January 24, 2022

Volume XII, Number 24

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January 21, 2022

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House Passes Fostering Innovation Act

This week, the U.S. House of Representatives unanimously passed the Fostering Innovation Act of 2015 (H.R. 4139), bipartisan legislation that would extend for an additional five years the current exemption for emerging growth companies from certain internal corporate financial control requirements of the Sarbanes-Oxley Act.  The bill offers relief for medical technology and other emerging growth companies beyond the original five years of the Jumpstart Our Business Startups Act (known as the “JOBS Act”), and is premised on the view that the still limited resources of these concerns are better spent to advance the research, development and marketing of important products than to implement often costly auditing procedures.

H.R. 4139 defines eligible still emerging growth companies as those with annual average revenue of less than $50 million and less than $700 million in public float. The ultimate prospects for the legislation remain uncertain in that it has yet to be considered in the Senate and it is not without opposition (the SEC Office of the Investor Advocate has come out against it).

Come what may, the bipartisan House action, like passage of the 21st Century Cures Act earlier this session, reinforces a recognition by Congress that small technology companies—as well as the investors that help underwrite their research and development (“R&D”) costs—need the confidence that their focus can remain on the core mission of innovating and creating quality jobs.  Both of these initiatives, along with the package of biomedical innovation bills pending in the Senate (roughly the Senate’s version of the 21st Century Cures Act), advance the notion that public policy can be used as a positive tool to spur innovation by relieving regulatory burdens and streamlining the review and approval processes for medical devices and bio-pharmaceuticals.

The calendar is quickly winding down in an increasingly politically contentious election year environment on Capitol Hill, and it is unclear whether the Fostering Innovation Act and/or a version of the 21st Century Cures Act will make it to the finish line. But each of these measures offers glimpses of how Congress can play an important part in helping to reduce the costs of bringing new products to market, which ultimately may effectuate faster access and lower prices for patients and consumers who need life-saving or quality of life enhancing medical technologies.  The promise of accelerating technological advances will only be realized if the applicable laws and regulations keep up with the pace of change by incenting and rewarding innovation.  To this end, it is important that public policy support R&D as well as efficient product reviews and approval/ clearance processes.  It is also critical for timely and adequate coverage and reimbursement of new technologies to follow.  Passage of the Fostering Innovation Act has been applauded by BIO and other stakeholders as an important pro-growth public policy.

© 2022 Covington & Burling LLPNational Law Review, Volume VI, Number 147
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About this Author

Gary Heimberg, Covington Burling, Regulatory and public policy lawyer
Of Counsel

Gary Heimberg’s practice focuses on public policy and government affairs matters for pharmaceutical, medical device and consumer health care clients. He has substantive knowledge of the current legislative and policy issues facing the Life Sciences industry, including in the areas of intellectual property, pricing, oversight & investigations, OTC medicines, vaccines, biodefense, and FDA reform. Mr. Heimberg has also facilitated the implementation of internal corporate policies and procedures to adhere to federal compliance requirements.

Mr. Heimberg’s...

202-662-5009
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