HOUSE PANEL CLEARS SECURITIES LITIGATION REFORMBILL

By Lisa PierceyWashington Editor

WASHINGTON _ The House Commerce Committee voted onThursday to pass a securities litigation reform bill which aims to curblawsuits filed against companies whose stock prices drop. That billdiffers from one contained in the Republicans' original ContractWith America. Changes were made in response to concerns voicedby Securities and Exchange Commission chairman Arthur Levitt Jr.and by Democrats. (See BioWorld Today, Feb. 13, 1995, p. 1.)

The bill must be reviewed by the Judiciary Committee before it goesto the House floor in March. Republicans have argued that a keyprovision in the bill, the so-called "loser pays" scheme, woulddiscourage "professional plaintiffs" from filing "frivolous" class-action lawsuits.

Amendments finalized on Thursday included toning down the loser-pays rule slightly with a provision to shift the burden of proving thecase was frivolous to the winners, not the losers, and giving judgessome authority over assessing costs. Other amendments included achange in the requirement for recklessness _ defendants insecurities suits could be held liable not just for reckless behavior, butfor "an extreme departure from standards of ordinary care."However, defendants who "genuinely forget to disclose" couldescape liability.

Last week, House Speaker Newt Gingrich (R-Ga.) predicted thatsecurities litigation reform would be one of the toughest battlesRepublicans would have to fight in enacting the Contract WithAmerica. He said that trial lawyers, a powerful lobby in Washingtonand the driving force behind many class-action securities lawsuits,would be fearsome opponents.

The SEC also opposes the securities litigation legislation, even in itsamended form. In a statement released last week, the SEC said itcould not support the Commerce Committee bill "because of thepotential impact on U.S. investors and markets." Levitt has said thatthe reforms could eliminate meritorious cases, along with frivolousones, and thus allow fraud to go unchecked.

Biotech Execs Lobby For Tax Credit, FDA Reform

Genentech Inc. president and CEO, Kirk Raab, and Genzyme Corp.president and CEO, Henri Termeer, joined the ranks of 12 executiveswho met privately with President Clinton, Vice President Al Goreand several other high-ranking officials last Monday. The meeting,initiated by the Administration, was billed as an opportunity toexchange ideas on Clinton's technology policies with executivesfrom high-technology sectors, such as the computer, aerospace,defense and chemical industries.

According to Lisa Raines, Genzyme's vice president of governmentrelations, the two-hour meeting included significant discussion onwhy the President's proposed 1996 budget failed to specify how hewould fund a research and development tax credit. The credit isconsidered critical for research-intensive industries such asbiotechnology.

At a January meeting of the National Task Force on AIDS DrugDevelopment, Raab lamented the rumored absence of the credit inClinton's budget, saying, "eliminating that credit is absolutely thewrong direction to go in." Administration officials have argued, offthe record, that the lack of a plan to pay for the research anddevelopment tax credit was a purely tactical move. The idea was toavoid handing Republicans detailed plans for cuts (such asspecifying exactly which budget cuts would pay for the credit) thatcould then be used to pay for other things.

"It puts the burden of figuring out how to pay for it on Congress,"Raines told BioWorld. "It was not important enough to them topropose a way to pay for it themselves and that was disappointing."Raines, who attended the White House meeting, noted that otherfavored projects of Clinton's _ such as the Commerce Department'sAdvanced Technology Program _ were listed in the budget alongwith proposals on how to pay for them.

Another topic raised by biotechnology executives during the meetingwas FDA reform. A policy paper prepared by White House staff andtitled, "Administration's Technology Policy For 1995," wasdistributed at the meeting. It included a paragraph under the heading"Regulatory Reform" that stated: "The Administration is committedto working with industry on regulatory reform issues that affect ourability to compete, such as export controls on high technologyproducts, the approval process for biotechnology and pharmaceuticalproducts, and environmental regulations."

"We're optimistic that the White House is willing to work on abipartisan basis to support regulatory reforms that would enhanceinnovation in biotechnology," said Raines. "Both Henri [Termeer]and Kirk [Raab] made it clear that we are talking about moderate,reasonable, common sense kind of reforms. They said that proposalscoming from BIO [Biotechnology Industry Organization] will notinvolve reorganizing the FDA or changing basic regulatoryrequirements."

Streamlining FDA processes and improving efficiency at the agencydovetail with the goals of Gore's "Reinventing Government"program. Other government officials who attended the meetingincluded presidential science advisor John Gibbons, CommerceDepartment Secretary Ronald Brown and Treasury Secretary RobertRubin. n

(c) 1997 American Health Consultants. All rights reserved.