub that’s home to more than 1,000 drugmakers. For decades, biotechs here have rolled out treatments for diseases such as multiple sclerosis and cystic fibrosis. They’re now working on novel therapies for cancers and Alzheimer’s amid uncertainty over how they’ll be paid, or whether they’ll be paid enough to justify huge drug development investments.

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At a Senate hearing in March, lawmakers lambasted Moderna executives over the Cambridge biotech’s plan to raise the price of its COVID vaccine five-fold, to $130 a dose, now that federal officials have said they no longer plan to buy doses for all Americans.

Moderna CEO Stéphane Bancel testifies before the Senate Health, Education, Labor, and Pensions Committee on Capitol Hill in March. Chip Somodevilla/Getty

Medicare, meanwhile, has for now limited reimbursements for a pair of Alzheimer’s drugs co-developed by Biogen, another Cambridge company, to patients taking part in clinical trials. The treatments were cleared by regulators through an accelerated approval pathway while Biogen and its Japanese partner continue to test them. Medicare said Thursday it will expand coverage if the drugs gain full approval from the Food and Drug Administration.

And there’s an additional worry for Massachusetts: whether it can hold onto its status as what Governor Maura Healey, in a visit to a Moderna plant last week, described as the “global epicenter” for life sciences, where 18 of the world’s 20 largest biopharma companies have labs or other operations.

The state’s biotech sector continued to expand through the early stages of the pandemic, even as other corners of the economy were crippled. Data from the state biotech trade group, called MassBio, capture the growth since the BIO convention last came to Boston five years ago:

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Lab space in the state has nearly doubled, to 56 million square feet, spilling out of Kendall Square in Cambridge into neighboring Boston, Somerville, and Watertown. While still a small share of the state’s overall labor force, its biotech workforce has grown 51 percent to 112,000 employees, many hired at biomanufacturing plants outside Route 128. And the average wage for workers in the sector has ballooned to $200,000, up $40,000 since 2018, though the figure is skewed by the pay packages of high-priced executives.

At the same time, scores of other states, and countries, are building their own life sciences sectors and vying for companies and talent. Many are setting up booths in the exhibition hall at BIO, hoping to woo Bay State drugmakers to expand in Texas or North Carolina, Brazil or Germany, with promises of tax breaks and lower living costs.

“Heavy is the crown,” said Burlin O’Connell, who touted the state’s cluster of large and small biotechs, hospital labs, and venture capital. “Everyone’s trying to replicate the ecosystem we have here. To maintain our leadership, we have to continue making investments.”

Burlin O’Connell and other industry leaders have called on the Healey administration to reauthorize, with additional funding, the state’s 15-year-old, $1.6 billion life sciences initiative to offer incentives for biotech and medical technology companies setting up shop in Massachusetts. They want the next iteration of the program to focus on training new workers, adding more drug manufacturing, and expanding biotech activity outside the Boston area.

The program, launched by then-Governor Deval Patrick at a BIO convention in Boston, in 2007, and extended by then-Governor Charlie Baker in 2018, expires at the end of next year.

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Industry leaders have called on the Healey administration to reauthorize, with additional funding, the state’s 15-year-old, $1.6 billion life sciences initiative to offer incentives for biotech and medical technology companies setting up shop in Massachusetts. Suzanne Kreiter/Globe Staff

There are already signs of a slowdown in the state’s biotech sector, or at least a pause in its breakneck expansion. Massachusetts fell to third place, behind California and New York, in the most recent rounds of grants from the National Institutes of Health, a key source of research funding. Massachusetts remains the top per-capita recipient of NIH money.

Private investors are also pulling back. Just over $3 billion in venture capital has been pumped into state-based biotechs so far this year, putting the state on pace to fall short of last year’s record $8.7 billion haul. Some companies have laid off workers, while others continue to hire.

“The risk appetite has dampened,” said Mark Williams, a Boston University finance professor and president of the Boston Economic Club, suggesting that investors are less willing to place big bets on long-shot startups. He cited jitters from higher interest rates, recent bank failures, and fears of a recession.

“There’s still a lot of good biotech innovation happening in Massachusetts. The question is whether it will get funded,” Williams said.

Biotech’s business model relies heavily on venture capitalists and other private investors. They bankroll multiple startups, many of which fail, in the hope that some will generate enough profits to more than cover their losses. Consumers and health insurers balk at high drug prices, but financiers see them as vital to recouping their investments, saying the average cost of bringing a drug to market exceeds $2.5 billion.

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That’s why some in the industry are fretting over stepped-up scrutiny of the Food and Drug Administration’s accelerated approval pathway, which allows drugs that treat rare diseases onto the market with limited clinical data while drug companies complete their studies. Oregon, Tennessee, and other states are weighing moves to withhold or limit Medicaid payments for fast-tracked drugs until the FDA grants a medicine full approval.

Perhaps most alarming to biotechs is the Inflation Reduction Act, the massive climate, health, and tax bill that President Biden signed into law in 2022 and will take effect over the next three years.

The law prevents drugmakers from boosting prices on medicines beyond the annual rate of inflation. And it clears the way for Medicare to haggle with biopharma companies over the prices of 10 of the most costly medicines, a list the agency will release on Sept. 1. That was a longstanding goal of drug industry critics.

King said BIO plans to release data at the Boston convention laying out what she called the “negative impact” of the law on the industry — and its potential to drive away investors who fund lifesaving drugs.

“What the industry accomplished during the pandemic was really extraordinary,” the BIO chief said. “We were able to respond so quickly with the development of vaccines and therapeutics. ... We hope our message on the importance of innovation gets through.”

Rows of meeting booths were set up for the BIO 2023 convention. Vincent Alban For The Boston Globe

Robert Weisman can be reached at robert.weisman@globe.com.